CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                 NATIONAL SERVICE INDUSTRIES, INC.
                                                           (In thousands)

                                                                                   Years Ended August 31,       
                                                                                2000        1999         1998   
                   Cash Provided by (Used for) Operating Activities
                   Net income                                                $  99,870   $ 124,343    $ 108,720
                   Adjustments to reconcile net income to net cash
                   provided by operating activities:
                     Depreciation and amortization                              83,712      55,822       48,846
                     Provision for losses on accounts receivable                 4,792       3,651        3,558
                     Gain on the sale of property, plant, and equipment         (1,254)     (1,098)      (3,400)
                     Gain on sale of businesses                                   (356)    (11,220)      (2,449)
                     Restructuring expense, asset impairments, and other
                       charges                                                       -      (9,291)           -
                     Change in non-current deferred income taxes                 6,491       4,860        6,311
                     Change in assets and liabilities net of effect of
                       acquisitions and divestitures--
                       Receivables                                             (42,948)    (24,207)     (47,564)
                       Inventories and linens in service, net                  (37,210)     10,371      (16,995)
                       Current deferred income taxes                            (2,395)     12,486       (4,383)
                       Prepayments                                              (1,469)        517          493
                       Accounts payable and accrued liabilities                (10,502)     42,323      (64,830)
                       Self-insurance reserves and other long-term
                         liabilities                                             6,158        (360)      (1,944)
                            Net Cash Provided by Operating Activities          104,889     208,197       26,363 

                   Cash Provided by (Used for) Investing Activities
                   Sale of short-term investments                                    -           -      205,302
                   Purchases of property, plant, and equipment                (108,398)    (72,285)     (82,034)
                   Sale of property, plant, and equipment                        3,813       3,996        6,814
                   Sale of businesses                                                -      11,962        3,064
                   Acquisitions                                                (26,344)   (534,132)     (45,305)
                   Change in other assets                                      (16,800)     (7,527)      (6,532)
                            Net Cash (Used for) Provided by Investing
                              Activities                                      (147,729)   (597,986)      81,309 

                   Cash Provided by (Used for) Financing Activities
                   Proceeds from notes payable, net                              8,814       3,588          805
                   Issuances (repayments) of commercial paper, net (less
                   than 90 days)                                               (87,762)    352,265            -
                   Issuances of commercial paper (greater than 90 days)        194,953           -            -
                   Repayments of commercial paper (greater than 90 days)      (222,750)          -            -
                   Proceeds from issuances of long-term debt                   199,798     267,585       52,000
                   Repayments of long-term debt                                 (1,196)   (160,304)        (957)
                   Issuance (purchase) of treasury stock, net                    3,867     (38,390)    (144,484)
                   Cash dividends paid                                         (53,357)    (51,856)     (52,603)
                            Net Cash Provided by (Used for) Financing
                              Activities                                        42,367     372,888     (145,239)

                   Effect of Exchange Rate Changes on Cash                        (271)          9         (410)

                   Net Change in Cash and Cash Equivalents                        (744)    (16,892)     (37,977)
                   Cash and Cash Equivalents at Beginning of Year                2,254      19,146       57,123 
                   Cash and Cash Equivalents at End of Year                  $   1,510   $   2,254    $  19,146 

                   Supplemental Cash Flow Information:
                     Income taxes paid during the year                       $  66,705   $  40,799    $ 100,270
                     Interest paid during the year                              43,977      15,660        7,025
                   Noncash Investing and Financing Activities:
                     Treasury shares issued under long-term incentive plan   $   5,667   $       -    $       -
                     Noncash aspects of sale of businesses -
                       Receivables incurred                                  $       -   $     396    $       -
                       Liabilities assumed                                           -         954          166
                     Noncash aspects of acquisitions -
                       Assets acquired                                       $  10,699   $ 660,238    $  51,190
                       Liabilities assumed or incurred                             569     125,261        5,885
                       Treasury stock issued                                         -         845        5,000

The accompanying notes to consolidated financial statements are an integral part of these statements.

        The company operates in four business segments — lighting equipment, chemicals, textile rental, and envelopes — each of which is a leading competitor in its respective markets. The lighting equipment segment produces a variety of fluorescent and non-fluorescent fixtures for markets throughout the United States, Canada, Mexico, and overseas. The chemical segment produces maintenance, sanitation, and water treatment products for customers throughout the United States, Canada, Puerto Rico, Western Europe, and Australia. The textile rental segment provides linens and dust control products to healthcare, lodging, and dining customer segments in the United States. The envelope segment produces business and specialty envelopes in the United States.

        The company records revenues as products are shipped or as services are rendered. A provision for estimated returns, allowances, and warranty costs is recorded when products are shipped.

        The consolidated financial statements include the accounts of the company and all subsidiaries after elimination of significant intercompany transactions and accounts.

        The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

        Cash in excess of daily requirements is invested in time deposits and marketable securities and is included in the accompanying balance sheets at market value. The company considers time deposits and marketable securities purchased with an original maturity of three months or less to be cash equivalents. Investments purchased with a maturity of more than three months and less than a year are considered short-term investments. There were no short-term investments at August 31, 2000 and 1999.

        Concentrations of credit risk with respect to receivables are limited due to the wide variety of customers and markets using the company’s products and services, as well as their dispersion across many different geographic areas. As a result, as of August 31, 2000, the company does not consider itself to have any significant concentrations of credit risk.

        Inventories are valued at the lower of cost (on a first-in, first-out basis) or market and consisted of the following at August 31, 2000 and 1999:

                                                                         2000      1999  
                                         Raw materials and supplies   $104,566  $  99,249
                                         Work in progress               20,262     16,718
                                         Finished goods                132,751    102,224
                                                                      $257,579  $ 218,191

        Linens in service are recorded at cost and are amortized over their estimated useful lives of 12 to 60 months.

        Goodwill of $3,460 was recognized in connection with a 1969 acquisition and is not being amortized. Remaining amounts of goodwill ($368,019 in 2000 and $385,380 in 1999) and other intangible assets are being amortized on a straight-line basis over various periods ranging from 3 to 40 years.

        The company periodically evaluates whether events and circumstances have occurred that may warrant revision of the estimated useful lives of goodwill and other long-lived assets or whether the remaining balance of goodwill should be evaluated for possible impairment. The company uses an estimate of related undiscounted cash flows over the remaining life of the goodwill in measuring whether the goodwill is recoverable.

        For financial reporting purposes, depreciation is determined principally on a straight-line basis using estimated useful lives of plant and equipment (25 to 40 years for buildings and 3 to 16 years for machinery and equipment) while accelerated depreciation methods are used for income tax purposes. Leasehold improvements are amortized over the life of the lease or the useful life of the improvement, whichever is shorter.

        Research and development costs are expensed as incurred. Research and development expenses amounted to $19,088, $8,482, and $13,577 during 2000, 1999, and 1998, respectively.

        The functional currency for the company’s foreign operations is the local currency. The translation of foreign currencies into U.S. dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using a weighted average exchange rate during the period. The gains or losses, net of applicable income taxes, resulting from the translation are included in “Accumulated Other Comprehensive Income Items” in the Consolidated Statements of Stockholders’ Equity and Comprehensive Income and are excluded from net income.

        Gains or losses resulting from foreign currency transactions are included in “Other income, net” in the Consolidated Statements of Income and were insignificant in 2000, 1999, and 1998.

        The company’s retiree medical plans are financed entirely by retiree contributions; therefore, the company has no liability in connection with them. Several programs provide limited retiree life insurance benefits. The liability for these plans is not material.

        Statement of Financial Accounting Standards (“SFAS”) No. 112, “Employers’ Accounting for Postemployment Benefits,” requires the accrual of the estimated cost of benefits provided by an employer to former or inactive employees after employment but before retirement. The company’s accrual, which is not material, relates primarily to severance agreements and the liability for life insurance coverage for certain eligible employees.

        Interest expense, net, is comprised primarily of interest expense on long-term debt, credit facility borrowings, commercial paper, and line of credit borrowings offset by interest income on cash, cash equivalents, and short-term investments.

        Other income, net, is comprised primarily of gains resulting from the sale of fixed assets.

        SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” was issued in June 1998 and is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. In addition, SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities — an Amendment of FASB Statement No. 133,” was issued in June 2000 and is to be adopted concurrently with SFAS No. 133. However, the company does not currently participate in any significant hedging activities, nor does it utilize any significant derivative financial instruments.

        Certain prior period amounts in the financial statements and notes have been reclassified to conform with the 2000 presentation.

        The company has several pension plans covering hourly and salaried employees. Benefits paid under these plans are based generally on employees’ years of service and/or compensation during the final years of employment. The company makes annual contributions to the plans to the extent indicated by actuarial valuations. Plan assets are invested primarily in equity and fixed income securities.

        The following tables reflect the status of the company’s pension plans at August 31, 2000 and 1999:

                                                                                     2000       1999   
                            Change in benefit obligation:
                            Benefit obligation at beginning of year               $ 130,581  $ 124,545
                            Service cost                                              4,514      3,822
                            Interest cost                                             9,713      8,592
                            Acquisition                                                  --     11,869
                            Actuarial gain                                           (4,402)    (6,589)
                            Benefits paid                                            (9,499)   (11,840)
                            Other                                                       224        182 
                            Benefit obligation at end of year                     $ 131,131  $ 130,581 

                            Change in plan assets:
                            Fair value of plan assets at beginning of year        $ 162,568  $ 150,101
                            Actual return on plan assets                             15,004      9,466
                            Employer contributions                                    2,063        564
                            Employee contributions                                      544         --
                            Benefits paid                                            (9,499)   (11,440)
                            Acquisition                                                  --     13,663
                            Other                                                    (1,440)       214 
                            Fair value of plan assets at end of year              $ 169,240  $ 162,568 

                            Funded status:
                            Funded status                                         $  38,109  $  31,987
                            Unrecognized actuarial loss                               1,751      6,655
                            Unrecognized transition asset                            (3,044)    (4,030)
                            Unrecognized prior service cost                           3,849      3,670 
                            Prepaid pension expense                               $  40,665  $  38,282 

                            Amounts recognized in the consolidated balance
                            sheets consist of:
                            Prepaid benefit cost                                  $  48,655  $  45,086
                            Accrued benefit liability                                (8,577)    (7,713)
                            Intangible asset                                            528        854
                            Accumulated other comprehensive income                       59         55 
                            Prepaid pension expense                               $  40,665  $  38,282 

        The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for defined benefit pension plans with accumulated benefit obligations in excess of plan assets were $11,744, $8,779, and $1,113, respectively, as of August 31, 2000, and $10,428, $8,487, and $971, respectively, as of August 31, 1999.

        Components of net periodic benefit cost for the fiscal years ended August 31, 2000, 1999, and 1998 included the following:

                                                                     2000       1999        1998  
                                 Service cost                     $   4,514  $   3,822   $   3,091
                                 Interest cost                        9,713      8,592       8,509
                                 Expected return on plan assets     (15,017)   (13,893)    (12,344)
                                 Amortization of prior service cost     470        477         444
                                 Amortization of transitional asset    (987)    (1,011)     (1,131)
                                 Recognized actuarial loss              265        236          55 
                                 Net periodic pension benefit     $  (1,042) $  (1,777)  $  (1,376)

        Weighted average assumptions in 2000 and 1999 included the following:

                                                                           2000   1999 
                                Discount rate                              8.2%   7.5%
                                Expected return on plan assets             9.4%   9.2%
                                Rate of compensation increase              5.1%   5.1%

        During 2000, the discount rate used to determine the projected benefit obligation was increased to 8.2 percent to more closely approximate rates on high-quality, long-term obligations.

        The company also has profit sharing and 401(k) plans to which both employees and the company contribute. At August 31, 2000, assets of the 401(k) plans included shares of the company’s common stock with a market value of approximately $10,151. The company’s cost of these plans was $5,138 in 2000, $4,521 in 1999, and $4,292 in 1998.

        Long-term debt at August 31, 2000 and 1999, consisted of the following:

                                                                                       2000       1999  
                           Commercial paper                                         $       -  $249,726
                           6% notes due February 2009 with an effective rate of
                              6.04%, net of unamortized discount of $351 in 2000
                              and $393 in  1999                                       159,649   159,607
                           8.375% notes due August 2010 with an effective rate of
                              8.398%, net of unamortized discount of $244             199,756         -
                           4.3% to 8.5% other notes, payable in installments to
                              2026 (secured in part by property, plant, and
                              equipment having a net book value of $148 at August
                              31, 2000)                                                25,038    26,234 
                                                                                      384,443   435,567
                           Less - Amounts payable within one year included in
                             current liabilities                                          201       368 
                                                                                    $ 384,242  $435,199 

        Future annual principal payments of long-term debt are as follows:

                                                      Fiscal Year        Amount
                                                   2001                $    201
                                                   2002                   2,045
                                                   2003                   1,094
                                                   2004                   3,578
                                                   2005                      89
                                                   2006 and beyond      377,436
                                                                       $384,443

        In 1996, the company negotiated a $250,000 multi-currency committed credit facility (the “Credit Facility”) with ten domestic and international banks. The Credit Facility has a term of five years, expiring in July 2001, with no provision for a reduction in commitments. The Credit Facility contains restrictions on the incurrence of indebtedness by subsidiaries, as well as financial and other covenants, including the restriction that the company’s ratio of total debt to capitalization may not exceed 60 percent. In July 1999, the company entered into an additional $250,000, 364-day committed credit facility (the “Revolving Credit Facility”), which was renewed in July 2000 and expires in July 2001. Each credit facility permits certain subsidiaries of the company to borrow under such facility, and the company guarantees these borrowings. The combined $500,000 under the Credit Facility and the Revolving Credit Facility support the company’s commercial paper program, which was initiated in July 1999. Interest rates under the credit facilities are based on the LIBOR rate or other rates, at the company’s option. The company pays an annual fee on the commitments based on the company’s debt rating and leverage ratio. No amounts were outstanding under either facility at August 31, 2000 and 1999.

        Amounts outstanding under the company’s commercial paper program ($236,706 in 2000 and $352,265 in 1999) had weighted average interest rates of 6.8 percent and 5.6 percent at August 31, 2000 and 1999, respectively. At August 31, 1999, $249,726 of commercial paper was classified as long-term as the company intended to refinance this amount through long-term debt instruments. As discussed below, the company refinanced $200,000 of long-term commercial paper in the fourth quarter of 2000. Additionally, the remaining portion of commercial paper which was classified as long-term at August 31, 1999 (approximately $50,000) was reclassified to short-term debt in the fourth quarter of 2000.

        At August 31, 2000, the company had complimentary uncommitted lines of credit totaling $128,853 for general operating purposes, of which $28,853 is designated as multi-currency. At August 31, 2000, the company had $20,285 of foreign currency short-term bank borrowings under the multi-currency lines of credit at a weighted-average interest rate of 5.35 percent. At August 31, 2000, $74,390 in letters of credit was outstanding, primarily under the domestic uncommitted line of credit.

        In January 1999, the company issued $160,000 in ten-year publicly traded notes bearing a coupon rate of 6.0 percent. Proceeds were used for the repayment of $80,000 in borrowings under the Credit Facility, of which $52,000 was outstanding under the domestic uncommitted line of credit at August 31, 1998. The remainder was used for general operating purposes including working capital requirements, capital expenditures, acquisitions, and share repurchases. In August 2000, the company issued $200,000 in ten-year publicly traded notes bearing a coupon rate of 8.375 percent. Proceeds were used for the repayment of borrowings under the commercial paper program. The fair values of the $160,000 and $200,000 notes, based on quoted market prices, were approximately $138,720 and $201,880, respectively, at August 31, 2000.

        Excluding the $160,000 and $200,000 notes, long-term debt recorded in the accompanying balance sheets approximates fair value based on the borrowing rates currently available to the company for bank loans with similar terms and average maturities.

        In January 1999, the stockholders approved an amendment to the corporation’s Restated Certificate of Incorporation to increase the corporation’s authorized shares of common stock from 80,000,000 to 120,000,000. The additional shares will be available for potential acquisitions, stock dividends and splits, and other purposes determined by the Board of Directors to be in the best interests of the corporation.

        The company has a shareholder rights plan under which one preferred stock purchase right is presently attached to and trades with each outstanding share of the company’s common stock. The plan, which was to have expired May 19, 1998, was amended in December 1997 and extended to May 19, 2008.

        The rights become exercisable and transferable apart from the common stock (a) on the date that a person or group announces that they have acquired 15 percent or more of the company’s common stock or (b) ten days after a person or group makes an unsolicited offer to acquire beneficial ownership of, or the right to obtain beneficial ownership of, 15 percent or more of the company’s common stock (unless such date is extended by the Board of Directors) or (c) 20 business days before the date on which a business combination is reasonably expected to be consummated involving a person who, if the business combination is consummated, has or would acquire beneficial ownership of, or the right to obtain beneficial ownership of, 15 percent or more of the company’s common stock and that person has directly or indirectly nominated a director of the company at the time the business combination is considered. The rights are not triggered if the Board of Directors is notified that reaching the trigger threshold was inadvertent and divestiture of sufficient stock is thereafter made. Once exercisable, each right entitles the holder to purchase one one-thousandth share of Series A Participating Preferred Stock at an exercise price of $160, subject to adjustment to prevent dilution. The rights have no voting power and, until exercised, no dilutive effect on net income per common share. The rights expire on May 19, 2008, and are redeemable under certain circumstances.

        If a person acquires 15 percent ownership, except in an offer approved under the plan by a majority of the disinterested nonemployee directors, each right not owned by the acquirer or related parties will entitle its holder to purchase, at the right’s exercise price, common stock or common stock equivalents having a market value immediately prior to the triggering of the right of twice that exercise price. In addition, after an acquirer obtains 15 percent ownership, if the company is involved in certain mergers, business combinations, or asset sales, each right not owned by the acquirer or related persons will entitle its holder to purchase, at the right’s exercise price, shares of common stock of the other party to the transaction having a market value immediately prior to the triggering of the right of twice that exercise price.

        The company has 1,000,000 shares of preferred stock authorized, 500,000 of which have been reserved for issuance under the shareholder rights plan. No shares of preferred stock had been issued at August 31, 2000 and 1999.

        During fiscal 1998, the company adopted SFAS No. 128, "Earnings per Share." Upon adoption, the company was required to restate previously reported annual and interim earnings per share in accordance with the provisions of SFAS No. 128. The adoption of SFAS No. 128 did not have a material impact on the computation or manner of presentation of the company's earnings per share.

        The following table represents a reconciliation of basic and diluted earnings per share at August 31:

                                                                                 2000      1999       1998  
                       Basic weighted average shares outstanding (thousands)    40,708     40,899     42,462
                       Add: Shares of common stock assumed issued upon
                       exercise of dilutive stock options (thousands)               19        194        560 
                       Diluted weighted average shares outstanding (thousands)  40,727     41,093     43,022

                       Net income used in the computation of basic and
                       diluted earnings per share                              $99,870  $ 124,343  $ 108,720

                       Earnings per Share:
                         Basic                                                 $  2.45  $    3.04  $    2.56
                         Diluted                                               $  2.45  $    3.03  $    2.53

        In 1990, stockholders approved the National Service Industries, Inc. Long-Term Incentive Program for the benefit of officers and other key employees. There were 1,750,000 treasury shares reserved for issuance under the program.

        In 1997, stockholders approved the National Service Industries, Inc. Long-Term Achievement Incentive Plan for the benefit of officers and other key employees. On January 5, 2000, the stockholders approved an amendment to the plan which, in addition to other modifications, increased the number of shares authorized for issuance under the plan from 1,750,000 to 5,750,000. Treasury shares have been reserved for issuance under the plan.

        Aspiration Achievement Incentive Awards were granted annually beginning in September 1996 under the Long-Term Achievement Incentive Plan. Shares may be earned and issued to participants based on a level of achievement of performance over three-year performance cycles. Amounts charged to compensation expense for 2000, 1999, and 1998 were $7,209, $9,244, and $7,203, respectively. During fiscal 2000, 176,033 shares were issued under the award for the first performance cycle ended August 31, 1999. No shares were issued under this award as of August 31, 1999.

        Generally, the stock options granted under both long-term incentive programs become exercisable in four equal annual installments beginning one year from the date of the grant.

        In January 1993, stockholders approved the National Service Industries, Inc. 1992 Nonemployee Directors’ Stock Option Plan, under which 100,000 treasury shares were reserved for issuance. The stock options granted under that plan become exercisable one year from the date of the grant.

        Under all stock option plans, the options expire ten years from the date of the grant and have an exercise price equal to the fair market value of the company’s stock on the date of the grant. At August 31, shares available for grant as options under all plans were 3,517,152 in 2000, 694,279 in 1999, and 1,236,574 in 1998, less shares required for the payment of outstanding Aspiration Achievement Incentive Awards (approximately 628,061 at August 31, 2000).

        Stock option transactions for the stock option plans and stock option agreements during the years ended August 31, 2000, 1999, and 1998 were as follows:

                                                                         Outstanding                  Exercisable       
                                                                                 Weighted                    Weighted
                                                                  Number of       Average      Number of      Average
                                                                   Shares     Exercise Price    Shares    Exercise Price
               Outstanding at August 31, 1997                    1,387,214        $ 30.35       731,914       $ 27.11
                 Granted                                           500,000          44.50
                 Exercised                                        (142,568)         26.32
                 Cancelled                                               -              -
               Outstanding at August 31, 1998                    1,744,646        $ 34.74       876,721       $ 29.05   
                 Granted                                           665,250        $ 35.24
                 Exercised                                         (21,357)         27.71
                 Cancelled                                        (122,955)         39.24
               Outstanding at August 31, 1999                    2,265,584        $ 34.78     1,110,084       $ 31.30   
                 Granted                                         1,144,598        $ 27.51
                 Exercised                                         (29,350)         27.44
                 Cancelled                                         (27,533)         32.14
               Outstanding at August 31, 2000                    3,353,299        $ 32.40     1,752,011       $ 32.28   

               Range of option exercise prices:
                 Officers and other key employees -
                    $17.83 - $29.72 (average life - 7.5 years)   1,505,104        $ 26.66       701,004       $ 25.94
                    $29.72 - $41.61 (average life - 6.7 years)   1,342,195        $ 34.83       782,757       $ 34.38
                    $41.61 - $59.44 (average life - 6.9 years)     443,500        $ 44.49       222,250       $ 44.49
                 Nonemployee directors -
                    $22.13 - $30.98 (average life - 5.9 years)      35,500        $ 27.44        19,000       $ 27.22
                    $35.40 - $44.25 (average life - 5.7 years)      27,000        $ 39.49        27,000       $ 39.49

        During fiscal 1997, the company adopted the disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based Compensation.” Accordingly, no compensation cost has been recognized for these stock option plans. Had compensation cost for the company’s stock option plans been determined based on the fair value at the grant date for awards in fiscal years 2000, 1999, and 1998, consistent with the provisions of SFAS No. 123, the company’s net income and earnings per share would have been reduced to the following pro forma amounts:

                                                                   2000       1999      1998  
                                    Pro Forma Information:
                                      Net income                 $ 94,166  $120,141  $ 106,297
                                      Basic earnings per share       2.31      2.94       2.50
                                      Diluted earnings per share     2.31      2.92       2.47

        The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model. The weighted average grant date fair value of options was $9.18, $13.70, and $12.23, for 2000, 1999, and 1998, respectively.

        The following weighted average assumptions were used to estimate fair value:

                                                                  2000      1999       1998  
                                     Dividend yield                 2.6%      2.6%       2.8%
                                     Expected volatility           24.4%     36.2%      18.1%
                                     Risk-free interest rate        6.9%      5.2%       6.1%
                                     Expected life of options   10 years  10 years   10 years
                                     Turnover rate                  5.0%      5.0%       5.0%

        In 1998, stockholders approved the National Service Industries, Inc. Employee Stock Purchase Plan for the benefit of eligible employees. Under the plan, employees may purchase, through payroll deduction, the company’s common stock at a 15 percent discount. Shares are purchased quarterly at 85 percent of the lower of the fair market value of the company’s common stock on the first business day of the quarterly plan period or on the last business day of the quarterly plan period. There were 1,500,000 treasury shares reserved for purchase under the plan, of which 1,218,926 shares remain available for purchase at August 31, 2000.

        It is the company’s policy to self insure for certain insurable risks consisting primarily of physical loss to property; business interruptions resulting from such loss; and workers’ compensation, comprehensive general, and auto liability. Insurance coverage is obtained for catastrophic property and casualty exposures as well as those risks required to be insured by law or contract. Based on an independent actuary’s estimate of the aggregate liability for claims incurred, a provision for claims under the self-insured program is recorded and revised annually.

        The activity in the self-insurance liability for each of the years ended August 31 was as follows:

                                                                   2000       1999        1998  
                                   Reserve, beginning of period $  47,613  $  55,826   $  69,596
                                   Expense                         10,271      5,302       3,482
                                   Payments                       (13,394)   (13,515)    (17,252)
                                   Reserve, end of period       $  44,490  $  47,613   $  55,826 

        The company leases certain of its buildings and equipment under noncancelable lease agreements. Minimum lease payments under noncancelable leases for years subsequent to August 31, 2000, are as follows: 2001 - $14,437; 2002 - $11,082; 2003 - $8,426; 2004 - $6,118; 2005 - $3,573; after 2005 - $19,277.

        Total rent expense was $19,017 in 2000, $16,536 in 1999, and $12,237 in 1998.

        Approximately 48 percent of the company’s total work force is covered by collective bargaining agreements. Collective bargaining agreements representing 14 percent of the company’s total work force will expire within one year. Management believes that the renewal of the collective bargaining agreements will not have a material adverse effect on the company’s financial condition or results of operations.

        The company is subject to various legal claims arising in the normal course of business out of the conduct of its current and prior businesses, including patent infringement and product liability claims. Based on information currently available and based upon the advice of counsel, it is the opinion of management that the ultimate resolution of pending and threatened legal proceedings will not have a material adverse effect on the company’s financial condition or results of operations. However, in the event of unexpected future developments or information, it is possible that the ultimate resolution of such matters, if unfavorable, could have a material adverse effect on the company’s results of operations in a particular future period. The company’s reserves for known legal claims, which are included in current liabilities in the accompanying balance sheets, were $10,300 and $10,400 at August 31, 2000 and 1999, respectively. The actual costs of resolving legal claims may be substantially lower or higher than that reserved. The company does not believe that the amount of such costs below or in excess of that accrued is reasonably estimable.

        The company’s operations, as well as similar operations of other companies, are subject to comprehensive laws and regulations relating to the generation, storage, handling, transportation, and disposal of hazardous substances and solid and hazardous wastes and to the remediation of contaminated sites. Permits and environmental controls are required for certain of the company’s operations to limit air and water pollution, and these permits are subject to modification, renewal, and revocation by issuing authorities. The company believes that it is in substantial compliance with all material environmental laws, regulations, and permits. On an ongoing basis, the company incurs capital and operating costs relating to environmental compliance. Environmental laws and regulations have generally become stricter in recent years, and the cost of responding to future changes may be substantial.

        The company’s environmental reserves, which are included in current liabilities, totaled $10,160 and $11,000 at August 31, 2000 and 1999, respectively, and were calculated on an undiscounted basis. The actual cost of environmental issues may be substantially lower or higher than that reserved due to the difficulty in estimating such costs, potential changes in the status of government regulations, and the inability to determine the extent to which contributions will be available from other parties. The company does not believe that any amount of such costs below or in excess of that accrued is reasonably estimable.

        Certain environmental laws, such as Superfund, can impose liability for the entire cost of site remediation upon each of the current or former owners or operators of a site or parties who sent waste to a site where a release of a hazardous substance has occurred regardless of fault or the lawfulness of the original disposal activity. Generally, where there are a number of potentially responsible parties (“PRPs”) that are financially viable, liability has been apportioned based on the type and amount of waste disposed of by each party at such disposal site and the number of financially viable PRPs, although no assurance as to the method of apportioning the liability can be given as to any particular site.

        The company is currently a party to, or otherwise involved in, legal proceedings in connection with state and federal Superfund sites, two of which are located on property owned by the company. Except for the Crymes Landfill and M&J Solvents matters in Georgia, the company believes its liability is de minimis at each of the sites which it does not own where it has been named as a PRP. At the Crymes Landfill and M&J Solvents sites in Georgia, since the matters are currently in the investigative phase, the company does not know whether its liability is de minimis but believes that its exposure at each of the sites is not likely to result in a material adverse effect on the company due to its limited involvement at the sites and the number of viable PRPs. For property which the company owns on Seaboard Industrial Boulevard in Atlanta, Georgia, the company has conducted an investigation on its and adjoining properties and submitted a Compliance Status Report (“CSR”) to the State of Georgia Environmental Protection Division (“EPD”) pursuant to the Georgia Hazardous Site Response Act. The CSR is subject to EPD’s final approval. Until the CSR is finalized, the company will not be able to determine if remediation will be required, if the company will be solely responsible for the cost of such remediation, or whether such cost is likely to result in a material adverse effect on the company. For property which the company owns on East Paris Street in Tampa, Florida, the company has been requested by the State of Florida to clean up chlorinated solvent contamination in the groundwater on the property and on surrounding property known as Seminole Heights Solvent Site and to reimburse approximately $430 of costs already incurred by the State of Florida in connection with such contamination. The company believes that it has a strong defense due to likely off-site sources of the contamination and because contamination from the property, if any, was due to prior owners and not the company’s operations. At this time, it is too early to quantify the company’s potential exposure or the likelihood of an adverse result.

        In connection with the sale of the North Bros. business and 29 of the company’s textile rental plants in 1997, the company has retained environmental liabilities arising from events occurring prior to the closing, subject to certain exceptions. The company has received notice from the buyer of the textile rental plants of the alleged presence of perchloroethylene contamination on one of the properties involved in the sale. The company has since asserted an indemnification claim against the company from which it bought the property. The prior owner is currently conducting an investigation of the contamination at its expense, subject to a reservation of rights. At this time, it is too early to quantify the company’s potential exposure in this matter, the likelihood of an adverse result, or the possibility that the company may be fully or partially indemnified.

        The State of New York has filed a lawsuit against the company alleging that the company is responsible as a successor to Serv-All Uniform Rental Corp. for past and future response costs in connection with the release or potential release of hazardous substances at and from the Blydenburgh Landfill in Islip, New York. The company believes that it is not a successor to Serv-All Uniform Rental Corp. and therefore has no liability with respect to the Blydenburgh Landfill, and it has responded to the lawsuit accordingly. At this stage of the litigation, it is too early to quantify the company’s potential exposure or the likelihood of an adverse result.

        During 1997, the company conducted reviews of the textile rental, European chemical, and corporate operations as a part of management’s strategic initiatives to examine under-performing operations and to position the company for growth. As a result of the reviews, the company approved a significant restructuring program and recorded a related charge of $9,600 during the fourth quarter of 1997. The accrual included severance and union-related costs totaling $2,950 for 120 employees of the textile rental, chemical, and envelope segments, all of whom have since been terminated, and $6,650 in exit expenses to close certain facilities and consolidate the operations of others in the textile rental segment. Exit expenses include costs of unexpired leases and costs to dispose of facilities.

        The major components of the 1997 restructuring charges and related activity are as follows:

                                                              Reserve,                           Reserve,
                                                            Beginning       Cash      Non-Cash    End of
                                                            of Period     Payments   Adjustments  Period 
                        2000
                        Severance and union related costs      $  163       (163)          -      $    -
                        Exit costs                             $  464       (179)          -      $  285

                        1999
                        Severance and union related costs      $  630       (290)       (177)(1)  $  163
                        Exit costs                             $3,600       (378)     (2,758)(1)  $  464

                        1998
                        Severance and union related costs      $2,745     (2,115)          -      $  630
                        Exit costs                             $4,740       (390)       (750)(1)  $3,600

__________

(1) The restructuring reserves were reduced because the company realized lower costs than originally anticipated and also revised its estimate for certain expenses included in the original restructuring plan due to lease terminations or other changes.

        As a further result of the 1997 reviews, the company recognized long-lived asset impairments totaling $43,500. Textile rental assets to be disposed of in under-performing branches were reduced by $22,300 to state them at their estimated fair value less costs to sell. After the charge, the remaining net book value of these assets was immaterial. Fixed assets held for use by the textile rental, European chemical, and corporate units were reduced by $12,400 and related intangibles were reduced by $8,800. Impairments were recognized for those assets where the sum of estimated undiscounted future cash flows was less than the carrying amount of the assets, including related goodwill. Fair market values were established based on independent appraisals, comparable sales or purchases, and expected future cash flows discounted at the company’s cost of capital. Factors leading to the impairments were a combination of the results of the reviews discussed above, historical losses, anticipated future losses, and inadequate cash flows.

        The losses resulting from the accruals and impairments are included in “Restructuring expense, asset impairments, and other charges” in the Consolidated Statements of Income.

        During 1999, management performed an extensive review of the assets that were to be disposed of and the remaining restructuring accruals. In addition to realizing lower than anticipated costs, management determined that it was more economically feasible to continue to operate certain locations that were to be disposed of in the original plan. As a result, in 1999 the related reserve and impairments were reversed and $9,291 of income was recorded and included in “Restructuring expense, asset impairments, and other charges” in the Consolidated Statements of Income.

        Acquisition spending in 2000 totaled $26,344 and primarily related to the cash-out of remaining Holophane Corporation (“Holophane”) shares. The company purchased Holophane in July 1999 for approximately $470,811. Of the total purchase price, $454,564 was paid during fiscal 1999 and $16,214 was paid during fiscal 2000. The remaining $10,130 spent in 2000 related to several small acquisitions in the textile rental segment. These acquisitions were accounted for as purchases, and accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on estimated fair values. As a result, goodwill of $2,564 was recorded and is being amortized over periods ranging from 10 to 20 years. Identifiable intangibles of $5,539 are being amortized over periods ranging from 3 to 7 years and primarily include customer lists and non-compete agreements. Results of operations after the acquisition date are included in the Consolidated Statements of Income.

        There were no significant divestitures in 2000.

        Acquisition spending in 1999 totaled $534,977 ($534,132 in cash and 26,495 shares valued at $845) and was primarily related to the lighting equipment and envelope segments. The acquisitions were accounted for as purchases and, accordingly, the purchase price was allocated to the assets acquired and liabilities assumed based on estimated fair values.

        The lighting equipment segment acquired four companies during 1999. The largest acquisition was Holophane, a manufacturer of premium quality, highly engineered lighting fixtures and systems, which was purchased in July 1999 for approximately $470,811. The preliminary allocation of the purchase price resulted in additional goodwill of $251,781, which is being amortized over 40 years, and identifiable intangibles of $145,725, which are being amortized over periods ranging from 2 to 40 years. Identifiable intangibles include trade names, trademarks, patented technology, distribution network, trained workforce, and restrictive covenants. In 2000, certain adjustments were made to the purchase price allocation resulting in additional goodwill of approximately $1,324. These adjustments primarily related to severance charges and costs associated with the termination of a joint venture in Australia.

        Results of operations after the acquisition date of Holophane are included in the Consolidated Statements of Income. The following pro forma information has been prepared assuming the Holophane acquisition had taken place at the beginning of the respective fiscal year of the company. The pro forma information includes adjustments for interest expense on debt incurred to effect the acquisition, the interest income forgone on the cash portion paid for the acquisition, additional depreciation based on the fair market value of property, plant, and equipment, and amortization of goodwill and intangibles resulting from this transaction. The pro forma financial information does not purport to reflect the financial position or results of operations that actually would have resulted had the transaction occurred as of the date indicated or to project the results of operations for any future period.

                                                                            1999        1998  
                                    Pro Forma Information (Unaudited)
                                      Sales and Service Revenues        $2,422,991  $2,240,322
                                      Net income                           118,403     102,102
                                      Basic earnings per share                2.90        2.40
                                      Diluted earnings per share              2.88        2.37

        Other acquisitions in the lighting equipment segment included the September 1998 purchase of certain assets of GTY Industries (d/b/a “Hydrel”), a manufacturer of architectural-grade light fixtures for landscape, in-grade, and underwater applications; the April 1999 purchase of certain assets of Peerless Corporation, a manufacturer of high performance indirect/direct suspended lighting products; and the July 1999 purchase of C&G Carandini SA, a manufacturer of exterior lighting fixtures. In February 1999, the envelope segment acquired substantially all of Gilmore Envelope, an envelope manufacturer headquartered in Los Angeles, California. The company also made several minor acquisitions in the textile rental segment.

        Divestitures in 1999 primarily related to the envelope segment’s sale of Techno-Aide/Stumb Metal Products in June 1999 for approximately $4,191. The envelope segment recognized a pretax gain of $1,990 on the transaction. Other divestitures during 1999 related to the sale of industrial contracts in the textile rental segment and were not material.

        During 1999, management performed an extensive review of the liabilities recorded in connection with the textile rental segment’s 1997 uniform plants divestiture. In 1997, the textile rental segment accrued for items related to the sale of its uniform plants including environmental exposures, severance agreements, and costs to return leased facilities to pre-lease condition. The company realized lower costs than originally anticipated associated with these items and, as a result, reduced the liability and recorded a gain of $3,511.

        Acquisition spending in 1998 totaled $45,305 and was primarily related to the chemical and envelope segments. In November 1997, the chemical segment purchased Pure Corporation, a specialty chemical company with its core businesses in Indiana, Pennsylvania, and New York. In March 1998, the envelope segment purchased Allen Envelope Corporation, a single-plant, Pennsylvania-based envelope manufacturer, providing the segment with access to markets in the Northeast. In July 1998, the company purchased Calman Australia Pty Ltd (“Calman”). Calman, located in Victoria, Australia is a manufacturer of cleaning, maintenance, sanitation and industrial products, chemicals, supplies, and accessories. Additionally, the company paid certain performance payments associated with a prior year chemical acquisition. Divestitures during 1998 related to the textile rental segment and excess properties and were not material.

        The company accounts for income taxes using the asset and liability approach as prescribed by SFAS No. 109, “Accounting for Income Taxes.” This approach requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Using the enacted tax rates in effect for the year in which the differences are expected to reverse, deferred tax liabilities and assets are determined based on the differences between the financial reporting and the tax basis of an asset or liability.

        The provision for income taxes consists of the following components:

                                                                          2000     1999      1998  
                                Provision for current Federal taxes     $51,144  $ 49,221  $ 54,997
                                Provision for current state taxes         2,500     2,957     3,143
                                Provision for current foreign taxes       4,657     2,373     1,952
                                Provision for deferred taxes              5,015    19,428     4,309 
                                      Total provision for income taxes  $63,316  $ 73,979  $ 64,401

        A reconciliation from the Federal statutory rate to the total provision for income taxes is as follows:

                                                                              2000      1999     1998  
                           Federal income tax computed at statutory rate    $ 57,115  $69,414  $ 60,592
                           State income tax, net of Federal income tax
                                benefit                                        3,340    2,594     2,144
                           Foreign and other, net                              2,861    1,971     1,665
                                     Total provision for income taxes       $ 63,316  $73,979  $ 64,401

        Components of the net deferred income tax liability at August 31, 2000 and 1999 include:

                                                                            2000       1999  
                                     Deferred tax liabilities:
                                       Depreciation                      $  37,218  $  30,946
                                       Amortization of linens               22,941     25,416
                                       Pension                              16,466     14,134
                                       Intangibles                          53,251     52,006
                                       Other                                35,782     40,925
                                         Total deferred tax liabilities    165,658    163,427
                                     Deferred tax assets:
                                       Self-insurance                      (21,080)   (22,203)
                                       Deferred compensation               (24,476)   (23,348)
                                       Bonuses                              (5,638)    (5,017)
                                       Foreign tax losses                     (643)      (807)
                                       Restructuring and asset impairment  (19,638)   (19,136)
                                       Asset disposition reserves             (192)       (74)
                                       Other assets                         (8,123)    (7,556)
                                         Total deferred tax assets         (79,790)   (78,141)
                                     Net deferred tax liability          $  85,868  $  85,286

        At August 31, 2000, the company had foreign net operating loss carryforwards of $1,761 expiring in fiscal years 2001 through 2004.

                                           Sales and             Income               Basic     Diluted
                                            Service     Gross    before      Net    Earnings   Earnings
                                           Revenues    Profit     Taxes    Income   per Share  per Share 

                           2000
                           1st Quarter    $ 620,010  $ 247,724  $ 39,852  $24,390    $  .60     $  .60
                           2nd Quarter      605,413    240,623    33,130   20,276       .50        .50
                           3rd Quarter      645,040    258,182    33,950   20,776       .51        .51
                           4th Quarter      695,718    277,645    56,254   34,428       .84        .84

                           1999
                           1st Quarter    $ 518,926  $ 213,488  $ 40,930  $25,704    $  .62     $  .62
                           2nd Quarter      510,359    201,357    39,427   24,762       .60        .60
                           3rd Quarter      569,838    228,849    48,635   30,541       .75        .75
                           4th Quarter      620,106    248,685    69,330   43,336      1.07       1.07

                                                                                                          Capital
                                        Sales and                                                      Expenditures
                                         Service    Operating       Total   Depreciation Amortization       and
                                        Revenues  Profit (Loss)    Assets      Expense      Expense    Acquisitions

               2000
               Lighting Equipment     $1,511,641    $144,149    $1,145,927    $ 31,792      $14,994      $  68,721
               Chemical                  511,070      48,699       241,645       7,705        3,447          9,946
               Textile Rental(1)         321,522      28,208       222,957      14,154        1,432         30,795
               Envelope(2)               221,948       5,096       151,003       6,892          979         22,890 
                                       2,566,181     226,152     1,761,532      60,543       20,852        132,352
               Corporate                             (18,089)       58,607       2,317                       2,390
               Interest Expense, net                 (44,877)                                                      
                                      $2,566,181    $163,186    $1,820,139    $ 62,860      $20,852      $ 134,742 
               1999
               Lighting Equipment     $1,220,602    $121,755    $1,073,936    $ 20,351      $ 2,322      $ 541,649
               Chemical                  487,783      45,206       233,461       6,681        3,480         10,980
               Textile Rental(1)         309,115      42,935       203,509      13,666          860         20,669
               Envelope(2)               201,729      17,662       139,755       5,319          969         32,592 
                                       2,219,229     227,558     1,650,661      46,017        7,631        605,890
               Corporate                             (15,169)       45,128       2,174                         527
               Interest Expense, net                 (14,067)                                                      
                                      $2,219,229    $198,322    $1,695,789    $ 48,191      $ 7,631      $ 606,417 
               1998
               Lighting Equipment     $1,105,255    $109,286    $  397,962    $ 18,819      $   295      $  37,541
               Chemical                  454,532      36,460       235,269       6,387        2,807         20,217
               Textile Rental(1)         312,746      29,734       193,347      12,836        1,076         21,595
               Envelope                  158,777      13,293       103,087       3,895          488         47,111 
                                       2,031,310     188,773       929,665      41,937        4,666        126,464
               Corporate                             (14,903)       81,019       2,243                         875
               Interest Expense, net                    (749)                                                      
                                      $2,031,310    $173,121    $1,010,684    $ 44,180      $ 4,666      $ 127,339 

__________

(1) Textile rental segment 1999 operating profit included $9,291 of income related to the reversal of restructuring reserves and asset impairments. Gains resulting from the sale of businesses were $186 in 2000, $9,230 in 1999, and $2,449 in 1998. Gains on sale of businesses for 1999 included $3,511 related to the 1997 sale of textile rental plants to G&K Services, Inc. See Note 7: Acquisitions and Divestitures.
(2) Envelope segment operating profit included gains resulting from the sale of businesses of $170 in 2000 and $1,990 in 1999.

        The geographic distribution of the company’s sales and service revenues, operating profit (loss), and long-lived assets is summarized in the following table:

                                                                   2000         1999        1998    

                               Sales and service revenues(1)
                               United States                   $ 2,327,460  $2,061,774  $ 1,898,947
                               Canada                              104,335      85,829       79,435
                               European countries                   81,246      46,723       39,936
                               Other                                53,140      24,903       12,992 
                                                               $ 2,566,181  $2,219,229  $ 2,031,310 

                               Operating profit (loss)
                               United States                   $   155,678  $  195,470  $   174,447
                               Canada                                6,342       1,170          152
                               European countries                     (891)        934       (2,562)
                               Other                                 2,057         748        1,084 
                                                               $   163,186  $  198,322  $   173,121 

                               Long-lived assets(2)
                               United States                   $ 1,003,062  $  953,959  $   373,252
                               Canada                               15,196      14,719       14,196
                               European countries                   26,041      32,491       12,641
                               Other                                14,116      14,207        3,544 
                                                               $ 1,058,415  $1,015,376  $   403,633 

__________

(1) Sales are attributed to each country based on the selling location.
(2) Long-lived assets include net property, plant, and equipment, goodwill and intangibles, and other long-term assets.

        None.

        The information required by this item, with respect to directors, is included under the caption “Information Concerning Nominees” of the company’s proxy statement for the annual meeting of stockholders to be held December 21, 2000, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference.

        The information required by this item, with respect to beneficial ownership reporting, is included under the caption “Section 16(a) Beneficial Ownership Reporting Compliance” of the company’s proxy statement for the annual meeting of stockholders to be held December 21, 2000, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference.

        Executive officers of the company are elected at the organizational meeting of the Board of Directors following the annual meeting of stockholders.

       Name and age of each executive officer  Business experience of executive officers during the five years ended August 31, 2000
       and positions held with the company     and term in office.                                                                  

       James S. Balloun, age 62                Mr. Balloun was elected Chairman and Chief Executive Officer effective February, 1996
         Chairman, President, and Chief        and assumed the role of President in October, 1996. Previously, he served McKinsey &
         Executive Officer and Director        Company as a Director.

       George H. Gilmore, Jr., age 51          Mr. Gilmore was elected Executive Vice President and Group President effective June,
         Executive Vice President and Group    1999. Previously, he served as President of Moore Business Systems from 1994 to 1995,
         President                             President of Moore Document Solutions from 1995 to 1997, and as President and Chief
                                               Operating Officer of Calmat Co. from 1998 to 1999.

       David Levy, age 63                      Mr. Levy was elected Executive Vice President, Administration and Counsel in October,
         Executive Vice President,             1992. He served as Counsel until March 2000. From 1982 through September, 1992, he
         Administration and Director           served as Senior Vice President, Secretary and Counsel.

       Brock A. Hattox, age 52                 Mr. Hattox was elected Executive Vice President and Chief Financial Officer effective
         Executive Vice President and Chief    September, 1996. Previously, he served McDermott International, Inc. as Chief
         Financial Officer                     Financial Officer from 1991 to 1996.

       Stewart A. Searle III, age 49           Mr. Searle was elected Senior Vice President, Planning and Development effective
         Senior Vice President, Planning and   June, 1996. Previously, he served four years with Equifax as Senior Vice President of
         Development                           Development.

       Joseph G. Parham, Jr., age 51           Mr. Parham was elected Senior Vice President, Human Resources effective June, 2000.
         Senior Vice President, Human          Previously, he served as President and Chief Operating Officer of Polaroid Eyewear
         Resources                             from 1999 to 2000, and as Senior Vice President, Human Resources from 1994
                                               to 1999.

        The information required by this item is included under the captions “Compensation of Directors,” “Other Information Concerning the Board and its Committees,” “Compensation Committee Interlocks and Insider Participation,” “Summary Compensation Table,” “Option Grants in Last Fiscal Year,” “Aggregated Option Exercises and Fiscal Year-End Option Values,” “Long-Term Incentive Plans — Awards in Last Fiscal Year,” “Employment Contracts, Severance Arrangements, and Other Agreements,” and “Pension and Supplemental Retirement Benefits” of the company’s proxy statement for the annual meeting of stockholders to be held December 21, 2000, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference.

        The information required by this item is included under the caption “Beneficial Ownership of the Corporation’s Securities” of the company’s proxy statement for the annual meeting of stockholders to be held December 21, 2000, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference.

        The information required by this item is included under the caption “Certain Relationships and Transactions” of the company’s proxy statement for the annual meeting of stockholders to be held December 21, 2000, filed with the Commission pursuant to Regulation 14A, and is incorporated herein by reference.

(a) The following documents are filed as a part of this report:

    (1) Report of Management

        Report of Independent Public Accountants

        Consolidated Balance Sheets - August 31, 2000 and 1999

        Consolidated Statements of Income for the years ended August 31, 2000, 1999, and 1998

        Consolidated Statements of Stockholders' Equity and Comprehensive Income for the years ended
                August 31, 2000, 1999, and 1998

        Consolidated Statements of Cash Flows for the years ended August 31, 2000, 1999, and 1998

        Notes to Consolidated Financial Statements

    (2) Financial Statement Schedules:

        Report of Independent Public Accountants on Schedule II

        Schedule Number

                  II - Valuation and Qualifying Accounts

        Any of schedules I through V not listed above have been omitted because they are not applicable or the required  information
        is included in the consolidated financial statements or notes thereto.

    (3) Exhibits filed with this report (begins on next page):

        Copies of such materials will be furnished to stockholders upon request at a nominal rate.  Requests should be sent to Helen
        D. Haines,  Vice President and Secretary,  National  Service  Industries,  Inc., P.O. Box 7158,  Midtown  Station,  Atlanta,
        Georgia 30357-0158.

Page 39



                                                            EXHIBIT LIST
                                                 NATIONAL SERVICE INDUSTRIES, INC. 

        EXHIBIT 3               (a) Amended and Restated Certificate        Reference is made to Exhibit 3 of
                                    of Incorporation                        registrant's Form 10-Q for the
                                                                            quarter ended February 28, 1998,
                                                                            which is incorporated herein by
                                                                            reference.

                                (b) Certificate of Amendment of             Reference is made to Exhibit 3(a) of
                                    Restated Certificate of                 registrant's Form 10-Q for the
                                    Incorporation                           quarter ended November 30, 1998,
                                                                            which is incorporated herein by
                                                                            reference.

                                (c) By-Laws as Amended and Restated         Page 59
                                    October 5, 2000


        EXHIBIT 4               (a) Amended and Restated Rights             Reference is made to Exhibit 4.1 of
                                    Agreement dated as of December 17,      registrant's Form 8-A/A as filed
                                    1997 between National Service           with the Commission on December 17,
                                    Industries, Inc. and Wachovia Bank,     1997, which is incorporated herein
                                    N.A. (replacing Wachovia Bank, N.A.     by reference.
                                    with First Chicago Trust Company)

                                (b) First Amendment dated as of             Reference is made to Exhibit 1 of
                                    April 30, 1998 between National         registrant's Form 8-A/A-3 as filed
                                    Service Industries, Inc. and First      with the Commission on June 22,
                                    Chicago Trust Company of New York,      1998, which is incorporated herein
                                    to the Amended and Restated Rights      by reference.
                                    Agreement, dated as of December 17,
                                    1997 between National Service
                                    Industries, Inc. and Wachovia Bank,
                                    N.A

                                (c) Second Amendment dated as of            Reference is made to Exhibit 1 of
                                    January 6, 1999 between National        registrant's Form 8-A/A-4 as filed
                                    Service Industries, Inc. and First      with the Commission on January 12,
                                    Chicago Trust Company of New York,      1999, which is incorporated herein
                                    to the Amended and Restated Rights      by reference.
                                    Agreement, dated as of December 17,
                                    1997 between National Service
                                    Industries, Inc. and First Chicago
                                    Trust Company of New York, as Rights
                                    Agent, as amended.

        EXHIBIT 10(i)A          (1) US$250,000,000 Credit Agreement         Reference is made to Exhibit10(i)A
                                    dated as of July 23, 1996 among         of registrant's Form 10-Q for the
                                    National Service Industries,            quarter ended May 31, 1998, which is
                                    Inc., Certain of its                    incorporated herein by reference.
                                    Subsidiaries, Certain Listed
                                    Banks, Wachovia Bank of Georgia,
                                    N.A., as Agent, and Nationsbank,
                                    N.A. (South) and SunTrust Bank,
                                    Atlanta, as Co-Agents
Page 40


                                (2) US$250,000,000 Credit Agreement,        Reference is made to Exhibit(b)(8)
                                    dated as of July 15, 1999, among        of registrant's Schedule 14D-1 as
                                    National Service Industries,            filed with the Commission on June
                                    Inc., Wachovia Bank, N.A., The          25, 1999, as amended and
                                    First National Bank of Chicago,         supplemented by Amendment No. 2,
                                    Banc One Capital Markets, Inc.,         filed July 20, 1999, which is
                                    Wachovia Securities, Inc.,              incorporated herein by reference.
                                    Commerzbank AG, New York
                                    Branch, ABN Amro, N.V., and the
                                    other banks listed therein.

                                (3) Commercial Paper Dealer                 Reference is made to Exhibit (b)(4)
                                    Agreement, dated as of July 16,         of registrant's Schedule 14D-1 as
                                    1999, between National Service          filed with the Commission on June
                                    Industries, Inc. and Goldman,           25, 1999, as amended and
                                    Sachs & Co.                             supplemented by Amendment No. 2,
                                                                            filed July 20, 1999, which is
                                                                            incorporated herein by reference.

                                (4) Commercial Paper Dealer                 Reference is made to Exhibit (b)(5)
                                    Agreement, dated as of July 16,         of registrant's Schedule 14D-1 as
                                    1999, between National Service          filed with the Commission on June
                                    Industries, Inc. and J.P. Morgan        25, 1999, as amended and
                                    Securities, Inc.                        supplemented by Amendment No. 2,
                                                                            filed July 20, 1999, which is
                                                                            incorporated herein by reference.

                                (5) Commercial Paper Dealer                 Reference is made to Exhibit (b)(6)
                                    Agreement, dated as of July 16,         of registrant's Schedule 14D-1 as
                                    1999, between National Service          filed with the Commission on June
                                    Industries, Inc. and Wachovia           25, 1999, as amended and
                                    Securities, Inc.                        supplemented by Amendment No. 2,
                                                                            filed July 20, 1999, which is
                                                                            incorporated herein by reference.

                                (6) Commercial Paper Dealer                 Reference is made to Exhibit (b)(7)
                                    Agreement, dated as of July 16,         of registrant's Schedule 14D-1 as
                                    1999, between National Service          filed with the Commission on June
                                    Industries, Inc. and The First          25, 1999, as amended and
                                    National Bank of Chicago.               supplemented by Amendment No. 2,
                                                                            filed July 20, 1999, which is
                                                                            incorporated herein by reference.

        EXHIBIT 10(iii)A        Management Contracts and
                                Compensatory Arrangements:

                                (1) Amended and Restated Executives'        Page 76
                                    Deferred Compensation Plan,
                                    Effective as of October 4, 2000
Page 41


                                (2) (a)Restated and Amended                 Reference is made to Exhibit
                                    Supplemental Retirement Plan for        10(iii)A(c)-(i) of registrant's Form
                                    Executives of National Service          10-K for the fiscal year ended
                                    Industries, Inc.                        August 31, 1993, which is
                                                                            incorporated herein by reference.

                                (b) Amendment to Restated and               Reference is made to Exhibit
                                    Amended Supplemental Retirement         10(iii)A(a) of registrant's Form
                                    Plan for Executives of National         10-Q for the quarter ended February
                                    Service Industries, Inc.                28, 1994, which is incorporated
                                                                            herein by reference.

                                (c) Amendment No. 2 to Restated and         Reference is made to Exhibit
                                    Amended Supplemental Retirement         10(iii)A(3)(e) of registrant's Form
                                    Plan for Executives of National         10-K for the fiscal year ended
                                    Service Industries, Inc., Dated         August 31, 1996, which is
                                    August 31, 1996                         incorporated herein by reference.

                                (d) Amendment No. 3 to Restated and         Reference is made to Exhibit
                                    Amended Supplemental Retirement         10(iii)A(1)(a) of registrant's Form
                                    Plan for Executives of National         10- Q for the quarter ended May 31,
                                    Service Industries, Inc., Dated         2000, which is incorporated herein
                                    September 18, 1996                      by reference.

                                (e) Amendment No. 4 to Restated and         Reference is made to Exhibit
                                    Amended Supplemental Retirement         10(iii)A(1)(b) of registrant's Form
                                    Plan for Executives of National         10-Q for the quarter ended May 31,
                                    Service Industries, Inc., Dated         2000, which is incorporated herein
                                    December 1, 1996                        by reference.

                                (f) Appendix B to Restated and              Reference is made to Exhibit
                                    Amended Supplemental Retirement         10(iii)A(e) of registrant's Form
                                    Plan for Executives of National         10-Q for the quarter ended February
                                    Service Industries, Inc., Effective     29, 1996, which is incorporated
                                    February 1, 1996                        herein by reference.

                                (g) Appendix C to Restated and              Reference is made to Exhibit
                                    Amended Supplemental Retirement         10(iii)A(d) of registrant's Form
                                    Plan for Executives of National         10-Q for the quarter ended May 31,
                                    Service Industries, Inc., Effective     1996, which is incorporated herein
                                    May 31, 1996                            by reference.

                                (h) Appendix D to Restated and              Reference is made to Exhibit
                                    Amended Supplemental Retirement         10(iii)A(1)(c) of registrant's Form
                                    Plan for Executives of National         10- Q for the quarter ended May 31,
                                    Service Industries, Inc., Effective     2000, which is incorporated herein
                                    October 18, 1996                        by reference.

                                (i) Appendix E to Restated and              Reference is made to Exhibit
                                    Amended Supplemental Retirement         10(iii)A(f) of registrant's Form
                                    Plan for Executives of National         10-K for the fiscal year ended
                                    Service Industries, Inc. effective      August 31, 1999, which is
                                    September 18, 1996.                     incorporated herein by reference.
Page 42


                                (j) Appendix F to Restated and              Reference is made to Exhibit
                                    Amended Supplemental Retirement         10(iii)A(g) of registrant's Form
                                    Plan for Executives of National         10-K for the fiscal year ended
                                    Service Industries, Inc. effective      August 31, 1999, which is
                                    June 1, 1999.                           incorporated herein by reference.

                                (k) Appendix G to Restated and              Reference is made to Exhibit
                                    Amended Supplemental Retirement         10(iii)A(1)(d) of registrant's Form
                                    Plan for Executives of National         10-Q for the quarter ended May 31,
                                    Service Industries, Inc., Effective     2000, which is incorporated herein
                                    May 15, 2000                            by reference.

                                (3) (a) The National Service                Reference is made to Exhibit
                                    Industries, Inc. Senior                 10(iii)A(f) of registrant's Form
                                    Management Benefit Plan, Dated          10-K for the fiscal year ended
                                    August 15, 1985                         August 31, 1985, which is
                                                                            incorporated herein by reference.

                                    (b) First Amendment to National         Reference is made to Exhibit
                                    Service Industries, Inc. Senior         10(iii)A(e)-(ii) of registrant's
                                    Management Benefit Plan, Dated          Form 10-K for the fiscal year ended
                                    September 21, 1989                      August 31, 1989, which is
                                                                            incorporated herein by reference.

                                    (c) Second Amendment to National        Reference is made to Exhibit
                                    Service Industries, Inc. Senior         10(iii)A(d)(iii) of registrant's
                                    Management Benefit Plan, Dated          Form 10-K for the fiscal year ended
                                    September 16, 1994                      August 31, 1994, which is
                                                                            incorporated herein by reference.

                                    (d) Third Amendment to National         Reference is made to Exhibit
                                    Service Industries, Inc. Senior         10(iii)A(4)(d) of registrant's Form
                                    Management Benefit Plan, Dated          10- K for the fiscal year ended
                                    August 31, 1996                         August 31, 1996, which is
                                                                            incorporated herein by reference.

                                (4) (a) Severance Protection                Reference is made to Exhibit
                                    Agreement between National              10(iii)A(h) of registrant's Form
                                    Service Industries, Inc. and            10-K for the fiscal year ended
                                    David Levy                              August 31, 1989, which is
                                                                            incorporated herein by reference.

                                    (b) Amendment to Severance              Reference is made to Exhibit
                                    Protection Agreement between            10(iii)A(5)(b) of registrant's Form
                                    National Service Industries, Inc.       10- K for the fiscal year ended
                                    and David Levy, Dated August 31,        August 31, 1996, which is
                                    1996                                    incorporated herein by reference.

                                (5) (a) Severance Protection                Reference is made to Exhibit
                                    Agreements between National             10(iii)A(c) of registrant's Form
                                    Service Industries, Inc. and            10-Q for the quarter ended February
                                    (i)  James S. Balloun                   29, 1996, which is incorporated
                                       (February 1, 1996)                   herein by reference.
                                    (ii)  Stewart A. Searle III
                                       (June 19, 1996)
Page 43


                                    (b) Amendment to Severance              Reference is made to Exhibit
                                    Protection Agreements, Dated August     10(iii)A(6)(b) of registrant's Form
                                    31, 1996                                10-K for the fiscal year ended
                                                                            August 31, 1996, which is
                                                                            incorporated herein by reference.

                                (6) Severance Protection Agreements         Reference is made to Exhibit
                                    between National Service                10(iii)A(34) of registrant's Form 10-K
                                    Industries, Inc. and                    for the fiscal year ended August 31,
                                    (a) Brock A. Hattox                     1999, which is incorporated herein by
                                    (September 9, 1996)                     reference.
                                    (b) George H. Gilmore, Jr.
                                    (June 1, 1999)
                                    (c) Joseph G. Parham, Jr.
                                    (May 15, 2000)

                                (7) (a) Bonus Letter Agreements             Reference is made to Exhibit
                                    between National Service                10(iii)A(j) of registrant's Form 10-K
                                    Industries, Inc. and                    for the fiscal year ended August 31,
                                    (i)   James S. Balloun                  1989, and to Exhibit 10(iii)A(d) of
                                    (February 1, 1996)                      the registrant's Form 10-Q for the
                                    (ii)  David Levy (October 1, 1989)      quarter ended February 29, 1996, which
                                    (iii) Stewart A. Searle III             are incorporated herein by
                                    (June 19, 1996)                         reference.

                                    (b) Supplemental Letter Agreement,      Reference is made to Exhibit
                                    Dated August 31, 1996                   10(iii)A(7)(b) of registrant's Form
                                                                            10-K for the fiscal year ended August
                                                                            31, 1996, which is incorporated herein
                                                                            by reference.

                                (8) Bonus Letter Agreements between         Reference is made to Exhibit
                                    National Service Industries,            10(iii)A(35) of registrant's Form 10-K
                                    Inc. and                                for the fiscal year ended August 31,
                                    (a) Brock A. Hattox                     1999, which is incorporated herein by
                                    (September 9, 1996)                     reference.
                                    (b) George H. Gilmore, Jr.
                                    (June 1, 1999)
                                    (c) Joseph G. Parham, Jr.
                                    (May 15, 2000)

                                (9) (a) Long-Term Incentive Program,        Reference is made to Exhibit
                                    Dated September 20, 1989                10(iii)A(k) of registrant's Form 10-K
                                                                            for the fiscal year ended August 31,
                                                                            1989, which is incorporated herein by
                                                                            reference.

                                    (b) Amendment No. 1 to Long-Term        Reference is made to Exhibit
                                    Incentive Program, Dated September      10(iii)A(h)(ii) of registrant's Form
                                    21, 1994                                10-K for the fiscal year ended August
                                                                            31, 1994, which is incorporated herein
                                                                            by reference.
Page 44


                               (10) National Service Industries,            Reference is made to Exhibit A of
                                    Inc. Long-Term Achievement Incentive    registrant's Schedule 14A as filed
                                    Plan as Amended and Restated,           with the Commission on November 22,
                                    Effective as of January 5, 2000         1999, which is incorporated herein by
                                                                            reference.

                               (11) Incentive Stock Option                  Reference is made to Exhibit
                                    Agreements between National             10(iii)A(1) of registrant's Form 10-K
                                    Service Industries, Inc. and            for the fiscal year ended August 31,
                                    (a) David Levy                          1989, which is incorporated herein by
                                    (b) Stewart A. Searle III               reference.
                                    (c) Brock A. Hattox

                               (12) Incentive Stock Option                  Reference is made to Exhibit
                                    Agreement Effective Beginning           10(iii)A(5) of registrant's Form 10-Q
                                    September 17, 1996 between              for the quarter ended November 30,
                                    National Service Industries,            1996, which is incorporated herein by
                                    Inc. and                                reference.
                                    (a) James S. Balloun
                                    (b) David Levy
                                    (c) Stewart A. Searle III

                               (13) Incentive Stock Option                  Reference is made to Exhibit
                                    Agreement Effective Beginning           10(iii)A(7) of registrant's Form 10-Q
                                    September 23, 1997 between              for the quarter ended November 30,
                                    National Service Industries,            1997, which is incorporated herein by
                                    Inc. and                                reference.
                                    (a) James S. Balloun
                                    (b) Brock A. Hattox
                                    (c) David Levy
                                    (d) Stewart A. Searle III

                               (14) Incentive Stock Option                  Reference is made to Exhibit
                                    Agreement for Executive Officers        10(iii)A(1) of registrant's Form 10-Q
                                    Effective Beginning September           for the quarter ended November 30,
                                    22, 1998 between National               1998, which is incorporated herein by
                                    Service Industries, Inc. and            reference.
                                    (a) James S. Balloun
                                    (b) Brock A. Hattox
                                    (c) David Levy
                                    (d) Stewart A. Searle III

                               (15) Incentive Stock Option                  Reference is made to Exhibit
                                    Agreement for Executive Officers        10(iii)A(4) of registrant's Form 10-Q
                                    Effective Beginning June 1,             for the quarter ended May 31, 1999,
                                    1999 between National Service           which is incorporated herein by
                                    Industries, Inc. and George H.          reference.
                                    Gilmore, Jr.
Page 45


                               (16) Incentive Stock Option                  Reference is made to Exhibit
                                    Agreement for Executive Officers        10(iii)A(4) of registrant's Form 10-Q
                                    Effective Beginning January 5,          for the quarter ended February 29,
                                    2000 between National Service           2000, which is incorporated herein by
                                    Industries, Inc. and:                   reference.
                                    (a) James S. Balloun
                                    (b) George H. Gilmore, Jr.
                                    (c) Brock A. Hattox
                                    (d) David Levy
                                    (e) Stewart A. Searle III

                               (17) Incentive Stock Option                  Reference is made to Exhibit
                                    Agreement for Executive Officers        10(iii)A(5) of registrant's Form 10-Q
                                    Effective beginning May 15,             for the quarter ended May 31, 2000,
                                    2000 between National Service           which is incorporated herein by
                                    Industries, Inc. and Joseph G.          reference.
                                    Parham, Jr.

                               (18) Nonqualified Stock Option               Reference is made to Exhibit
                                    Agreement for Corporate                 10(iii)A(j) of registrant's Form 10-K
                                    Officers between National               for the fiscal year ended August 31,
                                    Service Industries, Inc. and            1992, which is incorporated herein by
                                    (a) David Levy                          reference.
                                    (b) Brock A. Hattox

                               (19) Nonqualified Stock Option               Reference is made to Exhibit
                                    Agreement for Corporate                 10(iii)A(k) of registrant's Form 10-K
                                    Officers Effective Beginning            for the fiscal year ended August 31,
                                    September 21, 1994 between              1994, which is incorporated herein by
                                    National Service Industries,            reference.
                                    Inc. and David Levy

                               (20) Nonqualified Stock Option               Reference is made to Exhibit
                                    Agreement Effective January 3,          10(iii)A(b) of registrant's Form 10-Q
                                    1996 between National Service           for the quarter ended February 28,
                                    Industries, Inc. and James S.           1996, which is incorporated herein by
                                    Balloun                                 reference.

                               (21) Nonqualified Stock Option               Reference is made to Exhibit
                                    Agreement for Executive                 10(iii)A(6) of registrant's Form 10-Q
                                    Officers Effective Beginning            for the quarter ended November 30,
                                    September 17, 1996 between              1996, which is incorporated herein by
                                    National Service Industries,            reference.
                                    Inc. and
                                    (a) James S. Balloun
                                    (b) David Levy
                                    (c) Stewart A. Searle III
                                    (d) Brock A. Hattox
Page 46


                               (22) Nonqualified Stock Option               Reference is made to Exhibit
                                    Agreement For Executive                 10(iii)A(8) of registrant's Form 10-Q
                                    Officers Effective Beginning            for the quarter ended November 30,
                                    September 23, 1997 between              1997, which is incorporated herein by
                                    National Service Industries,            reference.
                                    Inc. and
                                    (a) James S. Balloun
                                    (b) Brock A. Hattox
                                    (c) David Levy
                                    (d) Stewart A. Searle III

                               (23) Nonqualified Stock Option               Reference is made to Exhibit
                                    Agreement for Executive                 10(iii)A(2) of registrant's Form 10-Q
                                    Officers Effective Beginning            for the quarter ended November 30,
                                    September 22, 1998 between              1998, which is incorporated herein by
                                    National Service Industries,            reference.
                                    Inc. and
                                    (a) James S. Balloun
                                    (b) Brock A. Hattox
                                    (c) David Levy
                                    (d) Stewart A. Searle III

                               (24) Nonqualified Stock Option               Reference is made to Exhibit
                                    Agreement for Executive                 10(iii)A(5) of registrant's Form 10-Q
                                    Officers Effective Beginning            for the quarter ended May 31, 1999,
                                    June 1, 1999 between National           which is incorporated herein by
                                    Service Industries, Inc. and            reference.
                                    George H. Gilmore, Jr.

                               (25) Nonqualified Stock Option               Reference is made to Exhibit
                                    Agreement (Surrendered                  10(iii)A(3) of registrant's Form 10-Q
                                    Aspiration Award) between               for the quarter ended February 29,
                                    National Service Industries,            2000, which is incorporated herein by
                                    Inc. and:                               reference.
                                    (a) James S. Balloun
                                    (b) Brock A. Hattox
                                    (c) David Levy
                                    (d) Stewart A. Searle III

                               (26) Nonqualified Stock Option               Reference is made to Exhibit
                                    Agreement for Executive                 10(iii)A(5) of registrant's Form 10-Q
                                    Officers Effective Beginning            for the quarter ended February 29,
                                    January 5, 2000 between                 2000, which is incorporated herein by
                                    National Service Industries,            reference.
                                    Inc. and:
                                    (a) James S. Balloun
                                    (b) George H. Gilmore, Jr.
                                    (c) Brock A. Hattox
                                    (d) David Levy
                                    (e) Stewart A. Searle III

                               (27) (a) Benefits Protection Trust           Reference is made to Exhibit
                                    Agreement Dated July 5, 1990,           10(iii)A(n) of registrant's Form 10-K
                                    between National Service                for the fiscal year ended August 31,
                                    Industries, Inc. and Wachovia           1990, which is incorporated herein by
                                    Bank and Trust Company                  reference.
Page 47


                                    (b) Amendment to Benefits Protection    Reference is made to Exhibit
                                    Trust Agreement between National        10(iii)A(12)(c) of registrant's Form
                                    Service Industries, Inc. and            10-K for the fiscal year ended August
                                    Wachovia Bank and Trust Company and     31, 1996, which is incorporated herein
                                    Adoption, Dated August 31, 1996         by reference.

                                    (c) Amendment No. 2 to Benefits         Reference is made to Exhibit
                                    Protection Trust Agreement between      10(iii)A(3) of registrant's Form 10-Q
                                    National Service Industries, Inc.       for the quarter ended November 30,
                                    and Wachovia Bank and Trust             1997, which is incorporated herein by
                                    Company, Dated September 23, 1997       reference.

                                    (d) Amended Schedule 1 of Benefits      Reference is made to Exhibit
                                    Protection Trust Agreement between      10(iii)A(4) of registrant's Form 10-Q
                                    National Service Industries, Inc.       for the quarter ended November 30,
                                    and Wachovia Bank and Trust             1997, which is incorporated herein by
                                    Company, Dated September 23, 1997       reference.

                                    (e) Amendment No. 3 to Benefits         Reference is made to Exhibit
                                    Protection Trust Agreement between      10(iii)A(4) of registrant's Form 10-Q
                                    National Service Industries, Inc.       for the quarter ended November 30,
                                    and Wachovia Bank, N.A. (formerly       1998, which is incorporated herein by
                                    Wachovia Bank and Trust Company),       reference.
                                    Dated January 6, 1999.

                               (28) (a) Executive Benefits Trust            Reference is made to Exhibit
                                    Agreement Dated July 5, 1990,           10(iii)A(o) of registrant's Form 10-K
                                    between National Service                for the fiscal year ended August 31,
                                    Industries, Inc. and Wachovia           1990, which is incorporated herein by
                                    Bank and Trust Company                  reference.

                                    (b) Amendment to Executive Benefits     Reference is made to Exhibit
                                    Trust Agreement between National        10(iii)A(13) of registrant's Form 10-K
                                    Service Industries, Inc. and            for the fiscal year ended August 31,
                                    Wachovia Bank and Trust Company and     1996, which is incorporated herein by
                                    Adoption, Dated August 31, 1996         reference.

                                    (c) Amended Schedule 1 of Executive     Reference is made to Exhibit
                                    Benefits Trust Agreement between        10(iii)A(5) of registrant's Form 10-Q
                                    National Service Industries, Inc.       for the quarter ended November 30,
                                    and Wachovia Bank, N.A. (formerly       1997, which is incorporated herein by
                                    Wachovia Bank and Trust Company),       reference.
                                    Dated September 23, 1997
Page 48


                                    (d) Amendment No. 2 to Executive        Reference is made to Exhibit
                                    Benefits Trust Agreement between        10(iii)A(5) of registrant's Form 10-Q
                                    National Service Industries, Inc.       for the quarter ended November 30,
                                    and Wachovia Bank, N.A. (formerly       1998, which is incorporated herein by
                                    Wachovia Bank and Trust Company),       reference.
                                    Dated January 6, 1999.

                               (29) (a) National Service                    Reference is made to Exhibit
                                    Industries, Inc. 1992 Nonemployee       10(iii)A(o) of registrant's Form 10-K
                                    Directors' Stock Option Plan,           for the fiscal year ended August 31,
                                    Effective September 16, 1992            1992, which is incorporated herein by
                                                                            reference.

                                    (b) First Amendment to the National     Reference is made to Exhibit
                                    Service Industries, Inc. 1992           10(iii)A(13)(b) of registrant's Form
                                    Nonemployee Directors' Stock Option     10-K for the fiscal year ended August
                                    Plan, Dated March 24, 1998              31, 1998, which is incorporated herein
                                                                            by reference.

                                    (c) Second Amendment to the National    Reference is made to Exhibit
                                    Service Industries, Inc. 1992           10(iii)A(1) of registrant's Form 10-Q
                                    Nonemployee Directors' Stock Option     for the quarter ended November 30,
                                    Plan, Dated January 5, 2000             1999, which is incorporated herein by
                                                                            reference.

                               (30) Nonemployee Directors' Stock            Reference is made to Exhibit
                                    Option Agreement between                10(iii)A(q) of registrant's Form 10-K
                                    National Service Industries,            for the fiscal year ended August 31,
                                    Inc. and                                1994, which is incorporated herein by
                                    (a) John L. Clendenin                   reference.
                                    (b) Robert M. Holder, Jr.
                                    (c) James C. Kennedy
                                    (d) Bernard Marcus
                                    (e) John G. Medlin, Jr.
                                    (f) Dr. Betty L. Siegel
                                    (g) Barrie A. Wigmore
                                    (h) Thomas C. Gallagher
                                    (i) Charles W. McCall
                                    (j) Herman J. Russell
                                    (k) Samuel A. Nunn

                               (31) Stock Option Agreement for              Reference is made to Exhibit 10(iii)A
                                    Nonemployee Directors Dated             of registrant's Form 10-Q for the
                                    March 19, 1997 between National         quarter ended May 31, 1997, which is
                                    Service Industries, Inc. and            incorporated herein by reference.
                                    (a) John L. Clendenin
                                    (b) Samuel A. Nunn
Page 49


                               (32) Nonemployee Directors' Stock            Reference is made to Exhibit
                                    Option Agreement Dated January          10(iii)A(1) of the registrant's Form
                                    5, 2000 between National                10-Q for the quarter ended February
                                    Service Industries, Inc. and            29, 2000, which is incorporated herein
                                    (a) Leslie M. Baker, Jr.                by reference.
                                    (b) John L. Clendenin
                                    (c) Thomas C. Gallagher
                                    (d) Bernard Marcus
                                    (e) Samuel A. Nunn
                                    (f) Ray M. Robinson
                                    (g) Herman J. Russell
                                    (h) Betty L. Siegel
                                    (i) Kathy Brittain White
                                    (j) Barrie A. Wigmore
                                    (k) Neil Williams

                               (33) (a) National Service Industries,        Reference is made to Exhibit
                                    Inc. Executive Savings Plan,            10(iii)A(s) of registrant's Form 10-K
                                    Effective September 1, 1994             for the fiscal year ended August 31,
                                                                            1994, which is incorporated herein by
                                                                            reference.

                                    (b) Amendment No. 1 to National         Reference is made to Exhibit
                                    Service Industries, Inc. Executive      10(iii)A(17)(b) of registrant's Form
                                    Savings Plan, Dated August 31, 1996     10-K for the fiscal year ended August
                                                                            31, 1996, which is incorporated herein
                                                                            by reference.

                               (34) (a)National Service Industries,         Reference is made to Exhibit
                                    Inc. Nonemployee Director               10(iii)A(26) of registrant's Form 10-K
                                    Deferred Stock Unit Plan,               for the fiscal year ended August 31,
                                    Effective June 1, 1996                  1996, which is incorporated herein by
                                                                            reference.

                                    (b) Amendment No. 1 to National         Reference is made to Exhibit
                                    Service Industries, Inc.                10(iii)A(6) of registrant's Form 10-Q
                                    Nonemployee Director Deferred Stock     for the quarter ended November 30,
                                    Unit Plan, Effective December 1,        1997, which is incorporated herein by
                                    1997                                    reference.

                                    (c) Amendment No. 2 to National         Reference is made to Exhibit
                                    Service Industries, Inc.                10(iii)A(19)(c) of registrant's Form
                                    Nonemployee Director Deferred Stock     10-K for the fiscal year ended August
                                    Unit Plan, Effective December 31,       31, 1998, which is incorporated herein
                                    1997                                    by reference.

                               (35) Employment Letter Agreement             Reference is made to Exhibit
                                    between National Service                10(iii)A(28) of registrant's Form 10-K
                                    Industries, Inc. and Brock A.           for the fiscal year ended August 31,
                                    Hattox, Dated August 26, 1996           1996, which is incorporated herein by
                                                                            reference.
Page 50


                               (36) Employment Letter Agreement             Reference is made to Exhibit
                                    between National Service                10(iii)A(2) of registrant's Form 10-Q
                                    Industries, Inc. and James S.           for the quarter ended November 30,
                                    Balloun, Dated February 1, 1996         1997, which is incorporated herein by
                                                                            reference.

                                    [refiled to disclose confidential
                                    information previously omitted and
                                    filed separately with the
                                    Securities and Exchange
                                    Commission]

                               (37) Employment Letter Agreement             Reference is made to Exhibit
                                    between National Service                10(iii)A(1) of registrant's Form 10-Q
                                    Industries, Inc. and George H.          for the quarter ended May 31, 1999,
                                    Gilmore, Jr., Dated May 5,              which is incorporated herein by
                                    1999.                                   reference.

                               (38) Employment Letter Agreement             Reference is made to Exhibit
                                    between National Service                10(iii)A(2) of registrant's Form 10-Q
                                    Industries, Inc. and Joseph G.          for the quarter ended May 31, 2000,
                                    Parham, Jr., Dated May 3, 2000          which is incorporated herein by
                                                                            reference.

                               (39) (a) Aspiration Achievement              Reference is made to Exhibit
                                    Incentive Award Agreements for          10(iii)A(22) of registrant's Form 10-K
                                    the Performance Cycle beginning         for the fiscal year ended August 31,
                                    September 1, 1996 between               1999, which is incorporated herein by
                                    National Service Industries,            reference.
                                    Inc. and
                                    (i) James S. Balloun
                                    (ii) Brock A. Hattox
                                    (iii) David Levy
                                    (iv) Stewart A. Searle III

                                    [refiled to disclose confidential
                                    information previously omitted and
                                    filed separately with the
                                    Securities and Exchange
                                    Commission]

                                    (b) Amendment of Aspiration             Reference is made to Exhibit
                                    Achievement Incentive Award             10(iii)A(8) of registrant's Form 10-Q
                                    Agreement and Election Form for         for the quarter ended May 31, 1999,
                                    Performance Cycle Ending August 31,     which is incorporated herein by
                                    1999 between National Service           reference.
                                    Industries, Inc. and:
                                    (i) James S. Balloun
                                    (ii) Brock A. Hattox
                                    (iii) David Levy
                                    (iv) Stewart A. Searle III
Page 51


                                    (c) Second Amendment of Aspiration      Reference is made to Exhibit
                                    Achievement Incentive Award             10(iii)A(2) of registrant's Form 10-Q
                                    Agreement for the Performance Cycle     for the quarter ended November 30,
                                    Ended August 31, 1999 between           1999, which is incorporated herein by
                                    National Service Industries, Inc.       reference.
                                    and
                                    (a) James S. Balloun
                                    (b) Brock A. Hattox
                                    (c) David Levy
                                    (d) Stewart A. Searle III

                               (40) (a) Aspiration Achievement              Page 102
                                    Incentive Award Agreements for
                                    the Performance Cycle beginning
                                    September 1, 1997 between
                                    National Service Industries,
                                    Inc., and
                                    (i) James S. Balloun
                                    (ii) Brock A. Hattox
                                    (iii) David Levy
                                    (iv) Stewart A. Searle III

                                    [refiled to disclose confidential
                                    information previously omitted and
                                    filed separately with the
                                    Securities and Exchange
                                    Commission]

                                    (b) Amendment of the Aspiration         Reference is made to Exhibit
                                    Achievement Incentive Award             10(iii)A(3) of registrant's Form 10-Q
                                    Agreement and Election Form for the     for the quarter ended November 30,
                                    Performance Cycle Ending August 31,     1999, which is incorporated herein by
                                    2000 between National Service           reference.
                                    Industries, Inc. and
                                    (i) James S. Balloun
                                    (ii) George H. Gilmore, Jr.
                                    (iii) Brock A. Hattox
                                    (iv) David Levy
                                    (v) Stewart A. Searle III
Page 52


                               (41) (a) Aspiration Achievement              Reference is made to Exhibit
                                    Incentive Award Agreements for          10(iii)A(3) of registrant's Form 10-Q
                                    the Performance Cycle beginning         for the quarter ended November 30,
                                    September 1, 1998 between               1998, which is incorporated herein by
                                    National Service Industries,            reference.
                                    Inc. and
                                    (i) James S. Balloun
                                    (ii) Brock A. Hattox
                                    (iii) David Levy
                                    (iv) Stewart A. Searle III

                                    [a confidential portion of which
                                    has been omitted and filed
                                    separately with the Securities and
                                    Exchange Commission]

                                    (b) Amendment of the Aspiration         Reference is made to Exhibit
                                    Achievement Incentive Award             10(iii)A(4) of registrant's Form 10-Q
                                    Agreement for the Performance Cycle     for the quarter ended November 30,
                                    Ending August 31, 2001 between          1999, which is incorporated herein by
                                    National Service Industries, Inc.       reference.
                                    and
                                    (i) James S. Balloun
                                    (ii) George H. Gilmore, Jr.
                                    (iii) Brock A. Hattox
                                    (iv) David Levy
                                    (v) Stewart A. Searle III

                                    [a confidential portion of which
                                    has been omitted and filed
                                    separately with the Securities and
                                    Exchange Commission]

                               (42) Aspiration Achievement                  Page 109
                                    Incentive Award Agreement for the
                                    Performance Cycle beginning
                                    September 1, 1997 between
                                    National Service Industries,
                                    Inc. and George H. Gilmore,
                                    Jr., Dated June 1, 1999.

                                    [refiled to disclose confidential
                                    information previously omitted and
                                    filed separately with the
                                    Securities and Exchange
                                    Commission]
 Page 53


                               (43) Aspiration Achievement                  Reference is made to Exhibit
                                    Incentive Award Agreement for the       10(iii)A(7) of registrant's Form 10-Q
                                    Performance Cycle beginning             for the quarter ended May 31, 1999,
                                    September 1, 1998 between               which is incorporated herein by
                                    National Service Industries,            reference.
                                    Inc. and George H. Gilmore,
                                    Jr., Dated June 1, 1999.

                                    [a confidential portion of which
                                    has been omitted and filed
                                    separately with the Securities and
                                    Exchange Commission]

                               (44) Aspiration Achievement                  Reference is made to Exhibit
                                    Incentive Award Agreements for the      10(iii)A(40) of registrant's Form 10-K
                                    Performance Cycle beginning             for the fiscal year ended August 31,
                                    September 1, 1999 between               1999, which is incorporated herein by
                                    National Service Industries,            reference.
                                    Inc. and
                                    (a) James S. Balloun
                                    (b) Brock A. Hattox
                                    (c) David Levy
                                    (d) Stewart A. Searle III
                                    (e) George H. Gilmore, Jr.

                                    [a confidential portion of which
                                    has been omitted and filed
                                    separately with the Securities and
                                    Exchange Commission]

                               (45) Aspiration Achievement                  Reference is made to Exhibit
                                    Incentive Award Agreement for the       10(iii)A(6) of registrant's Form 10-Q
                                    Performance Cycle beginning             for the quarter ended May 31, 2000,
                                    September 1, 1998 between               which is incorporated herein by
                                    National Service Industries,            reference.
                                    Inc. and Joseph G. Parham, Jr.,
                                    Dated May 15, 2000

                                    [a confidential portion of which
                                    has been omitted and filed
                                    separately with the Securities and
                                    Exchange Commission]
Page 54


                               (46) Aspiration Achievement                  Reference is made to Exhibit
                                    Incentive Award Agreement for the       10(iii)A(7) of registrant's Form 10-Q
                                    Performance Cycle beginning             for the quarter ended May 31, 2000,
                                    September 1, 1999 between               which is incorporated herein by
                                    National Service Industries,            reference.
                                    Inc. and Joseph G. Parham, Jr.,
                                    Dated May 15, 2000

                                    [a confidential portion of which
                                    has been omitted and filed
                                    separately with the Securities and
                                    Exchange Commission]

                               (47)(a) National Service                     Reference is made to Exhibit
                                    Industries, Inc. Supplemental           10(iii)A(9) of registrant's Form 10-Q
                                    Deferred Savings Plan,                  for the quarter ended November 30,
                                    Effective September 18, 1996            1996, which is incorporated herein by
                                                                            reference.

                                    (b) Amendment No. 1 to National         Reference is made to Exhibit
                                    Service Industries, Inc.                10(iii)A(23)(b) of registrant's Form
                                    Supplemental Deferred Savings Plan,     10-K for the fiscal year ended August
                                    Dated December 29, 1997                 31, 1999, which is incorporated herein
                                                                            by reference.

                               (48) National Service Industries,            Reference is made to Exhibit
                                    Inc. Management Compensation and        10(iii)A(31) of registrant's Form 10-K
                                    Incentive Plan as Amended and           for the fiscal year ended August 31,
                                    Restated, Effective as of               1998, which is incorporated herein by
                                    September 1, 1998.                      reference.

        EXHIBIT 12                  Ratio of Earnings to Fixed Charges      Reference is made to Exhibit 12 of
                                                                            registrant's Form 10-Q for the quarter
                                                                            ended May 31, 2000, which is
                                                                            incorporated herein by reference.

        EXHIBIT 21              List of Subsidiaries                        Page 117

        EXHIBIT 23              Consent of Independent Public Accountants   Page 118

        EXHIBIT 24              Powers of Attorney                          Page 119

        EXHIBIT 27              Financial Data Schedule for the Year        Page 132
                                Ended August 31, 2000

(b) None filed for the quarter ended August 31, 2000.

(c) Exhibits 2, 9, 11, 13, 18, and 22 have been omitted because they are not applicable.

(d) Not applicable.

                                                                 NATIONAL SERVICE INDUSTRIES, INC.

  Date: November 6, 2000                                         By:                      /s/ HELEN D. HAINES
                                                                                            Helen D. Haines
                                                                                     Vice President and Secretary

              Signature                              Title                              Date

                  *                       Chairman, President, and              November 6, 2000
         James S. Balloun                 Chief Executive Officer
                                          and Director

                  *                       Executive Vice President              November 6, 2000
         Brock Hattox                     and Chief Financial Officer

                  *                       Vice President and Controller         November 6, 2000
         Robert R. Burchfield

                  *                       Director                              November 6, 2000
         John L. Clendenin

                  *                       Director                              November 6, 2000
         Thomas C. Gallagher

                  *                       Director                              November 6, 2000
         Neil Williams

                  *                       Director                              November 6, 2000
         Roy Richards

                  *                       Director                              November 6, 2000
         David Levy

                  *                       Director                              November 6, 2000
         Bernard Marcus

                  *                       Director                              November 6, 2000
         Leslie M. Baker, Jr.

                  *                       Director                              November 6, 2000
         Samuel A. Nunn

                  *                       Director                              November 6, 2000
         Herman J. Russell

                  *                       Director                              November 6, 2000
         Betty L. Siegel

                  *                       Director                              November 6, 2000
         Kathy Brittain White

                  *                       Director                              November 6, 2000
         Ray M. Robinson

                  *                       Director                              November 6, 2000
         Barrie A. Wigmore

*By:     /s/ DAVID LEVY                   Attorney-in-Fact
         David Levy

                                                            SCHEDULE II
                                                 NATIONAL SERVICE INDUSTRIES, INC.

                                                 VALUATION AND QUALIFYING ACCOUNTS
                                        For the Years Ended August 31, 2000, 1999, and 1998
                                                        (In thousands)

                                                                  Additions Charged to  
                                                  Balance at                                             Balance at
                                                   Beginning    Costs and       Other                      End of
                                                   of Period    Expenses     Accounts(1)  Deductions(2)    Period   
            YEAR ENDED AUGUST 31, 2000:
              Deducted in the balance sheet from
                   the asset to which it
                   applies - Reserve for
                   doubtful accounts                $6,306       $ 4,792       $   232       $ 3,793       $ 7,537  

            YEAR ENDED AUGUST 31, 1999:
              Deducted in the balance sheet from
                   the asset to which it
                   applies - Reserve for
                   doubtful accounts                $4,631       $ 3,651       $ 1,709       $ 3,685       $ 6,306  

            YEAR ENDED AUGUST 31, 1998:
              Deducted in the balance sheet from
                   the asset to which it
                   applies - Reserve for
                   doubtful accounts                $4,302       $ 3,558       $   214       $ 3,443       $ 4,631