Award winning Avisplc Europe Annual Report 2009 Report Annual

Grand Travel Award World Travel Awards, World Travel Awards, World Travel Awards, for Norway’s best car Europe’s leading business World’s leading business Asia’s leading rental provider car rental company 2009 car rental company 2009 company 2009

World Travel Awards, World Travel Awards, World Travel Awards, British Travel Awards, Africa’s leading business India Ocean’s leading car Middle East’s leading business car hire company of the car rental company 2009 rental company 2009 car rental company 2009 year 2009

British Travel Awards, TTG Travel Awards 2009, BIT Tourism Awards 2009, Awarded Superbrand best business car hire car hire company of the year best car rental company status in Kuwait for 2009 company 2009

Grand Travel Award for Norway’s best car rental provider

Avis Europe plc Annual Report 2009 plc, Avis House, Park Road, Bracknell, Berkshire RG12 2EW

Telephone +44 (0)1344 426644 Facsimile +44 (0)1344 485616 www.avis-europe.com avis-europe.com Annual Report 2009 85 Avis at a glance Shareholder information

Registered office and head office Who we are Avis House, Park Road, Bracknell, Berkshire, RG12 2EW Tel: +44 (0) 1344 426644 We operate the Avis brand across four continents Avis Europe plc is a leading car rental Fax: +44 (0) 1344 485616 via a network of over 2,800 locations in 109 Registered number: 3311438 company in Europe, Africa, the Middle East countries, through wholly-owned subsidiaries in 13 countries complemented by franchisees in a and Asia operating the globally recognised Registrar further 96 countries. Avis and Budget brands. Shareholders with any queries relating to shareholdings, change of address, lost share certificates or dividend payments should contact the Company’s registrar, Equiniti, on 0871 384 2278 or write to Equiniti, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA. The registrar provides a wide range of shareholder information online. Shareholders can check their holding and find practical help on transferring shares or updating their details at: Our market presence www.shareview.co.uk

Avis Europe plc , Inc.* We are a market leader in Europe with Website Europe Americas an aggregate 18.2% market share. Africa Australasia The Avis Europe website, www.avis-europe.com, includes an Investor Centre Middle East Asia and is continuously updated with announcements and Avis news. (Source: Datamonitor’s European Car Rental Report 2009 – based on 2008 revenues.) Territories: Asia Corporately-owned: ShareGift Countries 13 7 Shareholders with a small number of shares, the value of which makes it uneconomic to sell them, may wish to consider donating them to charity Locations 1,566 2,052 through ShareGift, a registered charity administered by The Orr Mackintosh Foundation. The share transfer form needed to make a donation may be obtained from the Company’s registrar, Equiniti. Further information about Licensees: ShareGift is available at www.sharegift.org or by telephone: 020 7930 3737. Avis Countries 96 50 Founders Club Budget Countries 65 54 Founders Club members and holders of other shareholder privileges should Avis Locations 1,305 933 use the following dedicated phone line for all reservations and enquiries including queries about discounts – 0844 581 0173. Budget Locations 1,002 1,034 Avis Europe plc no longer offers discounts for new shareholders with effect *Avis Budget Group, Inc., independently owned and quoted in the US, operates Avis and Budget brands in the Americas, Australasia and Asia. from 1 January 2005.

New BA partnership – “Be there sooner” Following a successful 11-year relationship, we have now entered a new exclusive five- year partnership with British Airways as the airline’s sole global car rental provider. This new partnership extends car hire benefits to all British Airways customers across the board, making the travel process easier and quicker for our joint customers. statements Financial

Designed by Tor Pettersen & Partners. Typesetting by Orb Solutions Printed by Park Communications on FSC certified paper. Park is an EMAS certified CarbonNeutral ® Company and its Environmental Management System is certified to ISO14001:2004. 100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further use and on average 99% of any waste associated with this production will be recycled. This document is printed on Revive 50:50 Silk, a paper containing 50% recovered waste and 50% virgin fibre sourced from well managed, sustainable, FSC certified forests. The pulp used in this product is bleached using a Totally Chlorine Free (TCF) process. avis-europe.com Annual Report 2009 

Overview 2 A year of action The Budget brand serves customers across three 4 Chairman’s statement continents (Europe, Africa and the Middle East) 5 Chief executive’s review through over 1,000 locations in 65 countries. These 6 Strategy are predominantly franchise businesses with corporate Overview 7 Key Performance Indicators operations undertaken in conjunction with the Avis brand in France, the UK, Austria and Switzerland.

Business review 8 Service differentiation Avis Europe corporate rental revenue by country 10 Business description 10 Market analysis review

Other 12 Financial review 14% France 22 Playing our part 24% 24 Corporate social responsibility UK

16% Business Germany Spain 16% 13% Italy 17% Corporate governance 28 Board of Directors Avis Europe corporate rental revenue by customer 29 Corporate governance report 34 Statement of Directors’ responsibilities 34 Remuneration report 42 Directors’ report Individual governance

55% 43 Auditors’ report Insurance/ Replacement 11% Corporate Corporate 34% Avis recognised Financial statements 44 Consolidated Income Statement internationallyAvis Europe corporate rental revenue by location 45 Consolidated Statement of for outstanding service Comprehensive Income 46 Consolidated Balance Sheet During 2009 we were internationally recognised 47 Consolidated Statement of Changes statements with a number of prestigious awards including: in Equity Europe’sNon- Leading Car Rental Company, at the 48 Consolidated Cash Flow Statement Airport Airport World47% Travel Awards;53% and Car Hire Company of 49 Significant Accounting Policies the year, at the British Travel Awards. Avis won

56 Notes to Consolidated Financial Statements Financial ten awards in total. 78 Auditors’ Report - Parent company 79 Parent Company Balance Sheet 80 Parent Company Cash Flow Statement 81 Significant Accounting Policies 82 Notes to Parent Company Financial Statements 84 Five Year Summary 10 85 Shareholder Information  avis-europe.com Annual Report 2009 Overview

A year of action Demonstrating the strength & flexibility of our business model  avis-europe.com Annual Report 2009 Chairman’s statement

Currency effects As the industry environment is expected to remain Exchange rate movements, in particular the difficult and uncertain in 2010, we will continue sterling/euro exchange rate, affected results for to focus on opportunities to protect our revenue, 2009 compared to the prior year. The average keep capacity tight, raise prices and maintain a sterling/euro rate for operating profit for the year rigorous control over costs. At the same time we was 1.16 compared to 1.25 for the prior year. The are actively preparing to maximise opportunities strength of the euro adversely impacted customers from any upturn in our traditional core businesses, travelling into mainland Europe, particularly from as well as for longer term profitable growth the US and UK, whilst having a beneficial effect on through expansion in new markets. These markets the translation of our activities in the UK, including include China, where our early market entry, the the cost of the Group headquarters. strength of the Avis brand and quality of service are reinforcing our leading market position. Dividends In line with previous statements, and in view Outlook of the current difficult and uncertain economic Given the continuing uncertain trading environment We have delivered a very strong environment, the Board has not recommended and consequent limited visibility in our markets, result for 2009 in what was an payment of a dividend for the year ended 31 we will maintain our present prudent approach for December 2009. The Board’s intention is to the current year. We anticipate a slightly positive extremely difficult economic recommence the payment of dividends when the volume performance for the year and are working environment, reflecting a resilient financial and trading position of the Group allows. towards a further improvement in pricing. volume performance, good increases in rental revenue per Strategic development We will still keep fleet capacity tight and continue Our strategic positioning was a key factor in our ongoing focus on driving greater efficiency day for the second consecutive delivering our strong results for 2009. Our brand to mitigate cost inflation. The interest charge, year, a step-change improvement leadership and efforts to differentiate Avis in a excluding any additional cost of a refinancing in utilisation and significant cost price competitive and difficult market supported that is likely to be undertaken later in the year, is volumes. We gained share in a number of expected to benefit from lower rates as existing savings. At the same time the markets and were recognised internationally hedging matures. reduction in fleet and strong cash for outstanding customer service in a series of management drove a substantial prestigious awards including ‘Europe’s Leading We have ensured that we have sufficient liquidity Business Car Rental Company’ at the World for the next 12 months, will retain our tight reduction in net debt. Travel Awards and the Travel Trade Gazette’s control of capital to maintain debt at broadly ‘Car Hire Company of the Year’. Our geographic the level of 2009 and, from the actions outlined Results overview diversification and good customer balance also above, are well positioned to continue to make Rental income was 11.5% lower at €1,162.4 supported volumes. good progress in 2010. million, reflecting the global recessionary conditions. In the first half these revenues were At the same time our recent investment in revenue Employees and Directors 14.1% lower with a relatively stronger performance management and tight control over fleet capacity Finally, I would like to thank all our employees in the second half, being 9.2% below the helped us to maximise opportunities to achieve around the world for their continued hard work, comparative prior year period. pricing gains in order to mitigate the impact of enthusiasm, loyalty and professionalism in a lower volumes. globally very difficult trading environment. In In response to lower volumes in the year, particular the total alignment and commitment we improved pricing, undertook substantial The second key factor in delivering our results across all countries in the Group to reach structural cost actions, and achieved a significant was our strong operational discipline as we our targets, across all functions from senior improvement in utilisation10. In addition there was a took a number of significant actions to maintain management down to the stations, has been positive translation effect on reported costs due to profitability against the very difficult trading fundamental in delivering our results. In addition, the weaker sterling. environment. We delivered further substantial we have continued to achieve good customer cost savings across the Avis business and satisfaction scores this year, despite continuing As a result, underlying profit before tax7 totalled extended our cost review to the Budget brand. to reduce staff numbers and as always it is our €35.2 million (2008: €38.0 million). After Synergies between Avis and Budget are now being employees’ efforts on behalf of our customers that incurring exceptional charges primarily relating to maximised in the four markets where we operate really make the difference. restructuring the cost base, overall profit before tax Budget on a Corporate basis. We also drove was €4.5 million (2008: €3.0 million). a step-change improvement in utilisation, the Alun Cathcart amount of time that a car is “on-rent” and earning Chairman The underlying3 earnings per share improved to rental income, to maximise profitability, reduce 2.7 euro cents (2008: 2.4 euro cents) and the total capital employed and drive positive cash flow. In earnings per share was nil euro cents (2008: loss 2009, we achieved a gain of 3.9%pts in utilisation of 1.1 euro cents). and reduced net debt by €375 million.

Footnotes and detailed definitions are described on page 21. avis-europe.com Annual Report 2009  Chief executive’s review

gaining market share. Our good customer margin4 improved from 8.6% to 8.9%. In balance was reinforced with stronger performances particular, staff costs were substantially lower in the Leisure and Insurance/Replacement as a rigorous recruitment freeze was enforced customer groups, with the latter being off-airport and extended to June 2010, staff numbers were and less seasonal. reduced by 11% to 5,671 and salaries were frozen for 2009. In addition, variable costs were Overview Our brand strength enabled us to further improve flexed to mitigate lower volumes and the cost our leading position with industry partners; we review was extended to the Budget brand. In the continued to develop a number of key partnerships four markets where we operate the Budget brand and are now the fully exclusive partner for British on a corporate basis we maximised synergies with Airways. In addition we launched a new customer the Avis brand; closing the country headquarters offer, “Avis Flex”, as a versatile monthly rental and certain rental facilities; fully combining the product to satisfy increasing demand for greater fleet and infrastructure with Avis and downsizing flexibility from our Corporate customers. the central Budget headquarters.

Our strategic positioning and the We continued to reinforce the differentiation of Throughout the year, we managed our fleet rigorous execution of our plan our brand by focussing on speed and quality levels very proactively and on a conservative of customer service, making the rental process basis, allowing us to reduce capacity beyond for recession mitigated weaker faster, simpler and clearer for customers. For “Avis the fall in volumes in the very uncertain trading market conditions, enabling Preferred” customers we began the roll-out of our environment. Together with operational efficiencies, us to deliver a very strong unique “3-minute promise” to the first licensee the introduction of a non-cancellation fee and the performance in 2009. In response country. Under this programme we guarantee extension of some holding periods, this resulted in customers their keys and rental agreement within a significant improvement in utilisation10 of 3.9%pts. to lower volumes in the year, three minutes of entering the rental station, reflecting the global recessionary otherwise the customer receives a retail voucher The combination of these cost reductions, together conditions, we took early and for €30. The service is now available in our with network actions increased underlying operating corporately-owned markets of France, Germany, margin from 8.6% to 8.9% and underlying return substantial actions to protect our Spain, UK, Portugal, Switzerland, Belgium, Holland, on capital employed8 by 140 basis points to 9.9%, profitability, improving pricing, and Czech Republic and in our licensee operations also contributing to a €375 million reduction in net significantly reducing costs in Poland. It is providing real differentiation in the debt from €1,133 million to €758 million. market place. Approximately 70% of all “Avis and achieving a step-change Preferred” rentals within Europe now take place at Summary improvement in utilisation. At the a location offering the “3-minute promise”, offering In summary, these actions and results position same time the reduction in fleet strong and customer-oriented differentiation in the us very strongly in anticipation of any volume market place. recovery in our traditional core businesses in 2010 and strong cash management and beyond. In the very short term and given drove a €375 million reduction in Second consecutive year of improved pricing limited visibility, we will continue to take a prudent net debt. Underlying profit before During the year we placed a daily operational focus approach, not assuming any significant recovery tax totalled €35.2 million (2008: on achieving further pricing gains to mitigate lower in the market in the short term; retaining very tight volumes. In particular we kept a very tight control control over fleet capacity to maximise opportunities €38.0 million) and we improved over fleet capacity, reducing our fleet more than for further pricing gains; continuing our strong our underlying operating margin the fall in volumes, to enable us to increase prices focus on costs and our control on cash and capital by 30 basis points to 8.9% and where practicable. We achieved particularly good management. At the same time we are fully gains during the key summer months of July and prepared to maximise opportunities from any more return on capital employed by August, with rental revenue per day5 ahead by significant upturn in the market. 140 basis points to 9.9%, their 2.5% and 4.7% respectively. For the year as a highest levels in five years. whole, we achieved a 0.7% improvement in rental In addition, we are focussing on longer term revenue per day at constant currency2. Excluding profitable growth through expansion in new the impacts of car group mix, rental revenue per markets such as Asia and through the creation of Resilient volume performance day at constant currency was ahead by 2%. new mobility offers such as OKIGO, our car sharing Our geographic and customer diversification, as well club in Paris. As in our core traditional markets, as our brand leadership and service differentiation, Rigorous cost reduction and step-change Avis’ brand strength and quality of service are helped to support volumes in the face of exceptionally improvement in utilisation reinforcing our leading market position. weak demand. This resulted in volumes being only We took substantial and early actions to reduce 8.4% lower on a like-for-like1 basis. costs to mitigate the impact of recessionary Pascal Bazin conditions on our profitability. As a result, total Chief Executive Whilst demand softened in France, Germany, Italy, costs were €149 million lower, also benefiting and particularly Spain, we delivered a comparatively in part from the positive translation effect due to resilient performance in the UK where we are weaker sterling, and our underlying3 operating  avis-europe.com Annual Report 2009 Strategy

Our vision Loyal customers choosing Avis everywhere.

Our strategic focus We remain focussed on our key strategic priorities and are fully prepared to maximise opportunities from any upturn in our traditional core markets, as well as for longer term profitable growth through expansion in fast growing markets.

Build strong mobility and Drive profitable growth Continue to improve our Lower our peak debt and Live the “We Try Harder.” customer oriented brands We continued to protect our cost position and business improve capital efficiency ethos every day The strength of the Avis and profitable revenue, keeping model flexibility Capital management and We have continued to Budget brands supported fleet capacity tight to maximise We reduced overall costs cash generation remain key achieve good customer volumes in the very difficult opportunities for further pricing by €149 million to mitigate priorities. We reduced net satisfaction scores this year, economic environment. Our gains and maintained a good lower volumes as a result of debt by €375 million in 2009 despite further reducing staff focus on differentiating the balance between customer global recessionary conditions, and improved return on capital numbers. It is our employees’ brands in a very competitive groups and countries. In placing the business in a employed from 8.5% to 9.9%. efforts on behalf of our market place has encouraged addition, we are well prepared strong position to benefit from customers that really make good customer loyalty. to accelerate growth in fast any upturn in our traditional the difference and we were growing geographical markets core markets. recognised internationally for such as Asia where we are the outstanding service with ten leading international brand. awards in 2009.

2009 Operational highlights • Continued volume resilience: like-for-like1 reduction in volumes limited to 8.4%, supported by brand leadership, service differentiation and geographic diversification

• Proactive pricing actions improved reported rental revenue per day by 2.4% in the second half and 0.7%2 for the full year, despite negative impact of mix

• Rigorous cost reduction of €149 million, including step-change improvement in utilisation of 3.9% pts • Underlying3 operating margin4 improved from 8.6% to 8.9%

• Strong focus on cash management leading to €375 million reduction in year-end net debt versus 2008

Footnotes and detailed definitions are described on page 21. avis-europe.com Annual Report 2009  Key performance indicators

The Board monitors a range of financial and non-financial performance indicators, reported on a periodic basis, to measure the Group’s performance. Of these, the key measures are set out in the table below.

Operational Overview

Corporately-owned operations: 2009 2008 (as restated*) Rental revenue per day5 – reported currency (% change) (1.0) (1.3) Rental revenue per day5 – constant currency2 (% change) 0.7 0.7 Billed days9 (% change) (10.3) 0.3 Utilisation10 – average (%pts change) 3.9 0.2

Financial

Total Group: 2009 2008 Underlying3 operating margin4 (%) 8.9 8.6 Underlying3 return on capital employed9 (%) 9.9 8.5

* See Basis of Preparation

2009 Financial highlights • Rental income €151 million lower at €1,162 million; costs reduced by €149 million

• Underlying3 profit before tax of €35.2 million (2008: €38.0 million)

• Profit before tax on continuing operations of €4.5 million (2008: €3.0 million) including a net exceptional charge of €29.5 million (2008: €28.8 million), and losses on re-measurement items of €1.2 million (2008: losses of €6.2 million)

• Profit after taxation on continuing operations of €0.2 million (2008: loss of €11.2 million)

• Return on capital employed strongly ahead by 140 basis points to 9.9%  avis-europe.com Annual Report 2009 Business review Brand leadership and service differentiation We continually improve our customer offer to develop stronger customer loyalty We continue to lead the industry in reducing customer waiting times with our commitment to serve Avis Preferred customers in under 3 minutes at one of our 500 “3-minute promise” locations. Approximately 70% of all Avis Preferred rentals within Europe now take place at a “3-minute” location. We have also speeded up the return process with our Rapid Return Service. Business review 10 avis-europe.com Annual Report 2009 Business description Market analysis

The Group is an international vehicle rental of Europe, Africa, the Middle East and Asia. We Operating environment services company and a market leader in also have joint ventures in China and France and Market size and growth many of its markets. Under the Avis and associate operations in India and Malaysia. There is little external data available regarding Budget brands, we operate more than 3,800 the car rental market on a European-wide basis, corporately-owned and licensee locations Corporate locations are directly owned by the the latest being Datamonitor’s European Car throughout Europe, Africa, the Middle East Group and employ Avis Europe’s staff, premises Rental Report 2009, which is based on actual and Asia, which completed over seven million and fleet. Agency operations are owned and and estimated revenues for 2009. Datamonitor rental transactions in 2009 across the network. operated by third parties who rent the vehicles estimated that €10.9 billion of car rental During the year, our corporately-owned locations owned by the Group, but employ their own staff revenues were generated in Europe during 2009. employed some 5,300 staff (based on average and use their own premises. Agency revenue is The largest countries by revenue were Germany full-time equivalent headcount) and had an accounted for as Group revenue, with the agent (20%), the UK (19%), France (17%), Spain (11%) average fleet of 100,000 vehicles. receiving a percentage of revenue as commission. and Italy (10%). During this year, Datamonitor Licensee locations are owned and operated estimated that a combined fleet of approximately We close commercial ties with Avis by third parties who pay fees in return for the 1.2 million vehicles was employed by the car Budget Group, Inc., which owns the global use of the brand and operating system. In this rental industry, representing a decline of 8% rights to the two brands, as well as the Wizard third category, we only include the licensee fee compared with 2008. rental and reservation system. Long-term receivable in revenue. agreements with Avis Budget Group, Inc. give Growth has historically been closely tied the Group the rights to use the Avis and Budget In 2009, rental income from the Avis branded to general economic activity levels and, in names, brands and operating system through business represented 97% of our overall rental the case of rentals from airports, to airline master licensing agreements until 2036, income, and the Avis corporate countries passenger volume growth. From this perspective whilst cross-marketing and joint promotional accounted for approximately 94% of our overall the operating environment in 2009 was agreements are in place to provide customers rental income. extremely difficult for the car rental sector with with access to a global network. recessionary conditions in most of the Group’s The Budget branded business in Europe, Asia markets, both in Europe and internationally. The Our network comprises countries in Western and the Middle East serves customers through Economist Intelligence Unit (EIU) reported an Europe (the corporately-owned countries), which over 1,000 rental locations in 65 countries. The estimated decline of 4% in euro-area GDP for operate their own locations and also appoint local network is mainly represented by licensees. 2009 compared with growth of 0.6% (restated) agencies and sub-licensees, plus a wider network During 2009, the corporately-owned operations in 2008. The International Air Transport of national licensee operations across the rest in France, UK, Austria and Switzerland were Association (IATA) reported a decline of 5.3% in combined with the respective Avis businesses. In European passenger numbers in 2009 compared 2009, the Budget branded business represented with growth of 1.8% in 2008. Datamonitor 3% of our overall rental income. estimates that the overall fall in the car rental The total European market in 2009 exceeded the declines in GDP car rental market A description of the performance of the Group and airline passengers, being around 9% and for the year ended 31 December 2009, and reflecting its exposure to the discretionary in which we operate significant developments which occurred during element of consumer spending. the year, is set out in the Chairman’s statement on is worth around page 4, the Chief Executive’s review on page 5, In 2010, economic growth rates are forecast €9 billion. and on pages 12 to 21 of this Business review. to return to positive territory, albeit remaining

Leading market Flexible mobility position in Asia solution for businesses We are strengthening our leading market “Avis Flex” is a brand new scheme specifically position and accelerating growth in fast designed to offer Corporate customers a truly growing geographical markets such as Asia. flexible and cost effective rental solution. Our expansion in China continues and we In 2009 we established the “Avis Flex” brand expect to increase the number of locations in eight European markets and plan to extend from 26 to 100 by the end of 2012. We also it to a total of ten European markets in 2010. became the first leading global car rental company to operate in Vietnam, with the opening of a licensee operation in the second half of 2009. avis-europe.com Annual Report 2009 11

weak, with the overall demand outlook in the Insurance/Replacement: Mediterranean), examples being Maggiore in Italy Group’s main markets expected to remain difficult These customers come through insurance and ADA in France. and uncertain. As at January 2010, the EIU was and leasing companies, vehicle dealerships forecasting growth of 0.8% in euro-area GDP in and repair shops with which Avis has a direct It is noteworthy that the Group operates two of 2010 followed by a 1.2% increase in 2011, with contractual relationship. the three established global brands, Avis, Budget UK GDP forecast to grow by 0.7% in 2010 and by and Hertz. 0.8% in 2011. This category also displays a relatively even pattern of demand throughout the year and Avis Europe corporate rental revenue Growth expectations for the airline sector tend customers’ requirements are similar to those in by country to be higher than GDP growth, driven in part by the Corporate customer group. structural trends, in particular by the continued Other 14% France growth of low cost airlines. IATA currently forecasts Partnerships 24% growth in passenger traffic for flights in Europe of To support business from both Individual and UK 4.5% for 2010. Corporate customers we have an extensive 16% portfolio of over 70 international partnerships with Germany 16% Market composition the world’s airlines, railway networks and other Spain 13% Italy The car rental market is generally categorised leading travel companies.

17% review either by the type of customer group, (Leisure, Corporate, Insurance/Replacement) or by the Stations/locations location of rental (airport, non-airport). In 2009, Rental locations throughout the network are Avis Europe corporate rental revenue approximately 47% of the market was estimated selected for their convenience to customers, by customer Business to be Leisure, with 39% being Corporate and 14% with particular importance attached to being Insurance/Replacement business. During representation at airports, rail locations and 2008, 40% of the industry’s revenue came from other major travel points. Whilst Datamonitor Individual 55% airport rentals, with 60% attributable to non- estimates that across the market as a whole airport locations. 40% of revenue comes from airport rentals, Insurance/ Replacement Avis benefits from a broadly even distribution of 11% Customers revenue from airport and non-airport locations Corporate Reflecting the above, we recognise three due to its significant international network. 34% key customer groups within the corporately- owned segment, each with differing needs Competition and expectations: Individuals, Corporate and The European car rental market is primarily Avis Europe corporate rental revenue Insurance/Replacement. comprised of three large multinational companies by location that comprise around 60% of the overall market. Individual: The Datamonitor research referred to earlier These customers are individual travellers booking shows that the Avis and Budget brands had directly or indirectly through travel companies, tour the second highest aggregate market revenue Non- Airport operators, partnership arrangements and brokers. share in Europe in 2008 at 18.2%*. Airport 47% 53%

The Individual customer category is more seasonal The combined and Vanguard Group than the Corporate customer category, with (including the National and Alamo brands) holds demand peaking over the key holiday periods. the leading position in the European market Individual customers are principally attracted place with a reported share of 22.8%. Hertz is to Avis by its widespread network, quality of the third largest operator with a reported market service, reliability, car choice, brand, website and share of 12.8% in 2008*. There was further competitive prices. consolidation during 2009 as a number of smaller car rental operators ceased trading or entered Corporate: financial administration, due to the difficult market Corporate customers book via negotiated conditions and decreased availability of credit, arrangements with their employers and through particularly in Spain and the UK. vehicle replacement companies. In specific markets we face competition from other The Corporate customer category displays car rental operators. For example, is a major a relatively even pattern of demand throughout competitor in Germany with a share of 21.1% the year. The key requirements of Corporate in that market and Enterprise in the UK holding customers are competitive prices, speed 12.9% of that market (source: Datamonitor’s and quality of service, reliability, car choice, European Car Rental Report 2009). There are availability of management information and a large number of smaller-scale operators with geographical coverage. strength in particular markets (notably the

*Market share relates to 2008, with 2009 data not yet available. 12 avis-europe.com Annual Report 2009 Financial review

Key performance indicators Results overview The underlying3 earnings per share improved to The Board monitors a range of financial and Rental income6 was 11.5% lower at €1,162.4 2.7 euro cents (2008: 2.4 euro cents) and the non-financial performance indicators, reported million, reflecting the global recessionary total earnings per share was nil euro cents (2008: on a periodic basis, to measure the Group’s conditions. In the first half these revenues were loss of 1.1 euro cents). performance. Of these, the key measures are set 14.1% lower with a relatively stronger out in the table below: performance in the second half, being 9.2% Currency effects below the comparative prior year period. Exchange rate movements, in particular the 2009 2008 sterling/euro exchange rate, affected results Performance indicators (as restated*) In response to lower volumes in the year, we for 2009 compared to the prior year. The average Corporately-owned operations improved pricing, undertook substantial structural sterling/euro rate for operating profit Rental revenue per day5 – (1.0) (1.3) reported currency (% change) cost actions and achieved a significant for the year was 1.16 compared to 1.25 for improvement in utilisation10. In addition there was the prior year. The strength of the euro Rental revenue per day5 – 0.7 0.7 constant currency2 (% change) a positive translation effect on reported costs due adversely impacted customers travelling into Billed days9 (% change) (10.3) 0.3 to the weaker sterling. mainland Europe, particularly from the US and UK, whilst having a beneficial effect on the Utilisation10 – average (%pts change) 3.9 0.2 As a result, underlying profit before tax7 totalled translation of our activities in the UK, including Total Group: €35.2 million (2008: €38.0 million). After the cost of the Group headquarters. Underlying3 operating margin4 (%) 8.9 8.6 incurring exceptional charges primarily relating to Underlying3 return on 9.9 8.5 capital employed8 (%) restructuring the cost base, overall profit before Change in basis of segmental reporting tax was €4.5 million (2008: €3.0 million). During the year we took the decision to combine * See Basis of Preparation Footnotes and detailed definitions are described on page 21. the corporately-owned operations of Budget with Step-change improvement in utilisation of 3.9% pts

Utilisation increase versus Absolute capacity to flex fleet size to demand prior year comparative Volume % change Fleet % change % pts % +3.9 72.9 3 2

H2 08 H2 08 H1 09 H1 09 H2 09 H2 09 H1 08 H1 08 +0.4 +0.2 (1) +0.9 68.8 69.0 68.4 (3)

(10) (11) 60%

(14)

2006 2007 2008 2009 (16) avis-europe.com Annual Report 2009 13

the respective Avis businesses. Consequently, the rentals and was partially offset by an improvement corporately-owned operations of both the Avis and in rental length, which we had actively managed Budget branded businesses are now disclosed through our revenue management function. as a single segment. Comparative data has been restated accordingly. Reported rental revenue per day5 was 0.7% higher at constant currency and 1.0% lower on Change in accounting standards and policies a reported basis. Excluding the effects of car IAS 16, Property, plant and equipment (effective and customer mix and rental length, pricing was from 1 January 2009) has been amended, ahead by 2.0%, being 1.0% in the first half and whereby companies such as ourselves that 2.8% in the second half. With a very tight control routinely sell items that have been used for rental, over fleet capacity, we continued to increase now need to recognise the income on disposal of prices where practicable throughout the year, such assets in revenue. In addition, such assets, achieving particularly good gains during the key when they cease to be rented and become held summer trading period. for sale, are now transferred to inventories at their carrying amount. As a result cash flows arising Weaker economic conditions affected volumes from the purchase and disposal of such assets are from the Individual customer group as consumers review now classified within “operating activities”. These remained cautious with their discretionary amendments only apply to vehicles not subject to spending. We achieved an improvement in the manufacturer repurchase agreements. second half of the year, with a lower level of volume decline, and a particularly good summer Business In addition, the Group has applied IFRS 8, trading period as Leisure customers continued Operating segments (effective from 1 January to travel. In addition, the fourth quarter benefited 2009) whereby a “management approach” to from a weaker comparative. segment reporting has been adopted (as described above), and IAS 1 (revised), Presentation of We achieved good gains in revenue per day in financial statements (effective from 1 January the Individual customer group with the trend in 2009), which has changed the format of certain pricing improving significantly in the third quarter primary Financial Statements. as we maximised the benefits of tighter supply in southern Europe during the peak summer trading Revenue overview period. Pricing then remained above prior year in 2009 2008 the fourth quarter, albeit at a slightly lower level. (as % € million restated*) change Corporately-owned The economic environment particularly affected operations: rental revenue from Corporate customers, Rental revenue 1,011.4 1,139.7 (11.3) as many companies sought to control travel Other revenue 107.8 124.8 (13.6) expenditure, resulting in customers travelling less 1,119.2 1,264.5 (11.5) (although with longer rental length) and, to an Licensees: extent, renting smaller vehicles. Therefore the Avis 32.9 36.6 (10.1) reduction in volumes from Corporate customers Budget 10.3 12.7 (18.9) was proportionally greater. Whilst price increases 43.2 49.3 (12.4) were successfully implemented to many Corporate customers, reported revenue per day Rental income 1,162.4 1,313.8 (11.5) was lower due to the impact of increased rental Disposal proceeds on non- 233.1 354.4 (34.2) repurchase vehicles length and lower car group mix. Group Revenue 1,395.5 1,668.2 (16.3) Volumes from Insurance/Replacement customers * See Basis of Preparation proved more resilient in the first half, being less cyclical, with the less resilient second half Corporately-owned operations performance reflecting the effect of a very strong Revenue from the corporately-owned business comparative following significant new account segment was 11.5% lower at €1,119.2 million in wins (in the UK) in the prior year. Good gains reported currency and 10.0% lower on a constant were achieved in rental revenue per day. currency2 basis. Other revenue was 13.6% lower primarily Overall billed days9 were 10.3% lower and 8.4% reflecting lower fuel sales from both the reduced lower on a like-for-like1 basis, excluding the impact number of rentals, and the fall in global fuel of network actions which involved the closing and prices. Sub-licensee fees increased year-on-year licensing of over 200 stations. The reduction in in line with the increased number of sub-licensee billed days primarily reflected a lower number of stations, particularly in Germany. 14 avis-europe.com Annual Report 2009 Financial review continued

Operating profit overview Cost of sales of €642.2 million was €113.5 Underlying return on million or 15.0% lower leading to an improvement 2009 2008 capital employed (as % in our gross margin from 40.2% to 42.6%. We € million restated*) change lowered fleet costs by €67.8 million or 14.5% by increased by 140 basis Underlying operating profit – 103.4 112.7 (8.3) strategically reducing fleet capacity in anticipation continuing operations of lower demand, the closure and licensing of points to 9.9%. Amounts excluded from underlying: certain rental locations, and by driving significant - Net exceptional charges (29.5) (27.5) 7.3 improvements in utilisation through specific - Certain re-measurement items (4.0) 13.2 (130.3) operational initiatives. In addition, overall fleet and economic hedges Avis Licensee costs benefited from more stable used car Revenue from Avis Licensee countries was Operating profit including 69.9 98.4 (29.0) markets in 2009, which were supported by discontinued operation and 7.1% lower on a constant currency basis and amounts excluded from underlying scrappage laws particularly in Germany and the 10.1% lower on a reported basis with reductions UK. Conversely, in the prior year, fleet costs were * See Basis of Preparation in most regions reflecting the weaker global impacted by particularly weak used car markets economic conditions. The analysis of underlying operating profit in Spain and the UK. Other cost of sales was – continuing operations follows: €45.7 million or 15.9% lower, being fully flexed Budget Licensee with the reduction in revenues with significant Budget Licensee revenue was 3.9% lower Corporately-owned operations reductions in fuel costs and fully variable third excluding foreign exchange effects, reflecting party subcontracted services. 2009 2008 restructuring in the German network during the € million (as restated*) year. Excluding Germany, underlying revenue was Revenue 1,119.2 1,264.5 Administrative expenses of €408.9 million were ahead by 1.6% as continued growth of the diverse Cost of sales (642.2) (755.7) €26.3 million or 6.0% below prior year. Staff network offset difficult trading conditions. On a Gross Profit 477.0 508.8 costs were €22.1 million or 7.8% lower reflecting: reported basis, revenues were 18.9% lower. Gross Margin % 42.6% 40.2% the full year effect of 2008 redundancies; a 5% Administrative expenses (408.9) (435.2) reduction in Group headquarter staff; further Disposal proceeds on non-repurchase Underlying operating profit – 68.1 73.6 restructuring actions particularly in Germany and vehicles continuing Spain; and optimisation of synergies between Avis Disposal proceeds on non-repurchase vehicles and Budget corporately-owned operations. This * See Basis of Preparation were 34.2% below the prior year primarily was further reinforced by an extended recruitment reflecting the timing of the significant reduction in Revenues from our corporately-owned operations freeze, such that average staff numbers in the fleet. In particular, in 2009, vehicle purchases were €145.3 million lower at €1,119.2 million, the year were lowered by 10.9% to 5,319. were managed on a conservative basis in advance reflecting the challenging economic environment. Overheads were marginally lower with benefits of the summer peak, resulting in a significantly Underlying operating profit was only €5.5 million from the translation of sterling-based costs and lower level of disposals. lower at €68.1 million, as we fully flexed the restructuring action property savings partially variable elements of our cost base and made a offset by increases in local operating taxation number of structural reductions in fixed costs. charges and higher receivable provisions given the prevailing economic climate. Successful turnaround of the Budget brand Launch of new Maximising Strengthening website synergies with Avis network locations Budget successfully launched its new In the four corporately-owned In 2009, Budget further strengthened website in December 2009 in 32 countries countries of France, the UK, Austria its network in key European airports and 22 different languages. The new website and Switzerland, Budget achieved including the addition of seven new capitalises on the success of the previous significant cost reductions by gaining locations at the key Spanish airports version and responds to new innovations in greater synergies with Avis, sharing of Barcelona, Madrid, Alicante, Murcia, e-commerce and customer behaviour. fleet overheads and infrastructure. Malaga, Mallorca and Ibiza. avis-europe.com Annual Report 2009 15

Avis Licensee Underlying net finance costs were 9.1% lower at €68.3 million. As we maintain a fixed level We took substantial € million 2009 2008 of committed liquidity facilities, the benefit of Revenue 32.9 36.6 significantly lower average net debt (19.8% lower) actions to reduce Cost of sales and (1.9) (1.9) was partially offset by the resulting higher average administrative expenses costs and delivered gross cash deposits being held throughout most of Underlying operating profit 31.0 34.7 the year. The Group continued to be substantially a 30 basis points hedged in the short-term, therefore limiting the Avis Licensee underlying profit at €31.0 million effect of lower market borrowing rates. The improvement in our was reduced by €3.7 million, reflecting the lower resultant effective underlying finance rate was revenues resulting from the global recessionary 7.0% (2008: 6.2%), and before the effect of gross operating margin. conditions. cash balances was 6.7%.

Budget Licensee The €234 million (19.8%) decrease in average costs of €7.8 million were recognised including 2009 2008 net debt to €949 million resulted from: the redundancies, the rationalisation of certain rental € million (as restated*) reduction in on-balance sheet fleet capacity of stations to reflect synergies with Avis, and vacant Revenue 10.3 12.7 19,477 units to 86,933 in anticipation of lower property provisions. review Cost of sales and (6.0) (8.3) demand; the structural reduction from the administrative expenses closure and licensing of certain network During the year, we developed and prepared Underlying operating profit 4.3 4.4 locations, particularly in Germany; and driving a structure for a potential securitisation of See Basis of Preparation the improvement in utilisation. our fleet. Advisory, legal and other costs were * Business incurred in the development of corporate and Revenue of €10.3 million was €2.4 million Net exceptional charges operational structures. lower. Cost of sales and administrative expenses Net exceptional charges before taxation of €29.5 were €2.3 million lower, reflecting head office million were incurred in the year, summarised as The activities associated with the closed Centrus cost savings arising from the decision to combine follows: credit hire business continued to recover a the corporately-owned operations of Budget residue of receivables recognised as exceptional with the respective Avis business. Consequently, € million 2009 2008 items in both the current and prior year. During the underlying operating profit decreased to Restructuring costs – Avis 14.0 27.6 the prior year we also recognised an exceptional €4.3 million. Restructuring costs – Budget 7.8 – impairment provision against the goodwill arising Securitisation preparation costs 7.8 – on the acquisition of certain licensees in Holland. Operating margin - continuing Centrus receivables (0.1) (0.3) This followed a reappraisal of the business in 4 Underlying operating margin on continuing Goodwill impairment – 1.5 conjunction with the restructuring referred to above. operations was 8.9%, being 0.3%pts higher Net exceptional charges before 29.5 28.8 and reflecting the benefits of the significant tax – continuing operations In 2007, we disposed of our former subsidiary in cost reductions to mitigate lower revenues Discontinued operation – (1.3) Greece and in 2008 recognised an exceptional outlined above. Net exceptional charges after tax 29.5 27.5 credit of €1.3 million to reflect the final settlement including discontinued operation of a warranty provision. The operating margin on continuing operations after net exceptional items, certain re- Certain re-measurement items and economic measurement items and economic hedges reduced The net cash cost of exceptional items, including hedges from 5.8% to 5.0% primarily due to the impact the settlement of costs recognised in previous The following items have been recognised in of foreign exchange fair value gains in the prior years, was €29.2 million (2008: €21.1 million). the year and are excluded from underlying profit year. Overall net exceptional costs on continuing before tax: operations were €0.7 million higher year-on-year. Restructuring costs of €14.0 million were Operating Finance Profit recognised, reflecting the rationalisation of our € million profit items before tax Underlying net finance costs operations which commenced in the prior year. Net re-measurement losses 5.7 2.3 8.0 Actions included headquarter redundancies, the on derivative financial € million 2009 2008 instruments closure of certain low margin rental locations and Finance costs Economic hedge adjustments (1.7) (7.6) (9.3) vacant property provisions following the relocation Net finance costs (excluding 66.4 72.9 Foreign exchange loss – 2.5 2.5 payable on deferred consideration) of the headquarters of the UK business into the on borrowings Group head office. In the prior year, restructuring Interest payable on deferred 1.9 2.2 4.0 (2.8) 1.2 consideration costs of €27.6 million included €1.9 million Underlying net finance costs* 68.3 75.1 incurred in respect of a redundancy programme that commenced in December 2007. Operating profit re-measurement losses on Average net debt 949 1,183 derivative financial instruments arose from the * Excludes certain re-measurement items and economic hedges, During the year, we took the decision to combine recognition in the Income Statement of movements totalling a gain of €2.8 million (2008: loss of €19.4 million). the corporately-owned operations of Budget with in the fair value of forward exchange contracts the respective Avis businesses. Restructuring used to hedge net sterling exposures across the 16 avis-europe.com Annual Report 2009 Financial review continued

Group. Net re-measurement losses on finance holding period, thereby reducing our residual Shareholders’ equity in the unconsolidated Parent items primarily arose from movements in the value exposure. The split between the closing Company Balance Sheet at 31 December 2009 fair value of both interest rate swaps used to non-repurchase and repurchase vehicles on the remains largely unchanged at £311.9 million limit the Group’s floating interest rate exposures Balance Sheet is set out below: (2008: £314.6 million). and the embedded derivative. Economic hedge adjustments on finance items largely arose from 2009 2008 Cash flow/net debt movement € million % € million % the maturity of interest rate swaps in the year Non-repurchase 364.5 39 441.0 34 (the re-measurement loss on which was mainly 2009 2008 vehicles in fleet € million (as restated*) recognised in the prior year). The foreign exchange Non-repurchase 3.1 – 10.3 1 Net cash generated from/(used in) 448.9 (3.8) loss on borrowings primarily arose from translation vehicles within inventory operating activities of sterling debt exposures. Manufacturer 574.5 61 841.2 65 Net cash used in (13.4) (22.0) repurchase vehicles investing activities Joint ventures and associate 942.1 100 1,292.5 100 Net cash used in (408.3) (0.8) financing activities € million 2009 2008 The increase in the proportion of non-repurchase Net change in cash and cash 27.2 (26.6) Share of profit of joint 0.1 0.4 vehicles above reflected the overall lower fleet equivalents before foreign exchange ventures and associate size (non-repurchase vehicles being retained to Other movements in net debt 337.8 (81.2) maintain flexibility) and a shift from manufacturer resulting from cash flows Our joint venture in China continued to repurchase vehicles to short-term hire operating Net new finance leases 11.4 (23.2) demonstrate strong revenue and profit growth, lease vehicles. The average number of fleet units Other non-cash movements, (1.1) (21.3) benefiting from continued expansion. Our OKIGO operated under short-term hire operating leases including the effects of foreign exchange car club initiative in Paris in partnership with during the year was 17.8% higher at 13,101, with Movement in net debt 375.3 (152.3) Vinci Park (the leading car parking operator) also an Income Statement charge of €64.9 million demonstrated good customer take-up and growth. (2008: €61.9 million). Net debt brought forward (1,133.2) (980.9) The performance of our associate operation in Net debt carried forward (757.9) (1,133.2) India was impacted by the terrorist actions in The average number of fleet units, including * See Basis of Preparation Mumbai. operating lease vehicles, operated during the year decreased by 14.9% to 100,034 vehicles The €448.9 million cash generated from Taxation reflecting lower rental volumes and the step- operating activities was achieved by the tight change improvement in utilisation. control of fleet capacity. Average fleet levels € million 2009 2008 were significantly lower than 2008, with closing Underlying taxation: 10.4 16.2 Return on capital employed fleet assets being €350 million below the start Credit on exceptional items (5.8) – Underlying return on capital employed8 increased of the year. Credit on certain (0.3) (2.0) from 8.5% for the year ended 31 December 2008 re-measurement items and to 9.9% for the year ended 31 December 2009, In contrast, closing fleet working capital balances economic hedges reflecting the improved operating margin and were largely unchanged, with lower fleet creditors Taxation charge including exceptional 4.3 14.2 higher asset turn as the step-change improvement arising from reduced purchases at the end of items, certain re-measurement items and economic hedges and in utilisation and fleet discipline drove significant 2009 being offset by a reduction in fleet debtors discontinued operation reductions in capital employed. on earlier defleeting following the summer peak.

The underlying effective rate of taxation on Shareholders’ funds and returns Net cash used in investing activities was continuing operations decreased to 30% (2008: At the end of the year, shareholders’ equity in the substantially lower as we maintained tight control 43%) as a consequence of results arising in Consolidated Balance Sheet was €61.6 million of capital generally. Net cash used in financing different jurisdictions impacting both current and (2008: €69.3 million). Movements in shareholders’ activities reflects both the payment of interest, deferred taxation together with the resolution funds comprised the profit attributable to equity in line with underlying finance costs in the year, of a number of historic tax matters with the tax holders as recognised in the Income Statement and the repayment of borrowings following the authorities. and actuarial losses in respect of the Group’s reduction of fleet, the latter also being then pension scheme of €17.6 million (2008: gain of reflected in other movements in net debt resulting The tax credit on exceptional, certain re- €11.2 million) partly offset by translation reserve from cash flows. measurement items and economic hedges in gains of €5.5 million (2008: loss of €23.1 million) 2009 was €6.1 million credit compared to a €2.0 which arose from the translation of the UK The reduction in net new finance leases was due million credit in 2008, reflecting the change in mix asset base at the stronger closing sterling/euro to the disposal of finance lease vehicles exceeding of exceptional items and the updated assessment exchange rate. the inception of new agreements. of certain liabilities in respect of historic items. The direct impact of foreign exchange (pre- As a consequence, net debt at 31 December 2009 Fleet taxation) on shareholders’ equity was €1.0 million reduced to €757.9 million from €1,133.2 million at The majority of vehicles continue to be subject to as the translation reserve gain of €5.5 million was 31 December 2008, the Group having generated manufacturer repurchase arrangements, which offset by the losses arising from foreign exchange a positive free cash flow of €375.3 million in the guarantee a disposal value at the end of the on net debt of €2.5 million and foreign exchange year, compared to a cash outflow of €152.3 million derivatives of €4.0 million. in the prior year. avis-europe.com Annual Report 2009 17

Net debt of all unfunded scheme liabilities was €35.0 million 31 December 1 January (2008: €34.2 million). The increase in the deficit Strong cash 2009 2009 € million % € million % is primarily due to the net interest cost applied in management, together Interest bearing assets 63.3 (8) 52.1 (5) the year. Debt due within one year (74.0) 10 (45.1) 4 with the reduction in The charge in the Income Statement for defined Debt due after one year (509.5) 67 (841.3) 74 benefit schemes reduced to €8.1 million (2008: Finance leases (167.9) 22 (232.7) 21 fleet, led to a €375 €10.1 million), primarily as a result of lower Derivative debt instruments (69.8) 9 (66.2) 6 headcount. million reduction in Net debt (757.9) 100 (1,133.2) 100 Treasury year-end debt versus There have been no significant changes in the Financial risk management objectives and policies composition of net debt during the year. The We have a centralised treasury function that is 2008. debt due within one year includes US dollar loan responsible for the management of the Group’s notes (€51.6 million) due August 2010, with bank financial risks together with its liquidity and overdraft and commercial paper balances in both financing requirements. The treasury function is the current and prior year. not a profit centre and its objective is to manage review risk at optimum cost. Treasury operations are Pensions conducted within a regularly reviewed framework We operate both funded and unfunded defined of policies and guidelines approved and monitored benefit pension and statutory termination by a sub-committee of the Board. This framework Business schemes, as well as defined contribution schemes facilitates the execution of Board-approved throughout the Group. strategies. A discussion of the Group’s financial risk management objectives and policies, and Funded defined benefit schemes: exposure to various financial risks, is included in The principal funded scheme is operated in the Note 26 of the Consolidated Financial Statements. UK. The difference between the market value of scheme assets and the actuarial value of the Current liquidity funded scheme liabilities at 31 December 2009 We fund the Group’s operations through a was a deficit of €54.1 million (2008: €36.7 million). combination of retained earnings, working capital and borrowing facilities. The majority of borrowings The fair value of the scheme assets increased are raised through Avis Finance Company plc, by €26.2 million (2008: decreased by €49.5 an indirect wholly-owned subsidiary of the million) in the year to €123.4 million. This Company, and proceeds are used to finance the reflects an exchange translation gain from the Group’s subsidiaries on an arm’s length basis. In strengthening of sterling, an experience gain on order to ensure maximum flexibility to changing plan assets and additional funding contributions requirements, we seek to maintain access to a from the Group. The latter were increased in the wide range of funding sources. Financing facilities year to €9.2 million annually from 1 July 2009 therefore include bank borrowings, loan notes, to 1 January 2017. finance leases, operating leases and a commercial paper programme in Belgium. The present value of the scheme obligations has increased by €43.6 million (2008: decreased As at 31 December 2009, the Group had undrawn by €75.3 million) to €177.5 million, due to committed borrowing facilities of €849.6 million the change of assumptions (mainly changes (2008: €608.0 million) and additional uncommitted in the discount and inflation rate), interest on borrowing facilities available of €312.4 million scheme liabilities and the strengthened sterling (2008: €383.7 million). Of the undrawn committed currency noted above. The net actuarial loss facilities €192.1 million expire within one year was €18.0 million (2008: gain of €9.8 million) (2008: €300.3 million), €629.5 million between and interest on scheme liabilities was €9.0 million one and two years (2008: €nil) and €28.0 million (2008: €11.1 million). The non-contributory between two and five years (2008: €307.7 million). final salary section of the UK Plan was closed to future service accruals from 1 April 2007 and In addition, as at 31 December 2009, the Group future service benefits now accrue under the had outstanding loan notes and associated contributory Retirement Capital (cash balance) derivative financial instruments of €587.3 million section of the Plan. (2008: €597.8 million). Of these, €50.9 million matures within one year, €101.1 million matures Unfunded defined benefit schemes between one and two years, €435.3 million The principal unfunded scheme is held in Germany matures between two and five years, and €nil after and is closed to new entrants. The actuarial value more than five years (2008: €51.6 million between 18 avis-europe.com Annual Report 2009 Financial review continued

one and two years, €460.6 million between two spread risk. We also reinsure a limited amount of which in itself is highly seasonal. Disruption and five years and €85.6 million after more than the risks through the Group’s captive insurance could occur during the peak summer season five years). The Group also held cash and cash company, which in turn buys reinsurance to limit at the time when we increase staff levels and equivalents of €51.8 million (2008: €24.7 million). its own exposure. purchase more vehicles to accommodate the anticipated usual increase in demand. There The Group’s committed bank facilities and loan Principal risks and uncertainties may be disruptions in air travel patterns or a notes are unsecured and contain a number of Risk mitigation is a key part of the management general decrease in air travel as a result of financial covenants including: a minimum EBIT of the Group and we have a well developed a significant event such as a terrorist incident level; a maximum limit to the ratio of total net process to identify, manage and limit exposure or as a consequence of increased security financial debt to underlying EBITDA; and a to areas which may have a negative impact on measures being taken by the authorities minimum limit to the ratio of underlying EBITDA the business which is described in the Corporate in anticipation of such a threat. An economic to net interest expense. Each of these covenants governance report on pages 29 to 33. After downturn, as experienced recently, poses is measured at 30 June and 31 December each review, the relative importance of certain risks challenges for the Group given its capital year and on a rolling 12-month basis on either an has changed since the prior year end. Whilst the intensity and short forward reservations, underlying IFRS or frozen UK GAAP basis. On an key risks relating to economic uncertainty on requiring careful management of the business IFRS basis for the year ended 31 December 2009, demand and residual values in used car markets to manage capacity, costs and profitability. the ratio of total net financial debt to underlying continue, the risk for certain key counterparties EBITDA was 2.0:1 (2008: 2.5:1) and the ratio of such as AIG and has diminished. Pricing and competitive pressures underlying EBITDA to net interest expense was In addition, due to the increasing importance The Group and its licensees are subject to 5.6:1 (2008: 6.2:1). We monitor compliance of information technology, the risks related competition from a wide range of other rental against all the Group’s financial obligations and to communications networks and information operators both directly and via intermediaries manage the Consolidated Balance Sheet and debt systems have been added to this summary of and brokers. Large European rental operators requirements so as to operate within the financial principal risks and uncertainties. Where there compete with the Group in most customer covenants. The Group remained within its banking have been changes, we have taken actions to categories, and mergers and acquisitions covenants during the year. The first repayment on respond and will continue to monitor and respond involving those competitors may result in the Group’s committed borrowings is a relatively to the changing climate. increased competitive pressure. Local rental small (€51.2 million) repayment of US private operators may have lower operating costs, placement notes due in August 2010. Beyond Summarised below are some of the risk factors enabling them to charge relatively low prices. In this, the next borrowing repayment is not due until that may affect the Group’s business: addition, the car rental industry faces pressure February 2011, the maturity date of the Group’s from increased pricing transparency as a result €580 million revolving credit facility. Finance • International operations of the growth of internet travel portals, other leases, which are the only other form of committed • Demand forms of e-commerce and the rental brokers. This facilities, renew on a regular basis. • Pricing and competitive pressures transparency has increased the prevalence and • Fleet intensity of price competition. Other funding arrangements • Relationship with Avis Budget Group, Inc. Where commercially beneficial, we seek to • Communications networks and Fleet optimise financing costs by entering into information systems Loss or material change in the terms on which we operating lease transactions where substantially • Insurance obtain fleet vehicles from major vehicle suppliers all of the risks and rewards of ownership remain • Funding could harm the performance of the business. with the lessor. At 31 December 2009, the total • Interest and foreign currency In the event that we could not procure all the commitment to pay operating lease rentals in • Pensions required vehicles from current sources, vehicles future periods for land, buildings and vehicles could be obtained from other sources such as was €202.9 million (2008: €227.2 million). International operations dealers. However, there could be risks to business At the end of the year, the Group has certain Given its extensive geographic coverage, the volumes and to financial and operating results if insurance, operating lease and station rental Group’s business is subject to various risks we had to seek alternative supplier arrangements. commitments which are backed by guarantees inherent in international operations. These and letters of credit that have been issued by risks include, amongst other things: regulatory The effective cost of vehicles is dependent on banks to third parties amounting to €80.3 million requirements; differing legal and tax practices a combination of the new purchase price, the (2008: €80.0 million). and interpretations; potential difficulties in level of discount, the amount of any marketing managing foreign operations; different local contributions and the residual value of the Insurance accounting practices; and potential political vehicles, either on the pre-agreed price for We are legally obliged to provide all vehicle rental instability. The revenues received from licensee repurchase vehicles or the open market for non- customers with insurance against accidents operations represent a significant income repurchase vehicles. There is a risk that any caused to third parties, and cover is also offered stream for the Group, and are dependent on the increased cost of vehicles cannot be passed onto against theft and personal accident. In addition, we performance of the individual licensee operators. rental customers. cover various risks arising from the normal course of business, including damage to property and Demand Historically, sales incentive and discount general liability. Cover is arranged with a number The Group and its licensees face various risks programmes offered by manufacturers to car of major insurance companies to cost effectively associated with the demand for its services, rental companies have tended to keep the avis-europe.com Annual Report 2009 19

average cost of cars low for the car rental current vehicle residual values and, at least licensed from ABG as mentioned above, to industry. In periods when the environment for in the short term, have an adverse impact on accept reservations, process rental and sales new car sales improves or when manufacturers the Group’s performance until existing fleet is transactions, manage our fleet of vehicles, are trying to rebalance capacity for a downward replaced. In addition, further legislative changes account for our activities and otherwise conduct shift in demand, they could decide to reduce their encouraging the use of vehicles with lower our business. These information systems rely on allocation of sales to fleet purchasers such as the emissions could result in additional costs in the communications service providers to link them Group, or to remove the incentives and discounts medium term if the Avis fleet cannot be adapted with the business locations these systems serve. thereby increasing the average cost of vehicles. to wholly mitigate these changes and any A failure of a major system, or a major disruption resultant higher costs recovered. of communications between the system and Vehicles not covered by repurchase programmes the locations it serves, could cause a loss of are sold on the open market. Residual values Relationship with Avis Budget Group reservations, interfere with our ability to manage of these vehicles are exposed to an adverse Avis Budget Group, Inc. (ABG) licenses the Avis our fleet, slow rental and sales processes and movement in second-hand vehicle prices, which and Budget brands to the Group for operation otherwise adversely affect our ability to manage can be a result of a number of factors, including in specified territories through master licensing our business effectively. We design our systems, general economic conditions, tightening of agreements which expire in 2036. our service provider contracts, business continuity availability of credit to potential buyers, model plans and insurance programmes in order to changes and changes in government economic The Group does not have any cross-shareholdings mitigate such a risk but not eliminate it. review and environmental legislative policy which cause with ABG, yet through the close contractual short-term uncertainty and prompt change and business relationship the two companies In addition, as our systems contain identifiable in customer preference. Equally, a severe or work together to provide a seamless service personal data and confidential information persistent decline in the results of operations to customers of both the Avis and the Budget relating to other businesses, we have developed Business or financial condition of one of the major networks. We rely on ABG to operate its own strong security policies and undertake rigorous manufacturers supplying vehicles for the Group’s business in a manner that both upholds the value security measures to protect this data and any fleet could impact residual values. Any such of the global brands and allows the Group to systems that have been granted access to it. movement in used vehicle prices or poor demand provide a similar service in the locations in which If we did not maintain the security of the data in the used vehicle market may hinder our ability it operates. We have joint marketing initiatives we hold, we could suffer reputational damage, to sell these vehicles and could adversely affect with ABG and share market and customer potential regulatory enforcement action or, the Group’s results. information where appropriate. ABG also provides in some circumstances, claims for breach of joint services and cross-refers customers through contractual obligations. Where difficulties are experienced in sourcing a formalised agreement. The maintenance of vehicles, or where prevailing economic conditions a good management relationship with ABG is Insurance result in depressed used vehicle prices and therefore very important to the Group. We are legally obliged to provide all vehicle rental reduced demand, these risks may be mitigated by customers with insurance against accidents extending the holding period of vehicles. However, We use the Wizard rental and reservation caused to third parties. We also provide our extended holding periods may introduce new system under licence from ABG, pursuant to a customers the option to purchase waivers of risks including increased maintenance costs, long-term computer services agreement, which liability in the event that the vehicle sustains manufacturer warranty expiry, more uncertainty is subject to a five-year notice period. Wizard damage or is stolen whilst in their custody. In over residual values and the potential impact of has been operational since 1972, and has been addition, we cover various risks arising from the older vehicles on customer loyalty and safety continuously enhanced and expanded since that normal course of business, including damage to considerations. time. It is a fully integrated reservation, rental property and third party general liability. Cover and management information system that is is arranged with a number of major insurance If a decline in the results of operations or financial used by Avis Europe and ABG worldwide. We companies to cost effectively spread risk and condition of a vehicle manufacturer (or other are obliged to contribute to the cost of upgrading we are reliant on their continued credit standing. repurchase programme counterparty, such as a and enhancing Wizard, therefore unanticipated Certain of these insurance policies are supported dealer) were so severe as to cause it to default on costs could adversely affect the Group’s results. by letters of credit provided by the Group the an obligation to repurchase vehicles covered by Should Wizard need to be replaced, process and extent of which is partly dependent upon the repurchase guarantees, we would have to find an execution issues could present a substantial risk insurer’s perceived credit standing of the Group. alternative method for disposal of those vehicles, to the Group’s operations. We provide reinsurance services to some primary which could increase the Group’s expenses and insurers for a capped limit through the Group’s decrease the proceeds from such disposals. Any Any adverse changes to the terms of the own captive insurance companies. Where such default might also leave the Group with an agreements or any deterioration in ABG or its appropriate the captive companies purchase unpaid claim against the manufacturer or dealer business or in the relationship with ABG is likely reinsurance to limit their own exposure to with respect to repurchase vehicles that have to have an adverse effect on the Group’s financial acceptable levels. Significant risks would been sold and returned but not yet paid for. condition and results of its operations. exist to the stability of the Group’s business if access to primary insurance and/or reinsurance If governments across Europe introduce rapid Communications networks and information was constrained, denied or available only at changes to taxation or environmental regulations systems increased costs that could not be passed on in designed to encourage the use of vehicles with We rely heavily on information systems, including increased prices. lower CO2 emissions this may result in lower the Wizard rental and reservation system 20 avis-europe.com Annual Report 2009 Financial review continued

Funding each country where the Group has a corporately- The Group’s operations are by their very nature owned operation, revenue generated and costs capital intensive and are dependent on its various incurred are primarily denominated in the sources of funding. relevant local currency, so providing a natural currency hedge. In addition, intra-group trading Terms of credit between the Group and its transactions are netted and settled centrally. Any principal suppliers of fleet vary widely, depending remaining material foreign currency transaction both on the market in which the vehicles are exposures are hedged as appropriate into either to be used and on the supplier. Certain suppliers euro or sterling. Revenue recognised from also provide vehicles on operating lease licensees is primarily received in sterling. terms. Any material worsening of credit terms would result in a corresponding increase in debt With regard to translation exposures the policy funding requirements. is to match where possible the average assets of the Group to the equivalent average liabilities As a substantial proportion of the Group’s vehicles in each major currency and thus minimise any are funded with borrowings, including both on and impact to the Group. To the extent that this does off balance sheet leasing arrangements, the Group not occur, both foreign currency borrowings and depends on access to the debt markets and other forward exchange contracts are used. forms of financing to fund its fleet. If we are unable to access such debt facilities on commercially Pensions acceptable terms, or have difficulty meeting the The Group has two principal defined benefit terms of any financial covenants, the current pension schemes, a UK scheme which is in business, results of operations, financial condition deficit, and an unfunded scheme in Germany. and future prospects may be adversely affected. In The Group’s balance sheet liability against these the current economic climate, for example, access schemes is subject to uncertainty concerning the to certain markets is closed or limited. risks and returns around the respective assets and liabilities of the UK scheme and the interest In order to mitigate these risks and to guarantee rate applied to the book reserve for the German access to liquidity, we seek to ensure that the scheme. In particular, as detailed in the Notes to Group has a core level of long-term committed the Consolidated Financial Statements, volatility funding in place with maturities spread over in interest rates and inflation rates impact on the a number of years. This core funding is amount by which future pension liabilities are supplemented with shorter-term committed discounted and affect the returns forecast to be and uncommitted facilities particularly to cover earned. The Group’s future cash contributions seasonal debt requirements. Lease finance to the defined benefit pension schemes and generally tends to be only available on shorter government pension protection funds are also maturities than other forms of debt. All funding dependent on future scheme performance and is arranged with a wide range of providers, on underlying actuarial assumptions. Actuarial both a public and private basis. We maintain a valuations of the Avis UK Pension Plan for funding regular dialogue with debt providers to keep purposes are performed every three years with them updated on the trading performance and the next valuation due as at 31 March 2011. prospects of the business. Going Concern Interest and foreign currency The nature of the rental business model means Interest rate risk arises from the Group’s that we have, if required, an ability to readily borrowings which, after foreign currency risk vary our fleet size and hence largely our funding hedging, principally arise in euro and sterling. requirements. As an example, due to relatively Borrowings issued at variable rates expose the short holding periods, we are able to flex vehicle Group to cash flow interest rate risk whereas fleet levels relatively quickly to meet both borrowings issued at fixed rates expose the fluctuations in demand or funding constraints. Group to fair value interest rate risk. To manage This variation can be achieved by an interaction these risks, the Group is both financed through a of the management of pricing, utilisation and combination of fixed and floating rate facilities and absolute number of vehicles. Further flexibility enters into various derivatives. As present debt is achieved by varying the proportions of facilities mature the Group is exposed to higher manufacturer repurchase and non-repurchase credit spreads on its borrowings. vehicles, the latter having complete flexibility as to the disposal date. Furthermore, whilst most The majority of the Group’s business is transacted fleet deals are calendar year based, to further in euros, sterling, US dollars and Swiss francs. In enhance flexibility we purposely enter each year avis-europe.com Annual Report 2009 21

with a proportion of our fleet requirements being With regard to new committed financing, we have Footnotes and detailed definitions uncommitted. By way of an example, in the year commenced discussions with various financial 1 Like-for-like measures comprise only those corporately- owned and agency rental stations that were in operation ended 31 December 2009, in anticipation of a institutions with respect to a variety of potential throughout all of the current and comparative year. reduction in billed days, we reduced average fleet forms of new medium-term funding and are 2 Constant currency revenue data is calculated whereby levels by 14.9%. confident of a successful outcome. both current and prior year non-euro denominated revenue is translated into euro at the exchange rate prevailing in the equivalent month in the prior year. From a network perspective, temporary staff are Therefore, whilst any consideration of future 3 Underlying excludes exceptional charges, certain net employed for seasonal peaks helping provide matters involves making a judgement at a re-measurement and economic hedging items – see Basis of Preparation. Underlying is not a defined term under IFRS, additional flexibility in managing costs. A number particular point in time about future events and is not intended to be a substitute for, or superior to, IFRS of rental locations are separately managed by that are inherently uncertain, the Directors, measures. agents, who are responsible for staffing and after making appropriate enquiries, are of 4 Underlying operating margin is calculated as underlying operating profit divided by rental income. property and to whom we pay a fully variable the opinion that we have adequate resources 5 Rental revenue per day is calculated as rental revenues commission. Further, we fully franchise certain to continue in operational existence for the divided by billed days. 6 Excludes the impact of IAS 16, Property, plant and operations. We also benefit from diversification of foreseeable future. For this reason, the Directors equipment. For management reporting, revenues from the customers and suppliers, geographic spread and continue to adopt the going concern basis in disposal of vehicles not subject to repurchase agreements are sources of funding. preparing the Financial Statements. netted against the related net book value in cost of sales – see Basis of Preparation.

7 These profit measures exclude exceptional charges of review As part of our normal business practice, we Forward-looking statements €29.5 million (2008: €28.8 million) and certain net re- regularly prepare both annual and longer-term Certain statements in this Annual Report are measurement and economic hedging items totalling a loss of €1.2 million (2008: loss of €6.2 million). plans. These plans include an estimate of the forward-looking. Although the Group believes 8 Return on capital employed is the ratio of underlying financing required over the respective period. that the expectations reflected in these forward- operating profit for the past 12 months, including the operating Business While our base plans include an expectation of looking statements are reasonable, the Group can profit of the joint ventures and associate, to capital employed. Capital employed is an average of current and previous two obtaining new committed financing facilities over give no assurance that these expectations will period end closing balances, comprising shareholders’ funds the forthcoming 12 months, our forecasts indicate prove to have been correct. As these statements plus net debt and other liabilities. that even without any such new financing, involve risks and uncertainties, actual results may 9 Billed days include any day or period less than a day for which a vehicle rental is invoiced to a customer. given the level of operating lease lines currently differ materially from those expressed or implied 10 Utilisation is calculated as the average period of time during committed or at an advanced stage of negotiation, by those forward-looking statements. which operational vehicles are on rent as a percentage of their that we would still be able to operate within our holding period. committed facilities over the next 12 months and Martyn Smith remain within lenders’ financial covenants. Group Finance Director

Specifically regarding sources of liquidity, we have €208.5 million of borrowings due within 12 months of the year-end, which include €51.6 million of US dollar private placement notes (and an associated derivative contract) due in August 2010, together with finance leases, uncommitted overdraft facilities and commercial paper facilities. Committed facilities of €220 million are available for drawdown on new vehicle leases up to 30 June 2010, €95 million available for drawdown up to 31 December 2010 and €110 million which are available for drawdown up to 30 June 2011. Following drawdown, these facilities are retained for the holding period of the relevant vehicle, thereby extending the ultimate maturity of these facilities into future periods. Whilst we will seek the ongoing renewal of the finance leases and uncommitted facilities, we maintain sufficient forecast headroom within our other committed facilities.

Post 31 December 2010, the next borrowing repayment is due in February 2011, being a €580 million revolving credit facility, with the remaining €287 million US dollar private placement loan notes, €33.0 million euro loan notes, and €250 million Senior Floating Rate Notes then having a range of maturities through to 2014. 22 avis-europe.com Annual Report 2009

Playing our part in reducing greenhouse gas emissions avis-europe.com Annual Report 2009 23

We offset our emissions in 2009 in conjunction with The CarbonNeutral Company. Around 90% of total emissions were offset through renewable energy, independently validated and verified to the Voluntary Carbon Standard: the remaining offset was via reforestation. Since 1997, we have offset over 147,000 tonnes of CO2. review

Business 24 avis-europe.com Annual Report 2009 Corporate social responsibility

Board level responsibility for Corporate Social Responsibility Environmental impacts We remain committed to reducing our impacts (CSR) rests with the Chief Executive. In our corporately- on the environment, of which the largest is owned operations, CSR management and monitoring is greenhouse gas emissions. Since 1997, we have offset greenhouse gas emissions through assigned to local management. For licensee countries, innovative renewable energy and energy efficiency Regional Licensee Directors are responsible for promoting projects, as well as reforestation. For every metric tonne of CO2 produced, the company pays for one alignment with Group CSR principles and policies. metric tonne to be saved through climate-friendly offsetting initiatives in conjunction with The CarbonNeutral Company.

In 2009 our European corporately-owned Our impacts operations maintained their CarbonNeutral® status and an increasing number of our licensees participated in CarbonNeutral® programmes. In particular, during the year, Avis Europe’s largest licensee in South Africa achieved Carbon Neutral and actions Accreditation, by measuring and offsetting greenhouse gas emissions for all of its internal We are committed to measuring the impact that our electricity and fuel consumption. Avis Norway, business has on the environment and taking steps to Sweden and Spain maintained their eco ISO 14001 standards. improve the situation. We measure our environmental impacts internally through an information management system which Our CSR strategy is an integral part of our On community matters, our corporately-owned integrates environmental reporting into financial “We Try Harder.” philosophy operations focus their efforts on the provision reporting by tracking utility use and business With regard to the environment, our strategy is to of vehicles for community purposes and local travel. The system encompasses our corporately- measure the effect that our business operations environmental improvements, whilst local owned country headquarters and rental stations, have on the environment and lower the impact management have discretion to support local staff plus our shared service and call centres. progressively. We have developed a comprehensive volunteering and fundraising for causes environmental programme to ensure we gradually of their choice. Our data is reviewed and analysed by an

reduce our CO2 emissions in our premises, offset independent third party assessor working with non-reducible emissions, continue to introduce less In our marketplace, we continue to be leaders in The CarbonNeutral Company. polluting vehicles onto our fleet and encourage our the adoption and development of best practice customers and partners to offset their emissions. in many aspects of our customer service. In the In 2009 emissions from our corporately-owned

workplace we focus on continued improvement operations amounted to 13,517 tC02e, a reduction We face challenges in setting formal overall targets in employee satisfaction, which together with of almost 8%. for energy consumption because in many of our customer satisfaction, is essential for the longer- rental stations, particularly at airports, we have term success of the Group, particularly in the Corporately-owned operations limited or almost no ability directly to affect energy current challenging market conditions. In order to offset these emissions we have worked use in that we are often sharing a building with other with The CarbonNeutral Company to purchase users. However, where possible, our corporately- Group values are set out in our statement of offsets from a variety of independently validated owned country headquarters and rental stations, business principles (see www.avis-europe.com). and verified clean and renewable energy projects plus our shared service centres have set individual around the world. These projects include: targets. In addition, we have sought closer links with We are a member of the FTSE4Good Index and the airport operators to introduce joint environmental Kempen/SNS Smallcap SRI Europe Index. • River hydro projects in Sichuan Province, initiatives, particularly in relation to recycling. western China – the clean electricity generated by this project is delivered to the local grid;

• Hydro power stations in Guizhou Province, southwest China – the four hydro power plants generate clean electricity which is delivered to the local grid, replacing the need for coal fired power; and avis-europe.com Annual Report 2009 25

• Agricultural methane capture in Germany – the Fleet operations subscription to have an Avis car available 24/7 project captures methane from animal waste We focussed our efforts on four main areas: in one of the many Vinci car parks. A significant at three farms in Germany. continuing to minimise emissions from our fleet by increase in the number of customers included introducing more environmentally friendly vehicles the extension of the programme to universities. In addition to our offset programme with The in more locations; launching an Eco Collection; Studies show that sharing a car in this way CarbonNeutral Company, we continued our focus developing more efficient fleet systems and effectively replaces up to eight individual cars. on achieving reductions in CO2 emissions and processes across the business; and continuing made a number of significant changes to our the expansion of our OKIGO car sharing initiative We have now also signed a partnership with Vinci, offices in 2009 including: in Paris. the Paris Metro and SNCF (the leading French railway company) to facilitate the operation of a • Relocating to a new energy efficient Low emission vehicles: public car sharing scheme with 4,000 vehicles in headquarter building in Switzerland; During 2009 we continued to minimise emissions Paris in 2010. from our fleet by introducing more environmentally • Relocating our UK headquarter employees friendly vehicles in more locations. Despite the Community into our existing Group headquarter building in difficulties in the car manufacturing sector and We aim to make a positive contribution to the Bracknell; and the resulting reduction in model availability, we quality of life in the communities where we operate. increased the number of eco-friendly vehicles in review • Relocating employees in our customer service our fleet including: Our community investment guidelines provide that and Budget brand headquarters in Boulogne to we focus on local environmental improvement our French headquarter in Paris. • Ford flexi-fuel cars in France; and provision of free transport for community activities. In 2009, amongst many other Business Our corporately-owned operations also focussed • LPG fuelled Volkswagens in Italy; initiatives, we were able to help the distribution on developing and completing a series of initiatives of emergency aid following the earthquake in to improve environmental performance, including: • BMW 1 series with stop-start technology in Abruzzo in central Italy. Spain, Germany, the UK, Belgium, Italy and the • Systems and process changes – completing Czech Republic; and In addition to this activity across our corporate the implementation of recommendations to and licensee network, we support UNICEF on achieve further internal emissions reductions, • Toyota Prius in Holland. a variety of projects. We also support initiatives following a number of environmental audits which are particularly important to local staff. of headquarters and major rental locations As a result of these and other changes, around undertaken in the prior year. For example, half of 2009 fleet purchases emitted below 140g Some of our 2009 projects have included:

the UK is adopting the use of waterless car CO2 per km (the European norm for 2009). wash systems and Germany is targetting a • A variety of fundraising activities for a cancer “paperless” office; Launch of Eco Collection: care charity (Macmillan) in the UK; Towards the end of 2009 we launched a new • Staff engagement – making better use of low emission AVIS ECO collection in the UK • Fundraising for the Portuguese Association for resources and continuing to make all staff – guaranteeing customers a fuel efficient, the blind (ACAPO);

aware of what they can do to reduce energy sub-120 CO2 emission diesel model every time use, including the use of e-learning to reduce they rent a car from the new collection. We • Staging a theatrical performance in Italy to travel; are aiming to expand this offer across Europe raise funds for the paediatric oncology unit in over time. Rome General Hospital; and • Behaviour change – reducing European travel by around 30%, partly through the Fleet systems and processes • Partnership with act!onaid to provide development of e-learning tools to replace A number of countries have implemented or educational and cultural activities to face-to-face training and greater use of are beginning the roll-out of a car Delivery and disadvantaged children in Brazil. videoconferencing; Collection optimisation system aimed at improving the efficiency of our downtown network. In addition, we support employee volunteering • Resource sharing – introducing car sharing at Through optimising the scheduling of Delivery and fundraising: a number of our head office locations; and and Collection tasks, the system helps reduce emissions by minimising the mileage driven by • where staff commit to voluntary work for a • Stakeholder engagement – developing closer Avis drivers. charitable organisation in Barcelona, the Avis links with customer groups to help reduce contact centre makes a quarterly contribution; their environmental impact, including a carbon OKIGO car-sharing initiative: and offset tool for both Individual and Corporate In Paris the OKIGO initiative, in a joint venture customers. with Vinci Park, Europe’s leader in complete car • in our Group headquarters we match parking solutions, allows customers who pay a sponsorship funding for individual and team efforts. 26 avis-europe.com Annual Report 2008 Corporate social responsibility continued

Workplace In December 2009, Avis Portugal celebrated leadership development programmes. Avis UK, for During 2009 we continued to focus on developing 50 years in business and recognised teams example, has introduced a modular development a lean, efficient and flexible organisation. We and individuals for exemplifying the “We Try programme for those new to people management. continued to review our organisation at all levels Harder.” spirit. and took the decision to integrate the Avis and In addition, during the year we carried out a Budget businesses in four corporate countries Recognising and celebrating success is a key comprehensive review of some 300 managers – the UK, France, Austria and Switzerland. feature of our culture. We positively encourage and directors; focussing on their potential to grow our people to raise their ideas for improvements within the company; their personal aspirations Cost control was essential and we maintained and innovations by participating in our new and possible career paths. Through this process a recruitment freeze across the company and ideas scheme, called “Winning Ideas”. We also we ensured every individual reviewed was given also held salaries at 2008 levels. Consequently, continue to recognise and value long service open feedback. considerable effort was made to put these moves within the organisation and have a tradition of into context for our people and we focussed on public celebration of major service milestones in Diversity the continued positive elements of our business, all countries and centres. During 2009 we have continued to focus on celebrating successes, communicating regularly developing a workforce which reflects the and openly at team level, giving employees direct Disability policy communities that we serve. In particular, we have contact with our senior management, continuing Avis is committed to encouraging the recruitment, continued to ensure our management structure to provide training and development opportunities development and retention of disabled people. reflects the international nature of our business. and recognising those who achieve good results Specifically, the Company commits to: The Avis Executive Board comprises six different in difficult times. nationalities. In our contact centre in Barcelona • interview all (internal or external) applicants we employ some 30 nationalities. In our Group We have been particularly aware in 2009 of the with a disability who meet the minimum criteria headquarters, we now have some 21 different need to thank our people at every opportunity for for an advertised job vacancy; nationalities working side by side. their continued commitment in difficult times. • make every effort when employees become Equal opportunities The “We Try Harder.” promise disabled to enable them to stay in employment; We operate in many countries with diverse We rely on our people to deliver the “We Try and employment practices. Whilst respecting local Harder.” promise and appreciate that it is circumstances, wherever we operate we follow essential that we make Avis an enjoyable place to • take action to ensure that key employees (e.g. the principles of equal opportunity in recruitment, work where people can develop and grow. senior managers, managers with vacancies) development, remuneration and advancement. develop an awareness of disability, so that our Because we operate in many different countries commitments can work. We make every effort to offer part-time and and thus have employees with very different flexible working arrangements to those employees cultural backgrounds, we ensure that every If an employee becomes disabled while working for who have personal and family commitments. employee understands what “We Try Harder.” Avis, they are encouraged to notify the Company means and takes pride in working for Avis, and every effort is made to ensure continued Health and safety regardless of their role. employment. If appropriate, the Company will We continued to focus on creating a robust health arrange suitable training and rehabilitation and will and safety culture across the Group, with each We keep the spirit of “We Try Harder.” alive make any reasonable adjustments. country and centre required to report quarterly on through Company induction programmes and key statistics. through our communications and training Developing our people programmes. We have a number of employee Our Human Resources vision is to enable people The majority of countries have increased training recognition programmes that are widely used, to grow within our company – developing both in this area and many countries have taken encouraging employees to celebrate teamwork themselves and our organisation. actions locally to further improve performance. and enjoy time away from the workplace with their Avis France, for example, has introduced a colleagues. For example, every country recognises Each country and the Group headquarters carry comprehensive process which includes audit its “Station of the year” and individual employees out comprehensive training programmes for both and reporting from an external body and which recognise colleagues who have demonstrated front-line and head-office based employees. Much is underpinned by three comprehensive training great commitment or service through a scheme operational training takes place within stations programmes. known as “Making a Difference”. using real-life situations. Some of our countries have continued to develop their coaching During the summer when it was unclear what The majority of our countries hold annual programmes, enabling more experienced impact swine flu may have on our employees and conventions with the emphasis on the celebration employees to support and develop others. our business, we developed a robust contingency of the brand, teamwork and public recognition of plan which put the health and well being of our those who have exemplified the spirit of Avis. Despite the economic constraints all countries employees as our primary responsibility. continue to deliver personal and management/ avis-europe.com Annual Report 2009 27

Marketplace considerably higher prices in some locations. We aim to make Avis first choice for our The Net Promoter Score™, which measures We achieved solid customers by continually improving our service the willingness to recommend Avis to a friend, customer satisfaction and so ensuring customer satisfaction and was 4%pts lower, again mainly reflecting lower increased loyalty. This is especially important in a scores during the summer, with an improving scores, despite very price competitive market environment such trend from the third quarter of the year onwards. reducing staff numbers. as ours, where customer service is one of the The percentage of customer invoices which main differentiating factors between operators. were adjusted in 2009 was stable. The station During 2009 we continued to focus on further performance score, which records the overall developing and extending our “speed of service” efficiency of the running of a station, improved initiatives. In addition we sought to minimise the by a further 1% against last year, primarily driven impact of the staff and cost reductions made in by continued greater satisfaction with the car response to the weaker economic background on pick-up service, following the introduction of the our customer service levels and balance higher “3-minute promise”. utilisation rates with car availability. We also focussed our efforts on building on We monitor customer satisfaction principally the progress made in differentiating the brand review through customer surveys and the level of and making the rental process faster, simpler complaints and each Country Managing Director and clearer for customers. Despite some tough takes personal responsibility for monitoring and comparative figures we achieved a further 7% improving customer satisfaction scores. Each increase in the number of active Avis Preferred Business month we distribute over 35,000 surveys and we customers. For Avis Preferred customers we receive over 6,000 replies. Of those returned, began to roll-out our “3-minute promise” some 80% are received back in less than three programme to the first licensee country in 2009. days, enabling us to pass comments on to the Under this programme we guarantee customers relevant business area for appropriate action their keys and rental agreement within three with minimal delay. In addition, Avis UK operates minutes of entering the service station. If we fail, a “We Try Harder.” blog, enabling customers to the customer receives a retail voucher for €30. have an on-line dialogue with our marketing and The service is now available in our corporately- customer service departments in the UK with the owned markets of France, Germany, Spain, the aim of continually reviewing and improving the UK, Portugal, Switzerland, Belgium, Netherlands, services we provide. the Czech Republic and in our licensee operation in Poland, and is providing real differentiation in Avis UK achieved the ISO 10002:2004 the market place. Approximately 70% of all Avis Complaints Management System and Avis Preferred rentals within Europe now take place at Germany was awarded the “Best Car Rental a “3-minute” location. Company” by the German Institute for Service Quality (DISQ GmbH & Co. KG). Awards remain a strong indication of how we are seen by our customers and we were Our four key measures of customer satisfaction internationally recognised in a series of over ten remain: prestigious awards in 2009 including “Europe’s Leading Business Car Rental Company” at the • overall satisfaction; World Travel Awards and “Car Hire Company of the Year” at the British Travel Awards. • willingness of customers to recommend Avis (Net Promoter Score™);

• customer complaints; and

• perception of station performance.

In 2009, “overall satisfaction levels” were marginally below the prior year, mainly reflecting lower scores during the key summer months, when the car rental industry in general was experiencing a limited supply of cars and 28 avis-europe.com Annual Report 2009 Board of Directors

Executive Directors Non-executive Directors

Pascal Bazin (53) Alun Cathcart (66) #◊ Appointed to the Board 1 January 2008 Appointed to the Board 3 February 1997 Chief Executive (since January 2008) Chairman (since May 2004) He joined Avis France as President in 2005 from Redcats, the third largest Chairman of the Nominations Committee worldwide home shopping Group, where he was CEO of the Redcats Until 1 January 1999 he was Chairman and Chief Executive of Avis Europe specialised brands division and Senior Vice President of Group Strategy/ plc and served as Interim Chief Executive from November 2003 until March Development. His previous appointments include Chief Executive Officer of 2004. He spent 14 years in executive positions in the transportation industry a number of international divisions of the cosmetic group, Yves Rocher. He before joining Avis Europe in 1980, and became Chief Executive in 1983. He began his career in 1980 with management consulting firm Peat Marwick is Chairman of Palletways Group Limited and Chairman of Innovate Services Mitchell, after graduating from Polytechnique school in Paris. Limited.

Jean-Pierre Bizet (61) Les Cullen (58) *#◊ Appointed to the Board 29 October 2002 Appointed to the Board 25 May 2004 Executive Deputy Chairman (since May 2004) Chairman of the Audit Committee He was appointed a non-executive Director of the Board in October 2002, He has held successive appointments as Group Finance Director of STC plc, and became Executive Deputy Chairman in May 2004. In May 2005 he was De La Rue plc, Goodman Fielder Ltd, Inchcape plc and Prudential plc, having appointed Chief Executive Officer of s.a. D’Ieteren n.v., and he is also a previously held senior financial roles with Black & Decker and GrandMet. Director of Belron s.a. During the last few years, he has also been Chairman of a number of private- equity backed companies. He is a non-executive Director and Chairman of Martyn Smith (54) the Audit Committees of Interserve plc and F&C Global Smaller Companies Appointed to the Board 11 September 2002 plc. He is also a trustee of the charity Sustrans Ltd. Group Finance Director (since September 2002) He joined Avis Europe from John Menzies plc where he held the position of Roland D’Ieteren (68) #◊ Group Finance Director from 1999 to 2002. Prior to joining Menzies, he was Appointed to the Board 3 February 1997 Group Financial Controller for Inchcape plc, and previously held a number of Since May 2005 he has been Chairman of s.a. D’Ieteren n.v., having financial roles with Inchcape plc and Rothmans International. previously been President and Chief Executive Officer since 1975. He joined s.a. D’Ieteren n.v. in 1971. He is a non-executive Director of Belron s.a.

Benoit Ghiot (40) Appointed to the Board 15 December 2004 He is Chief Financial Officer of s.a. D’Ieteren n.v., having joined the Company in 2002, and is also a member of the Board of Directors of Belron s.a. Prior to joining the D’Ieteren group, he was Group Controller and Strategic Planning Director with the Belgian retail group GIB.

Axel von Ruedorffer (68) *#◊ Appointed to the Board 27 June 2001 From 1984 to 2002 he was a member of the Board of Managing Directors of Commerzbank AG, having joined the bank in 1967 and was responsible for Accounting and Taxes, Compliance, Financial Control and Internal Auditing. He is a non-executive Director of a number of companies, including Stiebel Eltron Group and a number of financial institutions.

Pierre Alain De Smedt (65) *#◊ Appointed to the Board 1 February 2007 Chairman of the Remuneration Committee (since May 2008) He is Chairman of Febiac npa (Belgian Automobile Association). He was with Volkswagen for 25 years, managing operations in Belgium and South America and was appointed Chairman of Volkswagen’s Spanish SEAT business in 1997. He moved to Renault for five years, becoming Deputy Director General for Renault Groupe SA. He currently holds a number of directorships with Belgacom, Deceuninck and Alcopa.

* Member of the Audit Committee # Member of the Nominations Committee ◊ Member of the Remuneration Committee avis-europe.com Annual Report 2009 29 Corporate governance report

Code principles role in scrutinising management performance and the Company’s system Introduction for monitoring and reporting performance. They also have responsibility for This report describes how the corporate governance principles set out in determining appropriate remuneration levels and succession planning for the the Combined Code on Corporate Governance 2008 (the Code) are applied executive Directors. The Chairman meets with the non-executive Directors at by the Company. The role of the Board is collectively to provide clear least annually in order to facilitate the non-executive Directors’ contribution and effective leadership of the Company by setting strategic objectives to the Board. The Company did not have a nominated Senior Independent and providing the highest values and standards for the conduct of the Director during the period to 3 March 2010 but continues to keep this Company’s business. The Board is also responsible for ensuring that requirement under review. sufficient resources are available to achieve the Company’s objectives, for ongoing review of management performance and for ensuring that a The Board meets a minimum of six times each year and more frequently framework of prudent and effective controls is in place to enable risks to when business needs require. There was one additional Board meeting in be properly assessed and managed. 2009, as well as the six scheduled meetings and two scheduled conference calls. All Directors attended all Board meetings, except that Roland D’Ieteren Board of Directors missed two meetings. The Chairman of each of the Nominations Committee, The Directors of the Company during the period 1 January 2009 to 3 March Remuneration Committee and Audit Committee attended the 2009 Annual 2010 are listed below: General Meeting and were available to answer shareholders’ questions during and after the meeting. Pascal Bazin Jean-Pierre Bizet The roles of Chairman and Chief Executive are separate and their respective Alun Cathcart (Chairman) responsibilities are defined in writing and approved by the Board. The Les Cullen Chairman’s key areas of activity are the leadership of the Board, including Roland D’Ieteren setting its agenda, ensuring that it receives clear, accurate and timely Benoit Ghiot information and facilitating the contribution of the non-executive Directors. Dr Axel von Ruedorffer The Chairman is responsible for ensuring the formulation of strategy, in Pierre Alain De Smedt particular for ensuring that effective plans are developed for the short-term Martyn Smith and long-term development of the Group. In coordination with the Chief Executive, the Chairman is responsible for encouraging close and effective Alun Cathcart, Roland D’Ieteren and Pierre Alain De Smedt retire by rotation working relationships between all levels of corporately-owned operations, at the forthcoming Annual General Meeting and, being eligible, will stand for licensee and Group level management. The Chairman is also responsible re-election. for corporate governance and for ensuring that the Company maintains effective communication with its shareholders and other stakeholders. The governance As at 3 March 2010, the Board of Directors comprised the Chairman, three Chairman also chairs the Nominations Committee and has responsibility executive Directors and a further five non-executive Directors. The non- for ensuring that the Board evaluation processes are carried out and their executive Directors include three Directors who have no other association results acted upon. with Avis Europe plc and are therefore regarded as independent, being Les Cullen, Dr Axel von Ruedorffer and Pierre Alain De Smedt. A further two of To enable the Board to function effectively, full and timely access is Corporate the non-executive Directors, Roland D’Ieteren and Benoit Ghiot, in addition given to all relevant information. The Board retains powers of decision on to one executive Director, Jean-Pierre Bizet, are appointed by s.a. D’Ieteren all matters of strategy, together with all significant commercial issues, n.v. which has a shareholding of 59.6% in the Company. The obligations of including acquisitions and investments and capital expenditure in excess the Directors appointed by s.a. D’Ieteren n.v., and of s.a. D’Ieteren n.v. as a of a specified level. The Company Secretary is responsible for ensuring shareholder, are set out in a Relationship Agreement entered into at flotation that Board procedures are followed and for advising the Board, through the in 1997. These include an obligation for the D’Ieteren-appointed Directors Chairman, on all matters of governance. All Directors have access to the to exercise their voting rights so as to maintain the independence of the Company Secretary whenever they require. In the event that any Director Board as required by the Listing Rules, thus ensuring that all Directors take wishes to take independent professional advice on any point arising in decisions objectively in the interests of the Company. Since 1998 the Board connection with the exercise of their duties, in accordance with written has adopted a policy that, notwithstanding the provisions of the Articles procedure the Company Secretary will arrange this at the Company’s of Association, all Directors should stand for election at the first Annual expense. The Company Secretary may only be removed by a resolution of General Meeting following their appointment and re-election at least every the Board of Directors. three years thereafter. Details of all Directors’ remuneration and service contracts are set out in the The Company considers that the non-executive component of the Board Remuneration Report on pages 34 to 41. helps to provide an effective Board with a strong mix of industry-specific knowledge and general commercial experience. This balance enables the Board Committees Board to bring informed and independent judgement to all aspects of the The Board Committees in place during 2009 were the Nominations Company’s strategic development and performance. The role of the non- Committee, the Remuneration Committee and the Audit Committee. Each executive Directors is viewed as especially important in reviewing business Committee reviews its terms of reference and its effectiveness annually and strategy and assisting the Board in the development of strategy. The non- recommends to the Board any changes required as a result of such reviews. executive Directors also review and monitor the Company’s financial controls The terms of reference of each Committee are available on the Company’s and risk management systems. The non-executive Directors have a key website at www.avis-europe.com. 30 avis-europe.com Annual Report 2009 Corporate governance report continued

The Nominations Committee ensures that the Company has a formal, Roland D’Ieteren is not regarded as an independent non-executive Director rigorous and transparent procedure for the appointment of new Directors. and Jean-Pierre Bizet is an executive Director, but considers it essential The Committee periodically reviews the structure and composition of the that s.a. D’Ieteren n.v., as the majority shareholder of the Company, is Board to ensure the required blend of skills and experience appropriate to represented on the Committee. The D’Ieteren-appointed Directors abstain the Company’s needs. It sets objective criteria in recommending appointees from discussion and voting on the remuneration of any Directors appointed by to the Board, including being satisfied that appointees have sufficient time s.a. D’Ieteren n.v. pursuant to the Relationship Agreement referred to above. available to devote to the role, especially for chairmanships. The Committee is also responsible for ensuring that induction and training requirements The Remuneration Committee met six times during 2009 and all Directors (or are met both for new Directors and for the Board as a whole to ensure that in the case of Roland D’Ieteren, an alternate) attended all meetings. Directors can update their skills and knowledge, including their knowledge of developments in the Company’s business. The Committee carries out reviews The Remuneration Report to shareholders appears on pages 34 to 41. of the succession plans for the Board and for senior executives across the Group to ensure that continuing management capability is available to match The Audit Committee assists the Board by ensuring that the Company the development needs of the business. presents a balanced and understandable assessment of its position with regard to financial reporting, including interim, preliminary and other formal During 2009, the Nominations Committee approved a small number of announcements relating to the Group’s financial performance. changes to the structure of the senior management team in order to support the business needs of the Group going forward. Under its terms of reference, the Audit Committee monitors the integrity of the Group’s Financial Statements and the effectiveness and independence of The members of the Nominations Committee as at 1 January 2009 were the external audit process. It is responsible for ensuring that an appropriate Alun Cathcart (Chairman), Les Cullen, Roland D’Ieteren, Dr Axel von relationship between the Group and the external auditors is maintained, Ruedorffer and Pierre Alain De Smedt. There were no changes to the including reviewing non-audit services and fees. The Committee’s policy is composition of the Nominations Committee between 1 January 2009 and to review the necessity to consider whether to invite other firms to compete 3 March 2010. As recommended by the Combined Code, the membership of for the role with the incumbent firm at least as frequently as audit partner the Committee comprises a majority of independent non-executive Directors. rotation is required. It reviews the effectiveness of the system of internal control through a number of processes, as set out under the Internal control The Nominations Committee met twice during 2009 and all members and risk management section below. This includes an annual review of the attended both meetings. Group’s system of internal control and the processes for monitoring and evaluating risks facing the Group. The Committee reviews the effectiveness The Remuneration Committee determines broad policy on senior executive of the internal audit and risk management function and is responsible for remuneration and terms of service and approves specific terms of approving, upon the recommendation of the Group Finance Director, the appointment for the Chairman, executive Directors and senior management. appointment and termination of the Director of that function. The Committee is also responsible for the structuring and allocation of the Group’s share incentive schemes, including the setting of appropriate The Chairman of the Audit Committee provides regular reports to the Board. performance targets. Details of the advisers used by the Committee during In satisfying itself that sufficient and appropriate work has been performed, 2009 are set out in the Remuneration Report on page 35. the Board as a whole considers the adequacy and scope of the reports it has received from the Audit Committee along with corroborative evidence In setting policy, the Committee ensures that appropriate incentives are where necessary. provided to attract, retain and motivate executives of the appropriate calibre, to encourage performance and, in a fair and responsible manner, to reward In 2009 the Audit Committee discharged its responsibilities by: individual contributions to the Group. The Committee takes account of market practice, the Group’s position relative to other companies and the Company’s • reviewing prior to Board approval, the Group’s draft annual financial performance. The Committee consults with the Chairman and/or Chief statements, interim results statement, interim management statements, Executive, as appropriate, when determining the individual remuneration internal control report and the external auditor’s report; package of each executive Director. However, no Director is involved in deciding his own remuneration. The Committee reviews the terms of the • reviewing regularly the appropriateness of the Group’s accounting policies executive Directors’ service contracts, particularly with regard to notice and their compliance with appropriate International Financial Reporting periods, termination payments and compensation commitments in the event Standards; of early termination. The activities of the Committee during the year are described in the Remuneration Report on pages 34 and 35. • receiving and considering a report on the Group’s systems of internal control and their effectiveness, reporting to the Board on the results of the The members of the Remuneration Committee as at 1 January 2009 review and receiving regular updates on key risk areas of financial control; were Pierre Alain De Smedt (Chairman), Alun Cathcart, Les Cullen, Roland D’Ieteren and Dr Axel von Ruedorffer. Although there were no changes to the • examining reports on Group-wide risk matters and assessing the composition of the Remuneration Committee between 1 January 2009 and effectiveness of the Group’s risk management system; 3 March 2010, Roland D’Ieteren appointed Jean-Pierre Bizet, another D’Ieteren appointed Director, who is also an executive Director, as his • reviewing the internal audit and risk management function’s terms of alternate. The Company recognises that the representation of the D’Ieteren- reference and its proposed annual audit programme, and receiving regular appointed Directors on the Committee is not in compliance with the Code as progress reports on its work; avis-europe.com Annual Report 2009 31

• assessing the effectiveness of the internal audit and risk management to authorise a conflict of interest or potential conflict of interest notified by function together with their resources and standing in the Group; a Director, provided that the Board considers this to be in the best interests of the Company. • reviewing the effectiveness of whistleblowing arrangements; Each of the Directors reviewed their individual position prior to the • considering and approving the audit fee and reviewing non-audit fees implementation date for the new legislation of 1 October 2008 and the Board payable to the Group’s external auditors during the year; authorised a number of pre-existing potential conflicts of interest notified to it as a result. The Company has implemented procedures to deal with any • appraising the external auditor’s plan for the audit of the Group’s Financial Directors’ conflicts of interest which may arise in the future, and considers Statements, including key areas of scope and key areas of risk; that these procedures are operating effectively. The Company carries out an annual review of authorisations given by the Board, and continues to monitor • assessing external auditors’ effectiveness and independence, and making best practice in this area as it develops. recommendations to the Board regarding their reappointment; and Share capital • conducting the annual review of the Audit Committee’s terms of reference The last Annual General Meeting authorised the Company to purchase up to and effectiveness. 92,052,404 of its own ordinary shares. This authority will expire, and is due to be renewed, at the next Annual General Meeting. The Company made no The members of the Audit Committee as at 1 January 2009 were Les purchases of its own shares during 2009 pursuant to this authority. Details of Cullen (Chairman), Dr Axel von Ruedorffer and Pierre Alain De Smedt. There the share capital of the Company are set out in Note 29 to the Consolidated were no changes to the composition of the Committee between 1 January Financial Statements. 2009 and 3 March 2010. As recommended by the Combined Code, all the members of the Committee are independent non-executive Directors. Substantial shareholdings At 3 March 2010, the Company had been advised of the following notifiable The Audit Committee met four times in 2009 and all members attended interests in its issued ordinary share capital, and the voting rights attached to all meetings. The Committee meets with executive Directors and senior those shares: management, as well as privately with both the external and internal auditors. % of voting rights D’Ieteren Car Rental s.a. 59.59 Board evaluation Odey Asset Management LLP 12.301 During 2009 the Board carried out its annual formal evaluation process UBS AG 5.11 which is designed to provide a rigorous evaluation of the Board’s own performance and that of its Committees. The evaluation process assesses 1 Comprising interests in 6.99% of the Company’s issued share capital and 5.31% in contracts governance

for difference relating to shares in the Company. the effectiveness of Board and Committee processes to provide a basis for feedback and development where required. As noted above, the Chairman As noted above, an agreement governing the relationship between s.a. has responsibility for the evaluation process and for taking any appropriate D’Ieteren n.v. and the Company was entered into in connection with the action based on the results of the evaluation. Company’s flotation in 1997. It includes restrictions on s.a. D’Ieteren n.v.’s power to appoint Directors and obligations on those Directors to ensure that Corporate The evaluation processes for Board performance are conducted via a set the majority of the Board is independent of s.a. D’Ieteren n.v. It also provides of structured questionnaires which ask each Board/Committee member to that all transactions between the Company and s.a. D’Ieteren n.v. will be comment on a range of factors which contribute to the effectiveness of the on an arm’s length basis. The agreement also contains certain anti-dilution Board or the relevant Committee. The results are reviewed by the Chairman rights for s.a. D’Ieteren n.v. provided that the D’Ieteren Group owns more and relevant feedback is provided to the Board and each Committee. than 30% of the issued ordinary share capital of the Company.

Directors’ interests During the year, the Group has entered into transactions with the D’Ieteren Details of Directors’ interests in the share capital of the Company are set out Group on an arm’s length basis with respect to the purchase and sale of below and in the Remuneration Report. vehicles and the provision of finance. Further details of these transactions are set out in Note 38 to the Consolidated Financial Statements. Jean-Pierre Bizet and Benoit Ghiot are Directors of D’Ieteren Car Rental s.a., an indirect wholly-owned subsidiary of s.a. D’Ieteren n.v., which held As recommended by the Combined Code the Company carries directors’ 548,586,255 ordinary shares of 1 pence each in the capital of the Company and officers’ liability insurance which is arranged under an umbrella policy as at 31 December 2009. Details of significant contracts entered into with effected by s.a. D’Ieteren n.v. The Company has entered into indemnities to s.a. D’Ieteren n.v. are disclosed below. There have been no changes in the the extent permitted by English law, indemnifying the Directors against claims above Directors’ interests between 31 December 2009 and 3 March 2010. brought against them.

Except as noted above, none of the Directors had any interests in the shares Shareholder relations of the Company or in any material contract or arrangement with the Company The Board as a whole is responsible for maintaining regular dialogue or any of its subsidiary undertakings. with shareholders. The Chief Executive and Group Finance Director make presentations to institutional shareholders following the announcement of the Conflicts of interest interim and preliminary results each year (which are also published on the At the Company’s Annual General Meeting in 2008, the Company’s Company’s website at http://ir.avis-europe.com/avisplc/presentations/) and Articles of Association were amended to permit the Board of Directors are actively involved in an investor relations programme during the rest of 32 avis-europe.com Annual Report 2009 Corporate governance report continued

the year. The Chairman is also responsible for maintaining a channel through A resolution to reappoint PricewaterhouseCoopers LLP as auditors to the which shareholders can express their views, and for communicating any Company will be proposed at the Annual General Meeting. shareholder issues or concerns to the Board as a whole. Internal control and risk management The Chief Executive makes a presentation at the Annual General Meeting The Directors regularly review the effectiveness of the Group’s system of highlighting key business developments during the year. All shareholders controls, including operational and compliance controls, risk management have the opportunity to put questions at the meeting or leave written and the Group’s internal control arrangements. Such a system is designed questions, which will be answered in writing as soon as possible afterwards. to manage, rather than eliminate, the risk of failure to achieve business A copy of the Chief Executive’s presentation may be requested at the Annual objectives, and can only provide reasonable, and not absolute, assurance General Meeting or from the Investor Relations Department. The Company’s against material misstatement or loss. These reviews have included an website at www.avis-europe.com provides current and historical information assessment of both financial and operational internal controls by the Group’s about the Group. internal audit and risk management function, management assurance of the maintenance of control, and reports from the external auditor on matters Health and safety at work identified in the course of its statutory audit work. A key part of the Group’s The Company has a health and safety policy approved by the Board. The own internal control review is a declaration and annual certification process Chief Executive is responsible for oversight of policy and each operating at the half year and year end by which the managers responsible confirm unit in the UK has a nominated member of senior management who has the adequacy of their systems of internal financial control, their compliance overall responsibility for setting goals and performance targets. Measures of with Group policies, local laws and regulations and are also required to report performance are reviewed regularly, and include work-related accidents and any breakdown in control or occurrence of fraud that has come to light. The ill health, health and safety training and risk assessment activities. Group has procedures in place which incorporate the recommendations on internal control: guidance for directors on the Combined Code (Turnbull). Charitable and political donations During the year, the Group made charitable donations totalling €14,000; Internal control environment £13,000 (2008: €29,000; £23,000). The Group made no political donations The Directors are responsible for the system of internal control and for during the year (2008: nil). regularly reviewing its effectiveness.

Payments to creditors The system of internal control includes but is not limited to: Given the number of countries in which the Group operates it is practice to agree the terms of payment at the start of business with each supplier and to • clear definition of the organisation structure and the appropriate pay in accordance with contractual and other legal obligations. The Company delegation of authorities to management; had no trade creditors at 31 December 2009 (2008: nil) and hence the number of creditor days outstanding for the Company was nil (2008: nil). • maintenance of appropriate segregation of duties together with other procedural controls; Auditors The Audit Committee regularly monitors the non-audit services being • strategic planning and the related annual budgeting and regular review provided to the Group by its external auditors, and has developed a formal process; independence policy to help ensure that there is no impairment to their independence or objectivity. The principles that underpin the provision of • monthly reporting and review of financial results and key performance non-audit services by the external auditors are that the auditor should not: statistics; enter into arrangements with the Group which could compromise their independence as auditors; audit its own firm’s work; make management • adoption of accounting policies to help ensure the consistency, integrity decisions for the Group; have any significant mutuality of financial interest and accuracy of the Group’s financial records; with the Group (e.g. material success fees) or provide legal and expert services to the Group in judicial or regulatory proceedings. Some types • specific treasury policies and the regular reporting and review of all of service are proscribed while others that might be perceived to be in significant treasury transactions and financing activities; conflict with the role of the external auditor must be submitted to the Audit Committee for approval prior to engagement, regardless of the fees involved. • procedures for the authorisation of capital expenditure;

The Audit Committee reviews all services being provided by the external • internal audit reviews and a schedule of regular finance reviews for auditors quarterly in order to consider the independence and objectivity of all corporately-owned businesses covering material local assets and the external auditors, taking into account relevant professional and regulatory liabilities; and requirements, so that these are not impaired by the provision of permissible non-audit services. • clearly defined Group policies and business standards, including the code of conduct, competition policy and covering key business areas. PricewaterhouseCoopers LLP were engaged by the Group for certain non- audit activities, the fees for which are set out in Note 4 to the Consolidated The Audit Committee has reviewed the effectiveness of the system of Financial Statements. The nature and materiality of this work has been internal control through the following processes: reviewed by the Audit Committee which is satisfied that there has been no conflict with the need for audit independence and objectivity. • review of internal and external audit plans; avis-europe.com Annual Report 2009 33

• consideration of individual internal audit reports by the Chairman of the required. The Audit Committee ensures that this function is appropriately Committee; staffed and that its scope of work is adequate in the light of the key identified risks facing the Group and the other monitoring functions in place. It also • collective review of any control issues that arise from internal and external reviews and approves an annual internal audit plan and considers responses audits together with any additional matters brought to its attention; to an effectiveness questionnaire.

• review of any significant risks identified by the Group’s risk management The Audit Committee also ratifies the appointment and dismissal of process; and the Director of Risk Management and Internal Audit and assesses his independence and objectivity and helps ensure that he has unfettered access • discussions with management on any significant new risk areas identified to management and the Audit Committee. by management and the internal and external audit processes. The role of internal audit is to: The Audit Committee has conducted a formal assessment of the effectiveness of the system of internal control through the review of an • assess the design and operating effectiveness of controls governing key updated Internal Control Systems document prepared by the Group’s operational processes and business risks; internal audit function. The document includes comprehensive descriptions of the risk management processes and controls environment, which together • provide the Board with an assessment, independent of management, as enable the Audit Committee to apply a structured approach to their review. to the adequacy of the Group’s internal operating and financial controls, systems and practices; The Board, with advice from the Audit Committee, has completed its annual review of the effectiveness of the embedded system of internal • assist the Board in meeting its corporate governance and regulatory control in accordance with the guidance of the Turnbull Report for the responsibilities; and period since 1 January 2009 and is satisfied that this review is in accordance with that guidance. • provide advisory services to management in order to enhance the control environment and improve business performance. Assessment of business risk The Group views the active management of risk as a key management Whistleblowing arrangements process and recognises that managing business risk to deliver opportunities During the year, a Group-wide framework was in place enabling employees is critical to the strategic development of the business. It is ensured that such to raise any concerns. The arrangements are regularly reviewed by the Audit business risks, covering strategic, operational, reputational, financial and Committee and re-communicated periodically by management to ensure environmental risks, are both understood and visible as far as practicable. their continuing effectiveness. The process has been communicated to all governance The Group’s policy is to ensure that risk is taken on an informed rather than employees across the Group and policy and procedures have been issued unintentional basis. to management of all operating units providing guidance on how they are expected to respond. Matters can be raised anonymously, and employees are The Group’s work in the area of risk management in 2009 was overseen assured that they will have protection under the policy. by the Avis Executive Board, membership of which comprises heads of key Corporate business functions and of main corporate country operations and is chaired Corporate governance statement by the Chief Executive. The Board of Directors confirm that the Company has complied throughout the financial year with the provisions set out in Section 1 of the Combined The Group has a risk management framework which aims to ensure that Code, except that the Company did not comply throughout the financial year the business understands the key risks it faces and has an embedded risk with the following provisions: (1) the requirement that independent non- management approach to its activities, links risk management to business executive Directors (excluding the Chairman) should comprise not less than performance reporting and seeks improvement in the management of risk by 50% of the Board; (2) the requirement that the Remuneration Committee sharing best practice throughout the organisation. The Group conducts an should comprise the Chairman together with independent non-executive annual risk review across all operating units and updates its centrally held Directors; and (3) the requirement that a Senior Independent Director be risk register with each risk’s impact, probability and mitigation actions. This nominated. The reasons for non-compliance in each of the relevant areas approach forms the cornerstone of the risk management activities of the are explained within the review of the Company’s application of the principles Group, the aim of which is to provide the Board with the assurance that the of the Combined Code set out above. In the areas of non-compliance the major risks facing the Group have been identified and assessed, and that Directors believe that current policy is in the best interests of the Company. there are controls either in place or planned to manage these risks. The Combined Code can be accessed at A summary of the principal risks facing the Group has been reviewed by the www.frc.org.uk/corporate/combinedcode.cfm Audit Committee and communicated to the Board and is provided in the Risk factors section of the Business review on pages 18 to 20.

Internal audit Avis Europe has an internal audit and risk management function, which is independent of the Group’s external auditors and which periodically works in partnership with an outsourced provider, as and when specialist skills are 34 avis-europe.com Annual Report 2009 Statement of Directors’ Remuneration report responsibilities

The Directors are responsible for preparing the Annual Report, the Directors’ This report has been prepared in accordance with the Large and Medium- Remuneration report and the Financial Statements in accordance with sized Companies and Groups (Accounts and Directors Report) Regulations applicable law and regulations. 2008 and the relevant requirements of the Listing Rules of the UK Listing Authority. The Board has given full consideration to the best practice Company law requires the Directors to prepare Financial Statements for each provisions on Directors’ remuneration as set out in the Combined Code. As financial year. Under that law the Directors have elected to prepare the Group required by the Large and Medium-sized Companies and Groups (Accounts Financial Statements in accordance with International Financial Reporting and Directors Report) Regulations 2008, a resolution to approve the Standards (IFRSs) as adopted by the European Union, and the parent Remuneration report will be proposed at the forthcoming Annual General Company Financial Statements in accordance with United Kingdom Generally Meeting of the Company at which the Financial Statements will be approved. Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law the Directors must not approve the Part 1 of this report sets out the Group’s policy on executive remuneration Financial Statements unless they are satisfied that they give a true and fair and explains the various elements of the Directors’ remuneration packages. view of the state of affairs of the Group and the Company and of the profit or Part 2 of this report, which contains the information on which auditors loss of the Group for that period. In preparing these Financial Statements, the are required to report to the Company’s shareholders, sets out details of Directors are required to: Directors’ earnings and pension entitlements and fees paid to non-executive Directors in 2009. Directors’ interests in shares, share incentive awards and • select suitable accounting policies and then apply them consistently; share options, all of which are beneficial except as noted, are set out on pages 39 to 41. • make judgements and accounting estimates that are reasonable and prudent; Changes to the Board of Avis Europe plc There were no changes to the composition of the Board in the period • state whether IFRSs as adopted by the European Union and applicable under review. UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Group and parent Company Part 1 (Unaudited) Financial Statements respectively; and Remuneration Committee Scope • prepare the Financial Statements on the going concern basis unless it is The Remuneration Committee is responsible for developing policy on inappropriate to presume that the Company will continue in business. remuneration for executive Directors and senior management and for determining specific remuneration packages for executive Directors and The Directors are responsible for keeping adequate accounting records that members of the Avis Executive Board (AEB). The Committee is constituted are sufficient to show and explain the Company’s transactions and disclose under terms of reference laid down by the Board. These terms are designed with reasonable accuracy at any time the financial position of the Company to enable the Company to comply with the requirements relating to and the Group and enable them to ensure that the Financial Statements and remuneration policy contained in the Combined Code. the Directors’ Remuneration report comply with the Companies Act 2006 and, as regards the Group Financial Statements, Article 4 of the IAS Regulation. The full terms of reference are set out on the Company’s website: They are also responsible for safeguarding the assets of the Company and the www.avis-europe.com and are available upon request. Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. During 2009, the Remuneration Committee’s activities included:

The Directors are responsible for the maintenance and integrity of the • review of incentive arrangements for 2009 and 2010 for executive Company’s website. Legislation in the United Kingdom governing the Directors, AEB members and senior management; preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions. • grants of awards under the Long Term Incentive Plan and Share Retention Plan; and Each of the Directors, whose names and functions are listed in their biographies on page 28 confirm that, to the best of their knowledge: • initiating a review of current pension liabilities.

• the Group Financial Statements, which have been prepared in accordance Membership with IFRSs as adopted by the EU, give a true and fair view of the assets, The Remuneration Committee is comprised of non-executive Directors. liabilities, financial position and profit of the Group; and Members during the period 1 January 2009 to 3 March 2010 are listed below: • the Business review includes a fair review of the development and performance of the business and the position of the Group, together with • Pierre Alain De Smedt (Chairman) a description of the principal risks and uncertainties that it faces. • Alun Cathcart • Les Cullen • Roland D’Ieteren • Dr Axel von Ruedorffer avis-europe.com Annual Report 2009 35

The Remuneration Committee is comprised of the Chairman of the Board Annual incentive bonus and four non-executive Directors. All the non-executive Directors on the Annual incentive bonus plans for executive Directors and key senior Committee are regarded as independent, except as explained on page 29 management are based on achievement of targets approved by the of the Corporate Governance report. The Committee met six times during Remuneration Committee and related directly to the annual profit plan the year and each member’s attendance at these meetings is shown in the approved by the Board. Targets and performance measures are quantitative Corporate Governance report on page 30. and there is a financial threshold below which no bonus payment is made.

Advisers In 2010, 80% of the bonus is based on stretching financial targets and During the period under review the Chief Executive, Group Finance Director 20% on achievement of quantitative individual objectives, which include the and Group HR Director attended meetings by invitation and provided advice leadership of key group initiatives. to the Committee to assist it in making informed decisions on matters relating to Directors’ performance and remuneration. No Director was The base salary, bonus payments and value of benefits in kind for each present when his or her own remuneration was being discussed. External Director are set out in the Directors’ emoluments table on page 39. Bonus advice was received from Hewitt New Bridge Street (Share Retention Plan), payments, benefits in kind and cash allowances do not form part of Deloitte LLP (Long Term Incentive Plan) and Freshfields Bruckhaus Deringer pensionable earnings for Directors. (share scheme rules). All advisers were appointed by the Company. Other than described above, no additional services were provided by the external Share incentive policy advisers during the year. The Remuneration Committee sets policy with regard to share incentives with the objective of aligning incentive plans with the Group’s medium term plan Remuneration policy and shareholders’ interests. Introduction The Group’s policy relating to the remuneration and benefits of executive and Shareholding guidelines implemented in 2005 require executive Directors to non-executive Directors is reviewed periodically. The executive remuneration build up their personal holdings of shares in the Company. The guidelines policy for 2010 is designed to attract, retain and motivate executive and are 150% of salary for the Chief Executive and 100% of salary for the Group senior management to ensure that the Company secures the appropriate Finance Director. The Remuneration Committee requires executives to retain competencies and experience the Group needs to meet its objectives and 50% of any vested shares (net of tax and exercise costs) arising from any satisfy shareholder expectations. In general, in determining its policy, the share incentive scheme until the shareholding requirement is achieved. Remuneration Committee takes account of market practice, the Group’s position relative to other companies and the Company’s performance. Outstanding share plans Outstanding share plans are as follows: Long Term Incentive Plan (last In response to the difficult economic climate, executive salaries were frozen award 2009); Share Retention Plan (last award 2009); Performance Share governance in 2009. Executive Directors and members of the AEB received an annual Plan (last award April 2004); and Share Option Schemes (last award April incentive opportunity designed for 50% of salary for on-performance target 2004). A description of each of these plans is set out below. The assessment (as defined and agreed by the Remuneration Committee). Executive Directors of whether performance conditions have been met is verified by the and members of the AEB also received a grant under the Long Term Remuneration Committee at the time of vesting. Incentive Plan, details of which are set out below. Corporate Individual Directors’ share incentive awards are set out pages 40 to 41. For 2010 executive salaries were again frozen and the executive Directors and members of the AEB have been provided with a similar annual incentive Long Term Incentive Plan opportunity as for 2009. The Long Term Incentive Plan, introduced in 2007, comprises awards of ordinary shares in the Company, structured as nil cost options or conditional Summary of executive Directors’ potential direct remuneration awards. Awards vest three years after grant, providing certain performance The Remuneration Committee believes that shareholder interests are conditions are met. It is intended that there will be annual grants of awards best served by remuneration packages that have a large component of under this Plan. performance-related pay. For 2010 the relationship between fixed and variable remuneration for achievement of maximum performance for the Chief The performance conditions required for vesting purposes are based on Executive and for the Group Finance Director is 40% fixed and 60% variable. tranches of 50% in respect of the Group’s three-year growth in earnings per The variable element comprises the annual incentive scheme and an award share (EPS) and 50% in respect of return on capital employed (ROCE). If one under the Long Term Incentive Plan. The Deputy Chairman, who is also an or both of the performance targets are not met at the end of the performance executive Director, has a service contract with an annual fee only. period, 50% or 100% (as appropriate) of the award will lapse immediately.

Salary The 2009-10 policy is that salary reviews may take place on a country basis as appropriate, whilst a salary freeze will be implemented for executive Directors and members of the AEB. 36 avis-europe.com Annual Report 2009 Remuneration report continued

The performance targets for awards granted under the Plan in 2007 are set ROCE tranche of Award out below: Percentage of award that vests in Percentage ROCE achieved respect of ROCE tranche EPS tranche of Award Less than 10.8% None Percentage of award that vests in 10.8% 20% Percentage growth in EPS respect of EPS tranche 11.9% 100% Less than RPI + 20% per annum None Between 10.8% and 11.9% Straight-line basis between RPI + 20% per annum 20% 20% and 100% RPI + 40% per annum 100% Between 20% and 40% Straight-line basis between EPS is calculated on an underlying basis i.e. excluding exceptional items, per annum above RPI 20% and 100% certain re-measurement items and economic hedge items. However, the Remuneration Committee has discretion to adjust for any exceptional items ROCE tranche of Award which it deems to be within management control, if appropriate, to ensure the Percentage of award that vests in outcome is fair to both shareholders and executives. The basis of the ROCE Percentage ROCE achieved respect of ROCE tranche calculation is included in Note 26 to the Consolidated Financial Statements. Less than 10% None EPS represents a complete measure of financial performance, capturing both 10% 20% interest and tax, and is closely tracked by many of the Company’s investors. Car rental is highly asset intensive and the Remuneration Committee 12.5% 100% wishes management to be focussed on improving the return the Company Between 10% and 12.5% Straight-line basis between achieves on this capital. Management will focus on the key drivers of ROCE 20% and 100% - asset turn and operating margin. The two measures of EPS and ROCE are considered by the Remuneration Committee to be the most relevant The performance targets for awards granted under the Plan in 2008 are set all-encompassing long-term performance measures for Avis Europe, in that out below: the ultimate aim of the business of the Group is to achieve a good economic return on renting its fleet of vehicles. EPS tranche of Award Percentage of award that vests in Participation is at the Remuneration Committee’s discretion. In 2009 awards Percentage growth in EPS respect of EPS tranche were made to all members of the AEB, which included two of the executive Less than 14.9% per annum None Directors, and to 37 senior managers. Maximum awards are capped at 14.9% per annum 20% 100% of salary (150% for the Chief Executive) (see page 40). Dividends, as and when reinstated, will not accrue on the awards made to date, but 23.0% per annum 100% it is anticipated that for awards granted in future, dividends would accrue Between 14.9% and 23.0% Straight-line basis between and be paid only on shares that vest. Outstanding awards will vest and per annum 20% and 100% become exercisable on a change of control, subject to the satisfaction of any performance conditions at that time. ROCE tranche of Award Percentage of award that vests in Share Retention Plan Percentage ROCE achieved respect of ROCE tranche On 1 May 2009 the Share Retention Plan was established as a one-off Less than 9.2% None discretionary benefit for the sole purpose of retaining the services of the 9.2% 20% Chief Executive. The Remuneration Committee views the contribution of the 9.6% 100% Chief Executive as essential to lead the Group through the current economic downturn and into the recovery, and therefore determined that it was Between 9.2% and 9.6% Straight-line basis between appropriate to implement this plan to facilitate his retention over the medium 20% and 100% term. A similar plan was implemented on a previous occasion.

The performance targets for awards granted under the Plan in 2009 are set The principal terms of the Plan are as follows. The sole participant is the out below: Chief Executive and the award is in the form of a conditional share award to acquire ordinary shares in the Company. The Plan was implemented EPS tranche of Award in accordance with section 9.4.2R(2) of the Listing Rules. In normal Percentage of award that vests in circumstances the award will vest in three equal tranches on 1 May 2010, Percentage growth in EPS respect of EPS tranche 1 May 2011 and 1 May 2012, provided that the Chief Executive is still Less than 12.5% per annum None employed by the Group and is not subject to notice of termination of his 12.5% per annum 20% employment (whether given or received) on these dates. There are no 22.8% per annum 100% performance conditions relating to this award. Between 12.5% and 22.8% Straight-line basis between per annum 20% and 100% avis-europe.com Annual Report 2009 37

The award will normally lapse on cessation of employment (save on death, or company is transferred outside the Group, or for any other reason at when the award will vest in full). If employment ceases by reason of injury the discretion of the Board. Outstanding options will vest and become or disability, or for any other reason if the Remuneration Committee so exercisable on a change of control and with the exception of the UK decides, the Remuneration Committee has the discretion to decide whether Approved Share Option Scheme, any options vesting will, at the discretion or not the award will vest and, if so, the extent to which it will vest. In the of the Remuneration Committee, be subject to the satisfaction of any event of a takeover, the Remuneration Committee will decide the extent to performance conditions at that time. which any outstanding part of the award will vest. In the event of a corporate reorganisation, the Remuneration Committee may decide that the award Options (all of which were granted prior to 2004) become exercisable continues over the shares of any new holding company. when real growth in EPS exceeds 3% per annum during any period of three consecutive years following the date of grant. The rules of the share If there is a demerger or other corporate event which, in the opinion of the option schemes limit the number of options that can be granted over new Remuneration Committee, will materially affect the share price, then the issue shares in a rolling 10-year period to 5% of issued share capital under Remuneration Committee may decide that the award vests early. In the discretionary share schemes, and 10% of issued share capital under all event of any increase or variation in the share capital of the Company, the share schemes. The total number of share options outstanding at payment of a capital dividend or other event similarly affecting the award, the 31 December 2009 is well within these dilution limits (see page 41). number of shares subject to the award may be adjusted. The Remuneration Committee may alter the Plan at any time. Avis Europe Employee Share Trust The Avis Europe Employee Share Trust was established in March 2000 Performance Share Plan to facilitate provision of shares for the Company’s share incentive schemes. No awards under this Plan have been made since April 2004 and it is not The Trust may hold up to 5% of the issued share capital of the Company anticipated that awards will be made in the future. The Performance Share at any one time. Plan is a seven-year plan, and was designed to encourage executives to focus on longer-term performance and growth in shareholder value. A At 31 December 2009, the Trust held 7,307,735 shares. It is intended that combination of performance targets was chosen for the measurement of the the shares in the Trust will be used to satisfy share awards made under the Company’s performance, being total shareholder return (TSR) and earnings Company’s various share incentive schemes as and when these awards vest. per share (EPS). EPS performance is calculated from the audited accounts The awards outstanding under each of the relevant plans at 31 December and TSR is calculated by external remuneration consultants. 2008 and 31 December 2009 are set out below:

Share awards Share awards Awards were determined by the Remuneration Committee and could not be outstanding at outstanding at greater than 100% of the qualifying participant’s total annual remuneration Share Incentive Scheme 31 December 2009 31 December 2008 measured at the date of the award. No award granted to date has exceeded Performance Share Plan 514,875 shares 514,875 shares governance one times annual salary. Awards vest over a period of seven years from the Long Term Incentive Plan 54,426,596 shares 31,274,278 shares date of the award. If the performance conditions are met at each of the third Share Retention Plan 1,055,662 shares – and fifth anniversary of the date of award, vesting accelerates to the extent Total 55,997,133 shares 31,789,153 shares of 25% of the award on each of these occasions. No awards can vest unless the EPS target is achieved. The extent to which an award vests is determined Corporate by the Group’s medium and long-term performance measured in terms The Company periodically reviews the number of shares held by the Trust of TSR. TSR was measured against a broad comparator group from the in light of the anticipated vesting dates and performance conditions under Transport and Support Services sectors. the various plans. The Company also regularly reviews its hedging policy but does not currently hedge any of these awards against potential Social On a change of control the Remuneration Committee would take into account Security costs that may be incurred across the Group as and when the the performance conditions when determining the vesting of awards. awards vest.

Share option schemes No options have been granted under these schemes since April 2004, and it is not anticipated that awards will be made in the future. Further details of share options are set out in Note 31 to the Consolidated Financial Statements.

The schemes comprise Inland Revenue approved and unapproved share option schemes which have an EPS based performance condition. Employees may not normally exercise options earlier than three years, nor more than 10 years after the grant (seven years for grants made before April 2000 for the unapproved scheme). Options lapse upon cessation of employment. However, special conditions apply if employment ceases because of death, injury, disability, redundancy, retirement or because the employing business 38 avis-europe.com Annual Report 2009 Remuneration report continued

Total shareholder return (TSR) The Board believes that it can be of benefit to Avis Europe if its executive The graph below illustrates the performance of Avis Europe plc and a “broad Directors serve as non-executive Directors of other companies, and, subject equity market index” over the past five years. As Avis Europe plc has been a to individual review, the general policy is that an executive Director may hold constituent of the FTSE All Share Index throughout this five-year period, that one non-executive directorship with another company and may retain the index is considered the most appropriate form of “broad equity market index” fees. During the year ended 31 December 2009, no executive Director held against which the Group’s performance should be graphed. As required by any external directorships. legislation, performance is measured by total shareholder return (share price plus dividends paid). Non-executive Directors 250 The Company’s policy is to engage non-executive Directors on renewable Total shareholder return – value of hypothetical £100 holding three-year terms, which can be terminated by either party at any time 200 without penalty (subject to the terms of the Relationship Agreement in respect of Directors appointed by s.a. D’Ieteren n.v.). Non-executive Directors are required to offer themselves for election at the next Annual 150 General Meeting following their appointment and thereafter for re-election every three years.

100 Date of appointment as a non-executive Director Alun Cathcart1 25 May 2004 50 Les Cullen 25 May 2004 Roland D’Ieteren 3 February 1997

0 Benoit Ghiot 15 December 2004 04 05 06 07 08 09 Dr Axel von Ruedorffer 27 June 2001 Avis FTSE All share index Pierre Alain De Smedt 1 February 2007

1 Alun Cathcart previously served as an executive Director for the periods 3 February 1997 to 31 March 1999 All dates at 31 December. and 1 May 2002 to 24 May 2004, having served as a non-executive Director for the intervening period 1 April This graph shows the value, by the end of 2009, of £100 invested in Avis Europe plc on 31 1999 to 30 April 2002. December 2004 compared with the value of £100 invested in the FTSE All Share Index. The other points plotted are the values at intervening financial year ends. All non-executive Directors, including the Chairman, have letters of appointment in accordance with policy. Non-executive Directors Non-executive Directors’ fees are positioned to attract non-executives Retirement benefits with broad business and commercial experience and to be competitive in Executive Directors based in the UK can participate in the Avis UK Pension the marketplace. The Chairman’s fee is determined by the Remuneration Plan although none of the executive Directors accrued benefits under the Committee. The Chairman and the Chief Executive set the remuneration Avis UK Pension Plan during 2009. of non-executive Directors based on periodic review of current survey data. Policy is to pay an annual fee of £32,500 with an additional fee for Martyn Smith withdrew from the Plan effective 5 April 2006 and has a chairmanship of a Committee. Non-executive Directors do not receive awards preserved pension entitlement under the Final Salary section. From that under the Company’s share incentive schemes. date he receives a taxable cash allowance of 20% of base salary in lieu of Pension Plan membership. The Final Salary section of the Plan was closed to Service contracts new entrants with effect from 1 July 2003. Executive Directors The Company’s policy is to employ each executive Director under a service Pascal Bazin does not participate in any Avis occupational pension plan. contract which is subject to 12 months’ notice on either side and runs until terminated. The contract provides for salary to be paid for any unexpired period of notice in the event of termination by the Company. Compensation for contractual benefits and bonus for the unexpired period of notice is at the discretion of the Remuneration Committee. There is no compensation for loss of rights under the share and pension schemes. All contracts contain mitigation provisions. There are no special contractual payments associated with change of control.

All executive Directors have service contracts in line with policy as shown.

Date of service contract Notice period Pascal Bazin 1 January 2008 12 months Jean-Pierre Bizet1 25 May 2004 12 months Martyn Smith 11 September 2002 12 months

1 The Deputy Chairman, who is also an executive Director, has a service contract with an annual fee only and his appointment is subject to the terms of the Relationship Agreement (see Corporate Governance report on page 29). avis-europe.com Annual Report 2009 39

Part 2 (Audited) Directors’ remuneration Directors’ emoluments The remuneration of Directors, comprising salary or fees, taxable benefits and bonus payments for the year ended 31 December 2009 are set out in the table below: Salary Salary Total year to Total year to Salary/ Taxable supplement supplement 31 December 31 December fees Bonus Benefits1 Pension Car/fuel 2009 2008 £ £ £ £ £ £ £ Executive P Bazin 571,230 458,126 11,142 – – 1,040,498 581,638 J-P Bizet 80,000 – – – – 80,000 80,000 M Smith 330,000 251,460 14,146 66,000 – 661,606 442,574 Total 981,230 709,586 25,288 66,000 – 1,782,104 1,104,212

Non-executive W A Cathcart 190,000 – 1,372 – 20,000 211,372 216,282 L Cullen 40,000 – – – – 40,000 40,000 R D’Ieteren 32,500 – – – – 32,500 32,500 B Ghiot 32,500 – – – – 32,500 32,500 Dr A von Ruedorffer 32,500 – – – – 32,500 32,500 P A De Smedt 37,500 – – – – 37,500 35,475 Total 365,000 – 1,372 – 20,000 386,372 389,257

Total 1,346,230 709,586 26,660 66,000 20,000 2,168,476 1,493,469

Avis Executive Board (excluding executive Directors): Aggregate 2,342,058 1,283,183 102,493 118,355 – 3,846,089 4,250,587 governance 1 Taxable benefits include principally car, fuel and medical insurance.

Base salaries for the executive Directors at 1 January 2010 are: Pascal Bazin €640,000 and Martyn Smith £330,000.

Pensions Corporate Details of Directors’ pension entitlements under the Avis UK Pension Plan (a defined benefit scheme) at 31 December 2009:

Amount of Transfer value of Amount of change remaining Accrued Increase/(decrease) Transfer value of Transfer value of Increase/(decrease) in accrued change in pension in accrued accrued pension accrued pension in value less benefit due accrued benefit to 31 December pension at 31 December at 31 December Director’s own to inflation during year 2009 excluding inflation 2008 2009 contributions Director £ pa £ pa £ pa £ pa £ pa £ pa £ pa W A Cathcart1 – – – – 4,478,087 4,726,621 248,534 M Smith2 – – – – 86,104 113,419 27,315

1 Alun Cathcart is no longer accruing a benefit in the Avis UK Pension Plan and has been in receipt of a pension from 12 September 2005. In the year to 31 December 2009 he received a pension of £315,048 (2008: £310,016). 2 Martyn Smith left the Avis UK Pension Plan on 5 April 2006 with a deferred pension of £6,160 per annum payable from age 62.

Directors’ interests in the Company’s shares The beneficial and non-beneficial interests of the Directors as at 31 December 2009 are shown below. There have been no changes between 31 December 2009 and 3 March 2010:

Executive 31 December 2009 1 January 2009 Non-Executive 31 December 2009 1 January 2009 P Bazin 284,336 284,336 W A Cathcart1 443,373 443,373 J-P Bizet – – L Cullen 20,000 20,000 M Smith 269,342 269,342 R D’Ieteren – – B Ghiot – – Dr A von Ruedorffer 20,000 20,000 P A De Smedt 479,270 879,270 1 Included within Alun Cathcart’s holding of 443,373 shares are 12,673 shares in which he has a non-beneficial interest as trustee for the beneficial owners. 40 avis-europe.com Annual Report 2009 Remuneration report continued

Directors’ interests in the Company’s share plans Details of awards outstanding at 31 December 2009 under the Group’s share schemes are shown below.

Long Term Incentive Plan The following awards were made under this Plan on 20 March 2009. The market price of the Company’s shares at that date was 3.92 pence. As at 31 December 2009, no awards under this Plan had vested. Award in year Vesting date of As at 31 December to 31 December Date of 2009 Lapsed during At 31 December outstanding 2008 2009 award 2009 2009 awards P Bazin 389,260 – – – 389,260 4 June 2010 7 October 4,349,234 – – – 4,349,234 2011 20 March 20 March – 6,637,205 2009 – 6,637,205 2012 M Smith 540,983 – – – 540,983 4 June 2010 7 October 1,943,462 – – – 1,943,462 2011 20 March 20 March – 1,849,073 2009 – 1,849,073 2012

Performance conditions The performance conditions required for vesting purposes are based 50% on the Company’s three-year growth in earnings per share (EPS) and 50% on return on capital employed (ROCE), based on the Group’s results under the International Financial Reporting Standards. These targets are set such that shares will vest only if performance is between a minimum threshold level, where 20% of an award will vest, and the maximum level, where 100% of an award will vest.

At 31 December 2009, 53 qualifying employees and qualifying former employees, including executive Directors, held options over 54,426,596 shares in total under this Plan. The market price of the Company’s shares at 31 December 2009 was 26.25 pence. During the year, the market price ranged between 2.5 pence and 42.25 pence.

Share Retention Plan On 1 May 2009 the Chief Executive received a conditional award set out in the table below. The market price of the Company’s shares at that date was 17.0 pence. The award is subject to the conditions as outlined on pages 36 and 37. The award took the form of a conditional share award and will vest in three equal parts as set out in the table below. As at 31 December 2009, no award under this Plan had vested.

Award in year to At 31 December 31 December Date of At 31 December Vesting date of 2008 2009 2009 award 2009 outstanding awards* P Bazin - 1,055,662 1 May 2009 1,055,662 1 May 2010 1 May 2011 1 May 2012

* Accelerated vesting conditions are disclosed on page 37.

Performance conditions There were no performance conditions relating to awards under the Share Retention Plan.

Performance Share Plan No awards have been made under this Plan since 2004. As at 31 December 2009, no awards under this Plan had vested.

Award in year to At 31 December 31 December Lapsed At 31 December Vesting date of 2008 2009 during 2009 2009 outstanding awards W A Cathcart1 244,409 – – 244,409 17 March 2010 M Smith 270,466 – – 270,466 17 March 2010

1 The awards held by Alun Cathcart were granted when he was an executive Director of the Company.

Performance conditions The performance conditions applying to the Performance Share Plan have been based on the performance of the Company in relation to the total shareholder return (TSR) of a peer group, together with an earnings per share (EPS) underpin.

For the awards to vest, TSR at the end of each performance period must be at least at the median in relation to the comparator group and there has to be a minimum real increase in EPS of 3% per annum over the relevant period. avis-europe.com Annual Report 2009 41

If both these conditions are met, 50% of the award may vest. For full vesting, the EPS target must be met and the Group’s TSR must be in the top quartile of the comparator group over the seven-year period. TSR achievement between the median and 75th percentile results in vesting between 50% and 100% of the award on a pro rata basis.

The comparator group for the TSR for awards disclosed above comprises the companies listed below:

Arena Leisure plc, Arriva plc, Associated British Ports Holdings plc, Eurotunnel plc/Eurotunnel SA, First Choice Holidays plc, First Group plc, Go-Ahead Group plc, RAC plc, Minorplanet Systems plc, Mitie Group plc, MyTravel Group plc, National Express Group plc, Christian Salvesen plc, Stagecoach Holdings plc, TBI plc, Tibbett & Britten Group plc.

Share option schemes Directors’ interests in share options granted under the Avis Europe plc share option schemes, all of which are beneficial except as noted, are shown below. No options were granted and no options were exercised during the period under review or the previous year. All options were granted for nil consideration. There have been no grants or exercises between 31 December 2009 and 3 March 2010.

31 December Lapsed during Granted during 1 January Exercise price 2009 year year 2009 (pence) Exercisable date Expiry date Executive P Bazin – J-P Bizet – M Smith 238,599 – – 238,599 83.6 September 2005 September 2012

Non-executive W A Cathcart1 357,899 – – 357,899 174.2 March 2005 March 2012 71,580 – – 71,580 83.6 September 2005 September 2012 429,479 – – 429,479 L Cullen – R D’Ieteren – B Ghiot – governance

Dr A von Ruedorffer – P A De Smedt –

1 The share options held by Alun Cathcart were granted when he was an executive Director of the Company. Corporate Performance conditions The performance conditions applying to the share option schemes have been based on real growth in earnings per share (EPS).

Options granted before 2004 (including the awards disclosed above) become exercisable when real growth in EPS exceeds 3% per annum during any period of three consecutive years following the date of grant, but have not satisfied this performance condition.

Options granted in 2004 become exercisable when real growth in EPS during the three-year period 2004 to 2006 exceeds 10% per annum compound. For 30% of the options to be exercisable there must be real minimum growth of 5% per annum compound. Vesting is on a straight-line basis for EPS growth between these targets. There is no re-testing and as the performance conditions relating to options granted in 2004 have not been met, these options have lapsed.

At 31 December 2009, 190 qualifying employees held options over 2,580,427 shares. No options were granted in 2009. The market price of the Company’s shares at 31 December 2009 was 26.25 pence. During the year, the market price ranged between 2.5 pence and 42.25 pence.

Signed on behalf of the Board

Judith Nicholson Company Secretary 3 March 2010 42 avis-europe.com Annual Report 2009 Directors’ report for the year ended 31 December 2009

The Directors present their report and the audited Financial Statements for Substantial shareholdings the year ended 31 December 2009. The details of substantial shareholdings are included in the Corporate Governance report on page 31. As noted in the Corporate Governance report, Principal activities and business review the Company has entered into a Relationship Agreement with s.a. D’Ieteren The principal activity of the Group is the supply of rental vehicle services. n.v. which holds 59.6% of the Company’s share capital, details of which are A full review of the Group’s activities and a report on its business, strategy summarised on page 31 of the Corporate Governance report. and likely future developments are included in the Chairman’s statement, the Chief executive’s statement and the Business review on pages 4 to 21, Appointment of Directors and Articles of Association incorporated in this report by reference. The Company’s Articles of Association provide that the Company may appoint Directors by ordinary resolution. The Company’s Articles of Association Share capital themselves may be amended by special resolution of the shareholders. As Details of the share capital of the Company and changes during the year explained in the Corporate Governance report one-third of the Directors covered by this Report are set out in Note 29 to the Consolidated Financial resign by rotation at least every three years. Details of the Relationship Statements. The rights and obligations attaching to the Company’s ordinary Agreement with s.a. D’Ieteren n.v., which includes rights for s.a. D’Ieteren shares are set out in the Company’s Articles of Association. There are no n.v. to appoint and remove up to three Directors, are set out on page 31 of restrictions on the voting rights attaching to the Company’s ordinary shares the Corporate Governance report. or on the transfer of securities in the Company. Significant agreements Results and dividends The Group has entered into the following significant agreements which are The results for the year are set out in the Consolidated Financial Statements subject to change of control provisions: (1) Trademark and System Licences on pages 44 to 77. The Directors do not recommend the payment of an dated 4 April 1997 for use of the Avis trademarks and operating system in interim or final dividend for the year (2008: nil). Europe, Africa, the Middle East and Asia which can be terminated in the event that a major competitor obtains control of 35% or more of voting Directors and their interests capital, whereupon associated agreements, including the Computer Services The names of the Directors of the Company as at 31 December 2009 appear Agreement dated 1 January 1991 for use of the Wizard system, would in the Corporate Governance report on page 29 (there are no appointments also terminate. (2) Trademark Licence dated 11 March 2003 for use of the between the period 1 January – 3 March 2010). The Directors’ interests Budget trademarks in Europe, Africa and the Middle East which can be in shares and options to purchase shares are detailed in the Remuneration terminated in the event that a major competitor obtains control of 35% or report on 39 to 41. more of voting capital. (3) A €580,000,000 Facilities Agreement dated 20 February 2006 which can be terminated in the event of a change of control. Employee involvement and share schemes (4) €250,000,000 Senior Floating Rate Notes due 2013 dated 21 July 2006 Details of employee involvement are included in the Corporate Social which can be accelerated in the event of a change of control. Responsibility report on pages 24 to 27. Details of the Company’s employee share schemes, including any provisions relating to a change of control, are Disclosure of information to auditors set out in the Remuneration Report on pages 34 to 41. So far as each Director is aware, there is no relevant audit information of which the Group’s auditors, PricewaterhouseCoopers LLP, are unaware Donations and each Director has taken all the steps that he ought to have taken as a Charitable donations are detailed in the Corporate Governance report on Director in order to make himself aware of any relevant audit information and page 32 and in the Corporate Social Responsibility Report on pages 24 to 27. to establish that the Group’s auditors are aware of this information.

Post balance sheet events Auditors There are no significant events affecting the Group since year end. PricewaterhouseCoopers LLP have expressed their willingness to continue in office and a resolution to reappoint them as the Group’s auditors will be Payments to creditors proposed at the Annual General Meeting. The Group’s policy with regard to payment of suppliers is set out in the Corporate Governance report on page 32. By order of the Board

Financial instruments Judith Nicholson The Group’s financial risk management objective is set out in Note 26 to the Company Secretary Consolidated Financial Statements. 3 March 2010

Purchase of own shares The details of own shares held are included in Note 30 to the Consolidated Financial Statements and details of the authority given to the Company for the purchase of its shares are set out on page 31 of the Corporate Governance report. avis-europe.com Annual Report 2009 43 Independent Auditors’ Report to the Members of Avis Europe plc

We have audited the Group Financial Statements of Avis Europe plc for the year Matters on which we are required to report by exception ended 31 December 2009 which comprise the Consolidated Income We have nothing to report in respect of the following: Statement, the Consolidated Statement of Comprehensive Income, the Consolidated Balance Sheet, the Consolidated Statement of Changes in Equity, Under the Companies Act 2006 we are required to report to you if, in the Consolidated Cash Flow Statement, the Significant Accounting Policies and our opinion: the related notes. The financial reporting framework that has been applied in • certain disclosures of Directors’ remuneration specified by law are their preparation is applicable law and International Financial Reporting not made; or Standards (IFRSs) as adopted by the European Union. • we have not received all the information and explanations we require for our audit; or Respective responsibilities of Directors and auditors • a corporate governance statement has not been prepared by the As explained more fully in the Directors’ Responsibilities Statement set out on Parent Company. page 34, the Directors are responsible for the preparation of the Group Financial Statements and for being satisfied that they give a true and fair view. Under the Listing Rules we are required to review: Our responsibility is to audit the Group Financial Statements in accordance with • the Directors’ statement, set out on pages 20 and 21 in relation to going applicable law and International Standards on Auditing (UK and Ireland). Those concern; and standards require us to comply with the Auditing Practices Board’s Ethical • the part of the Corporate Governance Statement relating to the company’s Standards for Auditors. compliance with the nine provisions of the June 2008 Combined Code specified for our review. This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Other matters Companies Act 2006 and for no other purpose. We do not, in giving these We have reported separately on the Parent Company Financial Statements of opinions, accept or assume responsibility for any other purpose or to any other Avis Europe Plc for the year ended 31 December 2009 and on the information person to whom this report is shown or into whose hands it may come save in the Directors’ Remuneration Report that is described as having been audited. where expressly agreed by our prior consent in writing. Stephen Wootten, Senior Statutory Auditor Scope of the audit of the Financial Statements for and on behalf of PricewaterhouseCoopers LLP An audit involves obtaining evidence about the amounts and disclosures in the Chartered Accountants and Registered Auditors Financial Statements sufficient to give reasonable assurance that the Financial Reading Statements are free from material misstatement, whether caused by fraud or 3 March 2010 error. This includes an assessment of: whether the accounting policies are

appropriate to the Group’s circumstances and have been consistently applied governance and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the Notes: Financial Statements. a) The maintenance and integrity of the Avis Europe plc website is the responsibility of the Directors; the work carried out by the auditors does not Corporate Opinion on Financial Statements involve consideration of these matters and, accordingly, the auditors accept In our opinion the Group Financial Statements: no responsibility for any changes that may have occurred to the Financial • give a true and fair view of the state of the Group’s affairs as at Statements since they were initially presented on the website. 31 December 2009 and of its profit and cash flows for the year then ended; • have been properly prepared in accordance with IFRSs as adopted by the b) Legislation in the United Kingdom governing the preparation and European Union; and dissemination of Financial Statements may differ from legislation • have been prepared in accordance with the requirements of the Companies in other jurisdictions. Act 2006 and Article 4 of the lAS Regulation.

Opinion on other matters prescribed by the Companies Act 2006 In our opinion: • the information given in the Directors’ Report for the financial year for which the Group Financial Statements are prepared is consistent with the Group Financial Statements; and • the information given in the Corporate Governance Statement set out on pages 29 to 33 with respect to internal control and risk management systems and about share capital structures is consistent with the Group Financial Statements. 44 avis-europe.com Annual Report 2009 Consolidated Income Statement for the year ended 31 December

2009 2008 Amounts Amounts excluded from Underlying1 excluded from Total Underlying1 underlying Total as restated2 underlying as restated2 Notes €m €m €m €m €m €m Continuing operations Revenue 2,3 1,395.5 – 1,395.5 1,668.2 – 1,668.2 Cost of sales (875.8) – (875.8) (1,113.1) – (1,113.1) Gross profit 519.7 – 519.7 555.1 – 555.1 Administrative expenses (416.3) (33.5) (449.8) (442.4) (15.6) (458.0) Operating profit/(loss) 3,4 103.4 (33.5) 69.9 112.7 (15.6) 97.1 Finance income 7 1.0 4.4 5.4 2.0 – 2.0 Finance costs 7 (69.3) (1.6) (70.9) (77.1) (19.4) (96.5) Share of profit of joint ventures and associate 15 0.1 – 0.1 0.4 – 0.4 Profit/(loss) before taxation 35.2 (30.7) 4.5 38.0 (35.0) 3.0 Taxation 8 (10.4) 6.1 (4.3) (16.2) 2.0 (14.2) Profit/(loss) after taxation 24.8 (24.6) 0.2 21.8 (33.0) (11.2) Discontinued operation – Greece Profit after taxation 3,6 – – – – 1.3 1.3 Profit/(loss) for the year attributable to equity holders of the Company 32 24.8 (24.6) 0.2 21.8 (31.7) (9.9) Earnings/(loss) per share (euro cents) Basic and diluted 10 – (1.1) Basic and diluted – continuing 10 – (1.2)

1 Underlying excludes net exceptional items, certain re-measurement items and economic hedges – see Basis of Preparation. 2 Restated following the amendment to IAS 16 – see Basis of Preparation.

The accompanying Notes form an integral part of these Consolidated Financial Statements. avis-europe.com Annual Report 2009 45 Consolidated Statement of Comprehensive Income for the year ended 31 December

2009 2008 Amounts Amounts excluded from excluded from Underlying1 underlying Total Underlying1 underlying Total Notes €m €m €m €m €m €m Profit/(loss) for the year attributable to equity holders of the Company 24.8 (24.6) 0.2 21.8 (31.7) (9.9) Actuarial (losses)/gains on retirement benefit obligations 23 – (17.6) (17.6) – 11.2 11.2 Cash flow hedges: – net fair value losses – (3.4) (3.4) – (11.8) (11.8) – transferred to Income Statement – 2.7 2.7 – 2.2 2.2 Exchange differences on translation of foreign operations – 5.5 5.5 – (23.1) (23.1) Tax on net items taken to equity 8 – 6.6 6.6 – 3.8 3.8 Other comprehensive expense for the year, net of taxation 32 – (6.2) (6.2) – (17.7) (17.7) Total comprehensive income/(expense) for the year attributable to equity holders of the Company 24.8 (30.8) (6.0) 21.8 (49.4) (27.6)

1 Underlying excludes net exceptional items, certain re-measurement items and economic hedges – see Basis of Preparation.

The accompanying Notes form an integral part of these Consolidated Financial Statements. statements

Financial 46 avis-europe.com Annual Report 2009 Consolidated Balance Sheet as at 31 December

2009 2008 2008 as restated1 as reported Notes €m €m €m Goodwill 11 0.2 0.2 0.2 Other intangible assets 12 13.1 14.7 14.7 Property, plant and equipment: – vehicles 13 364.5 441.0 441.0 – other property, plant and equipment 14 64.9 71.7 71.7 Investments accounted for using the equity method 15 12.2 12.2 12.2 Other financial assets: – investments held for sale 16 0.4 0.4 0.4 – derivative financial instruments 26 1.9 0.7 0.7 Deferred tax assets 17 42.5 31.7 31.7 Non-current assets 499.7 572.6 572.6 Non-current assets held for sale – – 10.3 Inventories 18 8.4 17.2 6.9 Trade and other receivables 19 989.6 1,351.7 1,351.7 Current tax assets 1.7 2.0 2.0 Other financial assets: – held for trading 16 2.7 – – – derivative financial instruments 26 2.4 9.2 9.2 Cash and short-term deposits 20 60.6 52.1 52.1 Current assets 1,065.4 1,432.2 1,421.9 Total assets 1,565.1 2,004.8 2,004.8 Trade and other payables 21 465.3 539.2 539.2 Current tax liabilities 41.2 24.4 24.4 Obligations under finance leases 24 167.9 232.7 232.7 Other financial liabilities: – borrowings 25a) 74.0 45.1 45.1 – deferred consideration 25c) 0.3 0.2 0.2 – derivative financial instruments 26 32.1 21.4 21.4 Provisions 22 18.6 33.8 33.8 Current liabilities 799.4 896.8 896.8 Deferred tax liabilities 17 6.4 26.1 26.1 Provisions 22 32.7 25.6 25.6 Retirement benefit obligations 23 89.1 70.9 70.9 Other financial liabilities: – borrowings 25a) 509.5 841.3 841.3 – deferred consideration 25c) 23.8 22.5 22.5 – derivative financial instruments 26 41.8 51.5 51.5 Non-current liabilities 703.3 1,037.9 1,037.9 Total liabilities 1,502.7 1,934.7 1,934.7 Net assets 62.4 70.1 70.1 Equity Called-up share capital 29 13.1 13.1 13.1 Share premium 381.5 381.5 381.5 Own shares held 30 (2.5) (0.4) (0.4) Retained deficit (295.6) (283.9) (283.9) Translation reserve (24.3) (30.8) (30.8) Hedging reserve (10.6) (10.2) (10.2) Shareholders’ equity 32 61.6 69.3 69.3 Minority interest 0.8 0.8 0.8 Total equity 62.4 70.1 70.1

1 Restated following the amendment to IAS 16 – see Basis of Preparation. The accompanying Notes form an integral part of these Consolidated Financial Statements. The Consolidated Financial Statements, including accompanying Notes, were approved by the Board on 3 March 2010 and were signed on its behalf by: Pascal Bazin Martyn Smith Chief Executive Finance Director Avis Europe plc Registered No. 3311438 avis-europe.com Annual Report 2009 47 Consolidated Statement of Changes in Equity

Attributable to equity holders of the Company Own Share shares capital Share held Retained Translation Hedging Minority Total (Note 29) premium (Note 30) deficit reserve reserve Total interest equity Notes €m €m €m €m €m €m €m €m €m At 1 January 2008 13.1 381.5 (3.3) (280.2) (11.5) (3.4) 96.2 0.8 97.0 Loss for the year attributable to equity holders of the Company 32 – – – (9.9) – – (9.9) – (9.9) Net actuarial gains on retirement benefit obligations – – – 11.2 – – 11.2 – 11.2 Cash flow hedges: – net fair value losses – – – – – (11.8) (11.8) – (11.8) – transfers to Income Statement – – – – – 2.2 2.2 – 2.2 Taxation 8 – – – (2.8) 3.8 2.8 3.8 – 3.8 Exchange differences on translation of foreign operations – – – – (23.1) – (23.1) – (23.1) Total comprehensive expense for the year – – – (1.5) (19.3) (6.8) (27.6) – (27.6) Increase in equity reserve arising from charge to income for share options in the year 32 – – – 0.2 – – 0.2 – 0.2 Decrease in equity reserve arising from exercise of share options 32 – – – (2.4) – – (2.4) – (2.4) Own shares released on vesting of share awards 32 – – 2.6 – – – 2.6 – 2.6 Other exchange movements 32 – – 0.3 – – – 0.3 – 0.3 At 31 December 2008 13.1 381.5 (0.4) (283.9) (30.8) (10.2) 69.3 0.8 70.1 At 1 January 2009 13.1 381.5 (0.4) (283.9) (30.8) (10.2) 69.3 0.8 70.1 Profit for the year attributable to equity holders of the Company 32 – – – 0.2 – – 0.2 – 0.2 Net actuarial losses on retirement benefit obligations – – – (17.6) – – (17.6) – (17.6) Cash flow hedges: – net fair value losses – – – – – (3.4) (3.4) – (3.4) – transfers to Income Statement – – – – – 2.7 2.7 – 2.7 Taxation 8 – – – 5.3 1.0 0.3 6.6 – 6.6 Exchange differences on translation of foreign operations – – – – 5.5 – 5.5 – 5.5 Total comprehensive (expense)/income statements for the year – – – (12.1) 6.5 (0.4) (6.0) – (6.0) Increase in equity reserve arising from charge to income for share options in the year 32 – – – 0.4 – – 0.4 – 0.4 Financial Purchase of own shares 32 – – (2.0) – – – (2.0) – (2.0) Other exchange movements 32 – – (0.1) – – – (0.1) – (0.1) At 31 December 2009 13.1 381.5 (2.5) (295.6) (24.3) (10.6) 61.6 0.8 62.4

The accompanying Notes form an integral part of these Consolidated Financial Statements. 48 avis-europe.com Annual Report 2009 Consolidated Cash Flow Statement for the year ended 31 December

2009 2008 as restated1 Notes €m €m Operating profit – continuing operations 69.9 97.1 Discontinued operation – Greece 6 – 1.3 Operating profit – all operations 69.9 98.4 Reverse amortisation of other intangible assets 4 4.8 3.4 Reverse depreciation on property, plant and equipment 4 129.1 132.2 Reverse adjustments arising on differences between sales proceeds and depreciated amounts 4 (1.0) 10.4 Reverse non-cash operating lease charge on manufacturer repurchase agreements 4 135.7 192.3 Payments in respect of manufacturer repurchase agreements (865.5) (1,525.0) Receipts in respect of manufacturer repurchase agreements 998.3 1,235.6 Purchase of vehicles not subject to manufacturer repurchase agreements (293.4) (491.5) Proceeds on disposal of vehicles not subject to manufacturer repurchase agreements 249.9 355.7 Decrease in non-vehicle inventories 1.7 0.5 Decrease in receivables 36.6 12.2 Increase/(decrease) in payables 2.5 (8.2) Decrease in provisions (9.0) (4.7) Decrease in retirement benefit obligations (1.5) (2.2) Reverse share-based payment charges 5 0.4 0.2 Reverse exceptional impairment 6 0.6 3.1 Reverse re-measurement items and economic hedging adjustments 4.0 (13.2) Cash (outflow)/inflow on derivative financial instruments – non-debt (2.2) 7.6 Net cash generated from operating activities before taxation 460.9 6.8 Tax paid (12.0) (10.6) Net cash generated from/(used in) operating activities 448.9 (3.8) Investing activities Purchase of other intangible assets 12 (2.2) (9.9) Purchase of other property, plant and equipment 14 (8.7) (16.4) Proceeds on disposal of other property, plant and equipment 0.6 0.6 Disposal of financial assets – investments held for sale – 0.2 (Purchase)/disposal of financial assets held for trading 33a) (2.7) 5.4 Investment in associate/joint venture 34 (0.4) (0.1) Acquisition of licensee businesses 34 – (1.9) Cash balances acquired with licensee businesses – 0.1 Net cash used in investing activities (13.4) (22.0) Financing activities Finance revenue received 1.0 2.0 Finance costs paid (61.6) (59.4) Finance cost element of finance lease payments (10.6) (19.2) Net capital element of finance lease payments 33a) (54.3) (53.5) Purchase of own shares 30 (2.0) – Cash flow on derivative financial instruments – debt 33a) (19.4) 0.2 (Repayment of)/proceeds from bank and other loans 33a) (261.4) 129.1 Net cash used in financing activities (408.3) (0.8) Increase/(decrease) in cash and cash equivalents (excluding exchange rate changes) 27.2 (26.6) Effects of exchange rate changes 33a) (0.1) (0.8) Net increase/(decrease) in cash and cash equivalents 27.1 (27.4) Cash and cash equivalents at 1 January 33a) 24.7 52.1 Cash and cash equivalents at 31 December 33a) 51.8 24.7

1 Restated following the amendment to IAS 16 – see Basis of Preparation.

The accompanying Notes form an integral part of these Consolidated Financial Statements. avis-europe.com Annual Report 2009 49 Significant Accounting Policies Applicable to the Consolidated Financial Statements for the year ended 31 December 2009

Basis of preparation in the Consolidated Cash Flow Statement. The Consolidated Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European In accordance with the revision, the Group has applied the above principles and Union, International Financial Reporting Interpretations Committee (IFRIC) comparatives have been restated accordingly. The impact on the comparative interpretations and the Companies Act 2006 applicable to companies reporting Group Consolidated Income Statement is a €354.4 million increase in both under IFRS. Avis Europe plc is a public limited company incorporated, listed revenue and cost of sales (with no impact on gross profit). The impact on the and domiciled in the UK. The Consolidated Financial Statements have been comparative Group Consolidated Balance Sheet is a €10.3 million increase in prepared under the historical cost convention as modified by the revaluation of inventories with a corresponding €10.3 million decrease in non-current assets certain derivative instruments and are prepared in accordance with the held for sale (with no impact on net assets). The impact on the comparative accounting policies set out below, which are consistent with those followed in Group Consolidated Cash Flow Statement is a €135.8 million reduction in net the preparation of the Consolidated Financial Statements for the year ended 31 cash generated from operating activities with a corresponding €135.8 million December 2008, except for the adoption of the following: reduction in net cash used in investing activities (with no impact on cash and cash equivalents). New standards, interpretations and amendments to published standards – effective in year ended 31 December 2009 IAS 23 (Revised), Borrowing costs (effective from 1 January 2009) removes the The following new standards, amendments to standards or interpretations are option of immediately recognising as an expense those borrowing costs which mandatory for the first time for the financial year beginning 1 January 2009. relate to assets that take a substantial period of time to prepare for their intended use. During the year there were minimal such borrowing costs which New standards, interpretations and amendments having an impact on the qualified for capitalisation. Consolidated Financial Statements IFRS 8, Operating segments (effective from 1 January 2009) requires an entity IFRS 7 (Amendment), Financial instruments: disclosures (effective from 1 to adopt a “management approach” to segment reporting such that segmental January 2009) requires all financial instruments that are measured at fair value information is in the form which management uses internally for assessing in the balance sheet to be classified into a three-level fair value hierarchy. The segment performance and deciding how to allocate resources to operating amendments are designed to assist understanding of the determination of fair segments. This information may be different from that used to prepare the value measurements and are provided in Note 28. Income Statement and Balance Sheet. The introduction of IFRS 8, in conjunction with the reorganisation of the Group’s Budget branded operations, has resulted New standards, interpretations and amendments having either no impact or no in a change in the Group’s reportable segments. Previously, the Avis corporately- significant impact on the Consolidated Financial Statements owned, Budget corporately-owned and Group headquarter results were IAS 19 (Amendment), Employee benefits (effective from 1 January 2009) separately disclosed. Consistent with the current presentation in the management clarifies that a plan amendment that results in a change in the extent to which accounts, these results have now been combined within total corporately-owned benefit promises are affected by future salary increases is a curtailment, while activities. Comparative segmentation data has been restated accordingly. an amendment that changes benefits attributable to past service gives rise to a negative past service cost if it results in a reduction in the present value of the IAS 1 (Revised), Presentation of financial statements (effective from 1 January defined benefit obligation. The definition of return on plan assets has been 2009) is mandatory for accounting periods commencing on or after 1 January amended to state that plan administration costs are deducted in the calculation 2009. The Income Statement and Statement of Recognised Income and of return on plan assets only to the extent that such costs have been excluded Expense have been replaced by a “Statement of Comprehensive Income”. from measurement of the defined benefit obligation. The distinction between IAS 1 permits the components of the income statement to continue to be short-term and long-term employee benefits is based on whether benefits are presented in a separate income statement, and the Group has taken this due to be settled within or after 12 months of employee service being option. Additionally, IAS 1 now requires the presentation of changes in equity rendered. IAS 19 has also been amended to be consistent with IAS 37, within a separate primary statement. Provisions, contingent liabilities and contingent assets, which requires contingent liabilities to be disclosed, but not recognised.

IAS 16, Property, plant and equipment (effective from 1 January 2009) was statements

amended whereby entities that routinely sell items of property, plant and IAS 32 (Amendment), Financial instruments: Presentation, and IAS 1 equipment that have been held for rental to others shall: (Amendment), Presentation of financial statements – Puttable financial instruments and obligations arising on liquidation (effective from 1 January

• transfer such assets to inventories at their carrying amount when they 2009) require certain instruments to be classified as equity puttable financial Financial cease to be rented and become held for sale; instruments. • recognise the income on disposal of such assets in revenue in accordance with IAS 18, Revenue; IAS 38 (Amendment), Intangible assets (effective from 1 January 2009), does • classify cash flows upon the purchase and disposal of such assets within not preclude an entity from recognising a prepayment in the event that “operating activities” in the Consolidated Cash Flow Statement. payment has been made in advance of obtaining right of access to goods or receipt of services. The above amendments apply to vehicles not subject to manufacturer repurchase agreements. IAS 39 (Amendment), Eligible hedged items (effective from 1 January 2009) has been amended to be consistent with IFRS 8, Operating segments, which Previously, vehicles not subject to manufacturer repurchase agreements were requires disclosure for segments to be based on information reported to the classified as “non-current assets held for sale” in the Consolidated Balance chief operating decision-maker. Sheet in accordance with IFRS 5, Non-current assets held for sale and discontinued operations, where their carrying amount was to be recovered IFRS 1 (Amendment), First-time adoption of International Financial Reporting through a sale transaction rather than through continuing use. Proceeds upon Standards (effective 1 January 2009) and IAS 27 (Revised), Consolidated and disposal of these vehicles, together with the proceeds upon disposal of other separate financial statements (effective from 1 July 2009) allow first-time vehicle fixed assets, were previously classified within “investing activities” adopters to use a deemed cost of either fair value or the carrying amount 50 avis-europe.com Annual Report 2009 Significant Accounting Policies continued Applicable to the Consolidated Financial Statements for the year ended 31 December 2009

under previous accounting practice to measure the initial cost of investments in IFRIC 17, Distributions of non-cash assets to owners (effective from 1 July subsidiaries, jointly controlled entities and associates in the separate financial 2009), applies to the entity making the distribution, not to the recipient, when statements. The amendment also removes the definition of the cost method non-cash assets are distributed to owners or when the owner is given a choice from IAS 27 and replaces it with a requirement to present dividends as income of taking cash in lieu of the non-cash assets. In particular, a dividend payable in the separate financial statements of the investor. The revised standard also should be recognised when the dividend is appropriately authorised and is no specifies the accounting where there is no change in control or control is lost. longer at the discretion of the entity and should be measured at the fair value Where there is a change in control, the effects of all transactions with non- of the net assets to be distributed. The Group will apply this prospectively from controlling interests are recorded in equity and these transactions will no longer 1 January 2010. result in goodwill or gains and losses. Any remaining interest in the entity is re‑measured to fair value and a gain or loss is recognised in profit or loss. IFRIC 18, Transfers of assets from customers (effective from 1 July 2009) clarifies the requirements for agreements in which an entity receives from a IFRS 2, Share-based payment (effective from 1 January 2009) deals with customer an item of property, plant and equipment that the entity must then vesting conditions and cancellations. It clarifies that vesting conditions are use either to connect the customer to a network or to provide the customer either service or performance conditions only. Other features of a share-based with ongoing access to a supply of goods or services. When the item of payment would need to be included in the grant date fair value calculation for property, plant and equipment transferred from a customer meets the definition transactions with employees and others providing similar services; they would of an asset under the IASB Framework from the perspective of the recipient, not impact the number of awards expected to vest or valuation thereof the recipient must recognise the asset in its financial statements. The Group subsequent to grant date. All cancellations, whether by the entity or by other will apply this prospectively from 1 January 2010. parties, should receive the same accounting treatment. IFRS 9, Financial instruments (effective 1 January 2013) introduces new IFRIC 13, Customer loyalty programmes (effective from 1 July 2008) provides requirements for the classification and measurement of financial assets, guidance on the treatment of customer loyalty programmes. An entity shall simplifying the mixed measurement model currently applied under IAS 39, account for award credits which are granted as part of customer loyalty Financial instruments: recognition and measurement, by defining two primary programmes as separately identifiable components of a sales transaction. The fair measurement categories for financial assets; amortised cost and fair value. value of the consideration received or receivable in respect of the initial sale shall The basis of classification depends on the entity’s business model and the be allocated between the award credits and other components of the sale. contractual cash flow characteristics of the financial asset. The new standard also requires a single impairment method to be used, replacing the many IFRIC 15, Agreements for the construction of real estate (effective from different impairment methods in IAS 39. The Group are reviewing the potential 1 January 2009) addresses the accounting for revenue and associated impact of this standard on future financial statements, but do not expect expenses by entities that undertake the construction of real estate and is that it will have a significant impact on the current treatment of the Group’s deemed not relevant to the Group’s operations. financial assets.

IFRIC 16, Hedges of a net investment in a foreign operation (effective from IFRIC 14 (Amendment), Prepayments of a minimum funding requirement 1 October 2008) provides guidance on net investment hedging, including: (effective 1 January 2011) applies in the limited circumstances when an entity is subject to minimum funding requirements and makes an early payment of • which foreign currency risks qualify for hedge accounting and the amount contributions to cover those requirements. The amendment permits such an that may be designated; entity to treat the benefit of such an early payment as an asset. This • where within the Group the hedging instrument may be held; and amendment is not expected to impact the amounts recognised under defined • the amount which is reclassified to the Income Statement upon disposal benefit schemes. of the hedged foreign operation. IFRIC 19, Extinguishing financial liabilities with equity instruments (effective 1 July New standards, interpretations and amendments to published 2010) requires that where an entity renegotiates the terms of a financial liability standards – effective after 31 December 2009 and issues equity instruments to extinguish all or part of the financial liability, then Note that the following are effective for annual periods beginning on or after the equity instruments issued are measured at their fair value. If their fair value the stated effective date: cannot be reliably measured the equity instruments are measured to reflect the fair value of the financial liability extinguished. The difference between the IFRS 3 (revised 2008), Business combinations (effective from 1 July 2009) financial liability extinguished and the initial measurement amount of the equity requires that all payments to purchase a business are recorded at fair value at instrument issued is included in profit and loss. As the Group does not currently the acquisition date, with contingent payments classified as debt subsequently issue equity instruments to extinguish financial liabilities, this is not expected to re-measured through the Income Statement. There is a choice on an have any material impact on the Group’s Consolidated Financial Statements. acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest’s proportionate Underlying measures share of the acquiree’s net assets. All acquisition-related costs should be In addition to total performance measures, the Group discloses additional expensed. The Group will apply this from 1 January 2010. underlying performance measures, including underlying profit and underlying earnings per share. The Group believes that these underlying performance IFRS 5 (Amendment), Non-current assets held-for-sale and discontinued measures provide additional useful information on underlying trends. The term operations, and consequential amendment to IFRS 1, First-time adoption of “underlying” is not defined under IFRS, and may therefore not be comparable International Financial Reporting Standards (effective from 1 July 2009), with similarly titled profit measurements reported by other companies. It is not clarifies that all of a subsidiary’s assets and liabilities are classified as held for intended to be a substitute for, or superior to, IFRS measures of profit. sale if a partial disposal sale plan results in loss of control. Relevant disclosure should be made for this subsidiary if the definition of a discontinued operation Underlying measures are calculated based on reported profit before exceptional is met. The Group will apply this prospectively to all partial disposals of items, certain re-measurement items and adjustments to reflect the realised subsidiaries from 1 January 2010. gains and losses on foreign exchange forward contracts and accrued interest avis-europe.com Annual Report 2009 51

cash flows on certain derivative financial instruments (economic hedge balances and unrealised gains on transactions between Group companies are adjustments). These are detailed below. eliminated upon consolidation.

Exceptional items Minority interests Exceptional items are material non-recurring items that derive from events or The amount of profits or losses for a reporting period allocated to minority transactions that fall within the ordinary activities of the Group, and which interests is adjusted (and separately disclosed in the Income Statement) individually or, if of a similar type, in aggregate, are separately disclosed by against income of the Group for the year. virtue of their size or incidence. Joint ventures Certain re-measurement items A joint venture is a contractual arrangement whereby the Group and one or more Items that represent re-measurement of underlying assets or liabilities (for parties undertake an economic activity that is subject to joint control. Joint control example due to interest rate or exchange rate changes) are presented as is when the strategic, financial and operating policy decisions relating to the certain re-measurement items. Events which may give rise to the classification activity require the unanimous consent of the parties sharing control. of gains and losses as certain re-measurement items include the following: Interests in joint ventures are recognised using the equity method. Unrealised a) recognised fair value gains and losses on derivatives in accordance with the gains and losses on transactions between the Group and its joint ventures financial instruments and hedge accounting policy below; are eliminated to the extent of the Group’s interest in the joint ventures. b) exchange gains and losses arising upon the translation of foreign currency The Group’s investment in joint ventures includes goodwill on acquisition. borrowings at the closing rate; and The Group’s share of profit from joint ventures represents the Group’s share c) actuarial gains and losses arising on defined benefit retirement benefit of the joint venture’s profit after tax. If the Group’s share of losses in a joint schemes. venture equals or exceeds its investment in the joint venture, the Group does not recognise further losses unless it has incurred obligations or made Economic hedge adjustments payments on behalf of the joint venture. Under IAS 39, the Group applies hedge accounting to hedge relationships (primarily forward exchange contracts, cross currency interest rate swaps Associate undertaking and interest rate swaps) where it is both permissible and practicable to do so. Investment in the associate undertaking is accounted for using the equity method Due to the nature of its economic hedging relationships, in a number of and is initially recognised at cost. This is an undertaking over which the Group circumstances the Group is unable to apply hedge accounting to these has significant influence but not control, generally accompanied by a share of derivatives. The Group continues, however, to enter into these arrangements between 20% and 50% of the voting rights. The Group’s share of profit from the as they provide certainty of the exchange rates applying to the foreign currency associate represents the Group’s share of the associate’s profit after tax. transactions entered into by the Group and the interest rate on the Group’s debt. These arrangements result in fixed and determined cash flows. The Group Segment reporting believes that these arrangements remain effective as economic hedges, and In accordance with IFRS 8, Operating segments (effective from 1 January therefore adjustment is made to reported profit measures such that the 2009), the Group adopts a “management approach” to segment reporting such underlying profit reflects full application of hedge accounting. that segmental information is in the form which management uses internally for assessing segment performance and deciding internally how to allocate Functional currency resources to operating segments. Consistent with presentation in the The functional currency of the Company is sterling. However, as a significant management accounts, the Group separately disclosed the results of its proportion of the Group’s revenues, costs, assets and funding arise in euro, the Corporately-owned operations, Avis Licensee and Budget Licensee businesses. Consolidated Financial Statements of the Group are presented in euro. Revenue Basis of consolidation Revenue includes both vehicle rental income and income from the disposal

The Consolidated Financial Statements comprise a consolidation of the of vehicles not subject to manufacturer repurchase agreements, and excludes statements accounts of the Company and its subsidiary undertakings. inter-company sales, value added and sales taxes. Rental revenue includes fees from the provision of services incidental to vehicle rental (such as the sale The accounting reference dates of certain of the Group’s subsidiary of fuel, sub-licensee income and the provision of foreign exchange services to undertakings and its associated undertaking are governed by local rental customers), and fees receivable from licensees net of discounts. Financial requirements and are not coterminous with the Group’s 31 December year end. For those companies with non-coterminous year ends, management When the outcome of a transaction involving the rendering of services (including accounts for the relevant period to 31 December have been consolidated. the provision of licence rights) can be estimated reliably, revenue associated The main subsidiary undertaking with such a non-coterminous year end is Avis with the transaction is recognised by reference to the stage of completion of the Autonoleggio SpA (30 June). In the opinion of the Directors, the expense of transaction at the balance sheet date. The outcome of a transaction can be providing additional coterminous statutory accounts, together with potential estimated reliably when all the following conditions are satisfied: consequential delay in producing the Group’s Consolidated Financial Statements, would outweigh any benefit to the shareholders. a) the amount of revenue can be measured reliably; b) it is probable that the economic benefits associated with the transaction will Subsidiary undertakings flow to the Group; Subsidiary undertakings are those entities in which the Group has, directly or c) the stage of completion of the transaction at the balance sheet date can be indirectly, an interest of more than half of the voting rights or otherwise has the measured reliably; and power to exercise control over the operations. Subsidiaries are consolidated d) the cost incurred for the transaction and the costs to complete the from the date that control is transferred to the Group and are no longer transaction can be measured reliably. consolidated from the date that control ceases. Subsidiaries are accounted for using the acquisition method of accounting. All inter-company transactions, 52 avis-europe.com Annual Report 2009 Significant Accounting Policies continued Applicable to the Consolidated Financial Statements for the year ended 31 December 2009

Cost of sales “Investments accounted for using equity method”. Cost of sales includes selling, revenue and rental related costs (e.g. commissions and credit card fees) and vehicle costs. Contributions to vehicle After initial recognition, goodwill is measured at cost less any accumulated costs from suppliers are credited over the holding period of the related impairment losses, until disposal or termination of the previously acquired vehicles. Any such contributions dependent on performance criteria are business. The profit or loss on disposal or termination will be calculated after recognised in the Income Statement only to the extent that it is considered charging the book amount, at current exchange rates, of any such goodwill probable that the criteria will be met. through the Income Statement. Goodwill is tested for impairment at least annually and whenever there are indications that goodwill may have become Administrative expenses impaired (including planned disposal or termination where there are indications Administrative expenses are recognised as an expense in the period in which that the value of the goodwill has been permanently impaired). Goodwill is they are incurred and include staff costs, non-vehicle related rental charges allocated to cash-generating units for the purpose of impairment testing. The and other overheads. allocation is made to those cash-generating units or group of cash-generating units that are expected to benefit from the business combination in which the Finance costs goodwill arose. Finance costs directly attributable to capital projects are capitalised as part of the individual project costs. All other finance costs are recognised as an Goodwill arising on acquisitions before 1 January 2004, the date of transition expense in the period in which they are incurred. to International Financial Reporting Standards, has been retained at the previous UK GAAP amounts, subject to being tested for impairment at that Share-based payments date. The Group’s policy up to and including 28 February 1998 was to Share-based payments are exclusively made in connection with employee eliminate goodwill arising upon acquisitions to reserves. Under IFRS 1 and share option plans (ESOPs). IFRS 3, such goodwill will remain eliminated against reserves and is not included in determining any subsequent profit or loss on disposal. IFRS 2, Share-Based Payment, is not applied to shares, share options or other equity instruments that were granted before or on 7 November 2002 nor for Other intangible assets options issued after that date which had vested at or before 1 January 2005. Other intangible assets are valued at cost less any accumulated amortisation Equity-settled ESOPs granted after that date are accounted for in accordance and any accumulated impairment losses. Costs that are directly associated with IFRS 2, such that the fair value of the employee service received in with identifiable and unique software products which are controlled by the exchange for the grant of the option is recognised in the Income Statement Group, and which have probable economic benefits exceeding the cost beyond over the related performance period. The total amount to be expensed over one year, are recognised as intangible assets. Costs associated with the vesting period is determined by reference to the fair value of the options maintaining computer software, or that are not directly associated with granted, excluding the impact of any non-market vesting conditions (for identifiable and unique software products, are expensed as incurred. Computer example profitability growth targets). Non-market vesting conditions are software programmes are amortised on a straight-line basis over periods included in assumptions about the number of options that are expected to varying between two and ten years. become exercisable. At each balance sheet date, the Group revises its estimates of the number of options that are expected to become exercisable. Vehicles not subject to manufacturer repurchase agreements It recognises the impact of the revision of original estimates in the Income Vehicles are initially measured at cost. This cost comprises the purchase price Statement, with a corresponding adjustment to equity. (including any import duties and non-refundable purchase taxes, after deducting trade discounts and rebates), plus any costs directly attributable to The proceeds received net of any directly attributable transaction costs are bringing the vehicle to the location and condition necessary for it to be capable credited to share capital and the share premium account when the options of operating. After initial recognition, the vehicle is carried at its cost less any are exercised. accumulated depreciation and any accumulated impairment losses. Straight- line depreciation is based on initial cost, after consideration of expected holding Employer’s national insurance on share options periods and estimates of residual values. Where the carrying amount of a Certain share options result in employer’s national insurance contributions vehicle is greater than its estimated recoverable amount, it is written down (NIC). Provision for such costs is made on outstanding share options that are immediately to its recoverable amount. Recoverable amount is the higher of fair expected to be exercised, calculated at the latest enacted NIC rate applied value less costs to sell and value in use. to the difference between the market value of the underlying shares at the balance sheet date and the option exercise price. This charge is allocated over Vehicles not subject to manufacturer repurchase agreements are transferred to the period from the date of grant to the end of the performance or service inventories if their carrying value is to be recovered through a sale transaction period. From that date to the actual date of exercise, the provision is adjusted rather than through continuing use. by using the current market value of the shares. Where there is no performance period, full provision is made immediately. Other property, plant and equipment Other property, plant and equipment is initially measured at cost. This cost Goodwill comprises the purchase price (including any import duties and non-refundable Business combinations are accounted for by applying the purchase method. purchase taxes, after deducting trade discounts and rebates), plus any costs The excess of the cost of the business combination over the acquirer’s interest directly attributable to bringing the asset to the location and condition in the net fair value of the identifiable assets, liabilities and contingent liabilities, necessary for it to be capable of operating. If applicable, initial estimates of recognised in accordance with IFRS 3, Business combinations, constitutes the cost of dismantling and removing the item and restoring the site are also goodwill and is recognised as an asset. Where the interest in the net fair value included in the cost of the item. of the identifiable assets, liabilities and contingent liabilities is greater than the cost of the business combination, it is recognised immediately in the Income After initial recognition, the assets are carried at cost less any accumulated Statement. Goodwill on acquisition of subsidiaries is included in “Goodwill”. depreciation and any accumulated impairment losses. The depreciable amount Goodwill on acquisition of associates and joint ventures is included in of the item is allocated according to the straight-line method over its useful avis-europe.com Annual Report 2009 53

economic life. The main useful lives are as follows: expense in the period in which the reversal occurs. a) Buildings: 40 to 50 years; Vehicles b) Plant and equipment: 3 to 15 years; Vehicles not subject to manufacturer repurchase agreements are classified c) Leased assets: depending on the length of the lease. within inventories if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is met when the Where the carrying amount of a fixed asset is greater than its estimated sale is highly probable, the asset is available for immediate sale in its present recoverable amount, it is written down immediately to its recoverable amount. condition, management are committed to the asset disposal, and disposal is Recoverable amount is the higher of fair value less costs to sell and value in expected to be completed within 12 months. Vehicles classified within use and is determined for an individual asset. inventories cease to be depreciated and are measured at the lower of carrying amount and fair value less selling costs. Leases Leases in which a significant portion of the risks and rewards of ownership are Trade and other receivables retained by the lessor are classified as operating leases. Trade and other receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, Operating leases for which the Group is the lessor less provision for impairment. A provision for impairment of trade receivables is Rental income is recognised on a straight-line basis over the lease term. Unless established when there is objective evidence that the Group will not be able to the vehicles themselves are held under operating leases for which the Group is collect all amounts due according to the original terms of the receivables. The the lessee, vehicles leased out under operating leases are included in vehicles in amount of the provision is the difference between the asset’s carrying amount the balance sheet. They are depreciated over their expected useful lives. and the present value of estimated future cash flows. The carrying amount is reduced through the use of an allowance account, and the amount is Operating leases for which the Group is the lessee recognised in the Income Statement within administrative expenses. When a Lease payments under operating leases (net of any incentive received from the trade receivable is uncollectible, it is written off against the allowance account lessor) are recognised as expenses in the income statement on a straight-line for trade receivables. Subsequent recoveries of amounts previously written off basis over the lease term. are credited in the Income Statement within administrative expenses.

Vehicles subject to manufacturer repurchase agreements Cash and cash equivalents Vehicles subject to manufacturer repurchase agreements are not recognised as Cash comprises cash in hand, demand deposits and bank overdrafts. Cash non-current assets since these arrangements are accounted for as operating equivalents include short-term, highly liquid investments that are readily leases (lessee accounting). The difference between the initial payment and the convertible to known amounts of cash and which are subject to an insignificant final repurchase price (the obligation of the manufacturer) is considered as a risk of changes in value. Bank overdrafts are shown within “borrowings” in deferred charge and is classified as prepaid vehicle operating lease charges “current liabilities” in the Balance Sheet. within trade and other receivables. At inception of the arrangement, a separate repurchase agreement receivable is also recognised within trade and other Impairment of financial assets receivables for the final repurchase price. At each balance sheet date the Group assesses whether there is objective evidence that a financial asset or a group of financial assets is impaired. If any Finance leases for which the Group is the lessee such evidence exists for available for sale financial assets, the cumulative loss Leases of vehicles (including vehicles subject to manufacturer repurchase – measured as the difference between the acquisition cost and the current fair arrangements) and other property, plant and equipment, where the Group has value, less any impairment loss on that financial asset previously recognised in substantially all the risks and rewards of ownership, are classified as finance profit or loss – is removed from equity and recognised in the Income Statement. leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased asset or the present value of the minimum lease Trade and other payables

payments. Each lease payment is allocated between the liability and the finance Trade and other payables are initially measured at fair value and subsequently statements charge so as to achieve a constant rate of return on the finance balance measured at amortised cost using the effective interest method. outstanding. The corresponding rental obligations, net of finance charges, are included in interest-bearing liabilities. The interest element of the finance cost is Provisions charged to the Income Statement over the lease period. The leased assets are A provision is recognised when there is a present obligation (legal or constructive) Financial depreciated over their expected useful lives on a basis consistent with similar as a result of a past event, it is probable that an outflow of resources embodying owned vehicles or other property, plant and equipment. If there is no reasonable economic benefits will be required to settle the obligation, and a reliable estimate certainty that ownership will be acquired by the end of the lease term, the asset can be made of the amount of the obligation. If these conditions are not met, no is depreciated over the shorter of the lease term and its useful life. provision is recognised. Provisions are measured at the value of the expenditures expected to be required to settle the obligation. Where the time value of money Inventories is material, provisions are discounted using an appropriate rate that takes into Fuel and vehicle parts account the risks specific to the liability. Inventories are measured at the lower of cost and net realisable value. The cost of inventories comprises all costs of purchase, costs of conversion and other Uninsured losses are recognised when the underlying event occurs at the value costs incurred in bringing the inventories to their location and condition at the of the expenditures expected to be required to settle the obligation. Accruals balance sheet date. Items are valued using the first in, first out method. When are made for uninsured losses notified and provisions are made for claims inventories are used, the carrying amount of those inventories is recognised as incurred but not reported at each year end. Recoveries of amounts claimed an expense in the period in which the related revenue is recognised. Provision from insurers to settle expenses incurred are recognised when it is virtually for write-downs to net realisable value and losses of inventories are recognised certain that reimbursement will be received. Provisions are measured at the as an expense in the period in which the write-down or loss occurs. Reversals value of the expenditure expected to be required to settle the obligation. are recognised as a reduction in the amount of inventories recognised as an 54 avis-europe.com Annual Report 2009 Significant Accounting Policies continued Applicable to the Consolidated Financial Statements for the year ended 31 December 2009

Retirement benefit obligations Foreign currency translation The Group operates various defined benefit and defined contribution retirement The Group consolidation is prepared in sterling. Income statements of foreign benefit plans. Most of these plans are funded schemes, that is they are operations are translated into sterling at the weighted average exchange rates financed through a pension fund or an external insurance policy. The minimum for the period and balance sheets are translated into sterling at the exchange funding level of these schemes is defined by national rules. rate ruling on the balance sheet date. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as local currency assets Payments to defined contribution retirement benefit plans are charged as an and liabilities of the foreign entity and are translated at the closing rate. expense as they fall due. Foreign currency transactions are accounted for at the exchange rate prevailing The Group’s commitments under defined benefit retirement benefit plans and at the date of the transactions. Gains and losses resulting from the settlement the related costs are valued using the “projected unit credit method”, with of such transactions and from the translation of monetary assets and liabilities actuarial valuations being carried out at each balance sheet date. Actuarial denominated in foreign currencies are recognised in the Income Statement. gains and losses are recognised in full in the period in which they occur. They Exchange movements arising from the retranslation at closing rates of the are recognised in the Statement of Comprehensive Income. Past service cost is Group’s net investment in subsidiaries, joint ventures and associates are taken recognised immediately to the extent that the benefits have already vested, and to the translation reserve. The Group’s net investment includes the Group’s otherwise is amortised on a straight-line basis over the average period until the share of net assets of subsidiaries, joint ventures and associates, and certain benefits become vested. inter-company loans. The net investment definition includes loans between “sister” companies and certain inter-company items denominated in any The retirement benefit obligation recognised in the Balance Sheet represents the currency. Other exchange movements are taken to the Income Statement. present value of the defined benefit obligation as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service Where the Group hedges net investments in foreign operations, the gains and cost, plus the present value of any refunds and reductions in future contributions losses relating to the effective portion of the hedging instrument is recognised in to the plan. The current service costs and gains and losses on settlements and the translation reserve in equity. The gain or loss relating to any ineffective portion curtailments are included in operating expenses in the Income Statement. is recognised in the Income Statement. Gains and losses accumulated in equity are included in the Income Statement when the foreign operation is disposed of. Taxation The current tax payable is based on taxable profit for the year. Taxable profit The Consolidated Financial Statements are presented in euro. The consolidated differs from net profit as reported in the Income Statement because it excludes sterling assets and liabilities at each balance sheet date are recalculated into items of income or expense that are taxable or deductible in other years. euro at the closing rate at that balance sheet date. The consolidated sterling It further excludes items that are never taxable or deductible. The Group’s income and expenses are recalculated into euro at the average monthly liability for current tax is calculated using tax rates that have been enacted or exchange rates. All resulting exchange differences arising after 1 January 2004 substantively enacted at the balance sheet date. are taken to the translation reserve.

Current tax for current and prior periods, to the extent unpaid, is recognised Equity as a liability. If the amount already paid in respect of current and prior periods Where the Company (or its subsidiaries) re-acquires its own equity instruments, exceeds the amount due for those periods, the excess is recognised as a those instruments are deducted from equity as own shares held. Where such current asset. The benefit relating to a tax loss that can be carried back to equity instruments are subsequently sold, any consideration received is recover current tax of a previous period is recognised as an asset. recognised in equity.

Deferred tax is provided in full using the balance sheet liability method, on Dividend distribution temporary differences between the carrying amount of assets and liabilities Final dividends to the Company’s shareholders are recognised as a liability in for financial reporting purposes and the corresponding tax bases for taxation the Consolidated Financial Statements in the period in which the dividends are purposes. Deferred taxes are not calculated on the following temporary approved by the Company’s shareholders. Interim dividends are recognised differences: (i) the initial recognition of goodwill and (ii) the initial recognition when paid. of assets and liabilities that affect neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected basis of realisation Borrowings or settlement of the carrying amount of assets and liabilities, using tax rates Borrowings are recognised initially at fair value, net of transaction costs enacted or substantively enacted at the balance sheet date. A deferred tax incurred. Borrowings are subsequently stated at amortised cost using the asset is recognised only to the extent that it is probable that future taxable effective interest rate method. profits will be available against which the unused tax losses and credits can be utilised. Deferred tax assets previously recognised are reduced to the extent Financial instruments and hedge accounting that it is no longer probable that the related tax benefit will be realised. In accordance with IAS 39, financial instruments are recorded initially at fair value. Subsequent measurement depends upon the designation of the Deferred tax is not recognised in relation to temporary differences associated with instrument, as follows: unremitted earnings of the Group’s overseas subsidiaries where the Group is in a position to control the timing of the reversal of the temporary differences and it is a) non-current investments (other than interests in joint ventures, associates probable that such differences will not reverse in the foreseeable future. and fixed deposits) and short-term investments (other than fixed deposits) are normally designated as available for sale and are held at fair value; Current and deferred tax are charged or credited to the Income Statement b) fixed deposits, comprising principally funds held with banks and other except when they relate to items charged or credited directly to equity, in which financial institutions, and short-term borrowings and overdrafts are case the tax is also dealt with in equity. classified as loans and receivables and are held at amortised cost; c) derivatives, including interest rate swaps, foreign exchange contracts, cross currency interest rate swaps, callable interest rate swaps, forward rate avis-europe.com Annual Report 2009 55

agreements, options and embedded derivatives, are classified as derivative contingencies at the date of the Consolidated Financial Statements. If in the financial instruments and are held at fair value; and future such estimates and assumptions, which are based on management’s d) long-term loans are generally held at amortised cost. best judgement at the date of the Consolidated Financial Statements, deviate from the actual circumstances, the original estimates and assumptions will be The fair values of derivative financial instruments are determined using a modified as appropriate in the period in which the circumstances change. The number of methods and assumptions based on prevailing conditions at the following policies are considered to be of greater complexity and/or particularly balance sheet date including market forward interest rates and exchange rates subject to the exercise of judgement. at the balance sheet date. Changes in fair value of derivative financial instruments that do not qualify for hedge accounting are recognised in the Goodwill Income Statement as they arise. As required by IAS 36, Impairment of Assets, the Group regularly monitors the carrying value of its assets, including goodwill. Impairment reviews compare The Group documents at the inception of the transaction the relationship the carrying values to the higher of fair value less costs to sell or the present between the hedging instruments and hedged item, as well as its risk value of future cash flows that are derived from the relevant asset or cash- management objectives and strategy for undertaking various hedging generating unit. These reviews therefore depend on management estimates transactions. The Group also documents its assessment, both at hedge and judgements, in particular in relation to the forecasting of future cash flows inception and on an ongoing basis, of whether the derivatives that are used and the discount rate applied to the cash flows. in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. Exceptional items Exceptional items are those that, by virtue of their size or incidence, should be The full fair value of a hedging derivative is classified as a non-current asset or separately disclosed in the Income Statement. The determination of which liability if the remaining maturity of the hedged item is more than 12 months, and items should be separately disclosed as exceptional items requires judgement. as a current asset or liability if the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability. Fleet Given the nature of the Group’s business, the main asset in the Balance Sheet Cash flow hedges is the vehicle fleet. The majority of fleet is held under manufacturer repurchase Changes in the fair value of derivative financial instruments that are designated arrangements, which guarantee a disposal value at the end of the holding and effective as hedges of future cash flows are recognised directly in equity and period. However, a proportion of fleet has no such contractual protection and any ineffective portion is recognised immediately in the Income Statement. If the therefore the value at the end of the rental life will depend on the market for cash flow hedge is a firm commitment or the forecast transaction results in the those vehicles at the time of disposal. Judgement is therefore required in the recognition of an asset or a liability, then, at the time the asset or liability is estimation of disposal value. recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or Trade and other receivables liability. For hedges that do not result in the recognition of an asset or a liability, The Group regularly assesses the recoverability of its trade and other receivable amounts deferred in equity are recognised in the Income Statement in the same balances. Where there is definitive evidence that the Group will not be able period in which the hedged item affects net profit or loss. to collect all amounts outstanding, a provision for impairment is recognised. The Group utilises previous customer history, debtor ageing profiles and other When a hedging instrument expires or is sold, or when a hedge no longer relevant information in assessing the level of provision required. meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast Post-employment benefits transaction is ultimately recognised in the Income Statement. When a forecast Application of IAS 19, Employee Benefits, requires the exercise of judgement transaction is no longer expected to occur, the cumulative gain or loss that was in relation to setting the assumptions used by the actuaries in assessing the reported in equity is immediately transferred to the Income Statement. financial position of each scheme. The Group determines the assumptions to be adopted in discussion with its actuaries, and believes these assumptions to Fair value hedges be in line with UK generally accepted practice, but the application of different statements For an effective hedge of an exposure to changes in the fair value of a hedged assumptions could have a significant effect on the amounts reflected in the item, the hedged item is adjusted for changes in fair value attributable to the risk Income Statement and Balance Sheet in respect of post-employment benefits. being hedged with a corresponding entry in the Income Statement. Gains or losses The sensitivity of principal scheme liabilities to changes in the assumptions from re-measuring the derivative, or for non-derivatives the foreign currency used by actuaries is set out in Note 23. component of its carrying amount, are also recognised in the Income Statement. Financial Provisions If the hedge no longer meets the criteria for hedge accounting, the adjustment to The Group continues to carry balance sheet provisions in a number of areas the carrying amount of a hedged item for which the effective interest method is against exposures that arise in the normal course of trading. These provisions used is amortised to the Income Statement over the period to maturity. cover areas such as uninsured losses, termination and reorganisation activities and property dilapidation reserves. Judgement is involved in assessing the Embedded derivatives exposures in these areas and hence in setting the level of the required provision. Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not Taxation closely related to those of the host contracts and the host contracts are not The Group is subject to taxation in a number of jurisdictions. Significant carried at fair value. Embedded derivatives are held at fair value, with judgement is required in determining the Group’s provision for tax. There are unrealised gains and losses recognised in the Income Statement as they arise. many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. As a result, the exercising of Critical accounting policies and judgements judgement is required in order to assess the exposures in these areas and set The preparation of the Consolidated Financial Statements requires the appropriate level of provision. management to make estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and disclosure of 56 avis-europe.com Annual Report 2009 Notes to the Consolidated Financial Statements for the year ended 31 December

1 General information 2009 2008 Amounts The Company is a public limited company with a primary listing on the London Stock Amounts excluded excluded from Exchange. The address of its registered office is Avis House, Park Road, Bracknell, from Underlying1 underlying Total Underlying1 underlying Total as restated2 as restated2 as restated2 Berkshire RG12 2EW. The Company’s ultimate majority shareholder is s.a. D’Ieteren n.v. Operating profit €m €m €m €m €m €m which is incorporated in Belgium. The ultimate controlling party of s.a. D’Ieteren n.v. is Corporately-owned the D’Ieteren family. operations: 68.1 (32.2) 35.9 73.6 (15.6) 58.0

This set of Consolidated Financial Statements was approved for issue on 3 March 2010. Licensees: Avis 31.0 – 31.0 34.7 – 34.7 2 Revenue Budget 4.3 (1.3) 3.0 4.4 – 4.4 The Group provides international vehicle rental services. Revenue, as disclosed on the 35.3 (1.3) 34.0 39.1 – 39.1 face of the Consolidated Income Statement, is derived entirely from continuing activities. The Group experiences a natural increase in demand from Leisure customers over the Operating profit/(loss)– European summer holiday months which generally results in lower revenue generated in continuing 103.4 (33.5) 69.9 112.7 (15.6) 97.1 the first half of the year as compared to the second half. Finance income3 1.0 4.4 5.4 2.0 – 2.0 Finance costs3 (69.3) (1.6) (70.9) (77.1) (19.4) (96.5) IAS 16, Property Plant and Equipment, was revised during the year (see Basis of Share of profit of joint Preparation). Accordingly, revenue comprises rental income, sub-licensee income and the ventures and associate3 0.1 – 0.1 0.4 – 0.4 disposal of vehicles not subject to manufacturer repurchase agreements. Revenue is Profit/(loss) before taxation 35.2 (30.7) 4.5 38.0 (35.0) 3.0 analysed below and comparative data has been restated accordingly. Discontinued operation 2009 2008 (see Note 6) – – – – 1.3 1.3 Revenue €m €m Profit/(loss) before taxation Rental income (see Note 3) 1,162.4 1,313.8 (including discontinued Disposal of vehicles not subject to manufacturer operation) 35.2 (30.7) 4.5 38.0 (33.7) 4.3 repurchase agreements 233.1 354.4 Total 1,395.5 1,668.2 1 See Basis of Preparation. 2 Restated following the amendment to IAS16 – see Basis of Preparation. 3 Segment information 3 Arise in the corporately-owned business segment. IFRS 8, Operating segments, has been applied from 1 January 2009 (see Basis of No adjustment is made between segments to recharge the value of Avis/Budget brand, Preparation). Segment information is presented below on the same basis as that which licence rights, or to allocate the value of goodwill written off to reserves in previous is used for internal reporting purposes by the chief operating decision maker. The chief periods. Avis goodwill of €1,080.4 million arising before 1 March 1998 was fully written operating decision maker is the Group Chief Executive. off to reserves, and Budget goodwill of €33.9 million arising on 12 March 2003 has been fully impaired and charged to the Income Statement in previous periods. Had the The Group’s reportable segments are determined by the nature of the Group’s risk and value of goodwill, brand or licence rights been charged to the segments, the individual rewards. The Group is subject to significant variation in risks and rewards between segment results would be materially affected. undertakings in the corporately-owned businesses (which are focussed on western Europe), and the licensing of such operations to third parties (primarily outside of western Assets Liabilities Net assets Europe) under the Avis and Budget brands. Revenue in the corporately-owned segment is 2009 2008 2009 2008 2009 2008 Balance sheet €m €m €m €m €m €m derived from vehicle rental services and in the licensee segment is derived from licensee Corporately-owned fee income. operations: 1,544.4 1,984.0 (1,501.1) (1,933.3) 43.3 50.7 During the year, the Group undertook the reorganisation of the corporately-owned Licensees: operations within the Budget brand business, combining these operations with the Avis 5.4 6.4 – – 5.4 6.4 equivalent Avis operations in the individual countries. Budget 3.1 2.2 (1.6) (1.4) 1.5 0.8 8.5 8.6 (1.6) (1.4) 6.9 7.2 Comparative segmentation data has been restated in respect of the above. Share of joint ventures and a) Business segments 2009 2008 associate (see Note 15) 12.2 12.2 – – 12.2 12.2 1 as restated Total 1,565.1 2,004.8 (1,502.7) (1,934.7) 62.4 70.1 Rental income2 €m €m Corporately-owned operations: Segment assets include software, vehicles, other property, plant and equipment, Rental revenue 1,011.4 1,139.7 inventories, receivables (including vehicles under manufacturer repurchase agreements) Other revenue3 107.8 124.8 and operating cash, goodwill (see Note 11) and investments. Segment liabilities include 1,119.2 1,264.5 operating liabilities and certain corporate borrowings. Capital expenditure, depreciation/ Licensees: amortisation and impairment losses arise only in the corporately-owned segment. Avis 32.9 36.6 Accordingly, a tabular analysis is not presented. Budget 10.3 12.7 43.2 49.3

Rental income2 1,162.4 1,313.8

1 Restated following the amendment to IAS16 – see Basis of Preparation. 2  For management reporting purposes the Group does not apply IAS 16, Property, plant and equipment, and instead nets the revenue from disposal of vehicles not subject to repurchase agreements against the related net book value arising upon disposal in cost of sales. The revenue from the sale of such vehicles was €233.1 million (2008: €354.4 million) (see Note 2). 3  Other revenue includes income from the sale of fuel, sub-licensee income, the provision of foreign exchange services to rental customers and other incidental operating income. avis-europe.com Annual Report 2009 57

3 Segment information continued 4 Operating profit/(loss) b) Geographical segments 2009 2008 Revenue Non-current assets1 Capital expenditure €m €m 2009 2008 2009 2008 2009 2008 Operating profit/(loss) is stated after charging/(crediting): as restated2 €m €m €m €m €m €m Underlying profit1: France 270.1 292.3 66.5 100.7 51.6 89.8 Hire of vehicles under repurchase contracts 168.4 235.6 Germany 288.5 326.4 50.5 56.9 88.1 96.3 Unwinding of discount on vehicle repurchase contracts (32.7) (43.3) Italy 250.7 318.3 137.0 149.3 82.1 180.3 Net operating lease charge on manufacturer repurchase contracts 135.7 192.3 Spain 215.3 321.0 104.2 124.9 66.3 85.0 Hire of plant and equipment 1.1 1.4 United Kingdom 221.3 251.2 28.7 31.5 25.0 46.4 Hire of motor vehicles 64.9 61.9 Other Europe 173.7 210.8 33.5 39.4 23.1 29.8 Net charge on hire of plant, equipment and motor vehicles 201.7 255.6 Rest of the world 7.1 4.3 11.0 10.3 3.1 4.9 1,426.7 1,724.3 431.4 513.0 339.3 532.5 Depreciation on vehicles – owned (see Note 13) 101.6 99.1 Depreciation on vehicles – under finance lease (see Note 13) 12.6 16.0 Share of joint ventures and Depreciation on other property, plant and equipment (see Note 14) 14.9 17.1 associate (see Note 15) – – 12.2 12.2 – – Depreciation on property, plant and equipment 129.1 132.2 Elimination of inter-segment (31.2) (56.1) – – (16.1) – Headquarters – – 11.3 14.6 4.2 9.7 Adjustments arising on differences between sales proceeds and Total 1,395.5 1,668.2 454.9 539.8 327.4 542.2 depreciated amounts – fleet (1.1) 10.3 Adjustments arising on differences between sales proceeds and 1 In accordance with IFRS 8, other financial assets and deferred tax assets are excluded from depreciated amounts – non fleet 0.1 0.1 non-current assets for the purpose of segmental reporting. Both categories of asset are included Adjustments arising on differences between sales proceeds and within non-current assets in the Group Consolidated Balance Sheet. depreciated amounts (1.0) 10.4 2 Restated following the amendment to IAS 16 – see Basis of Preparation. Amortisation of other intangible assets (see Note 12) 4.8 3.4 Exchange movements (0.6) (0.1) Contingent operating lease rentals2 51.3 55.2 Other operating lease rentals 54.9 56.4

Net amounts excluded from underlying1: Total net exceptional items – continuing (see Note 6) 29.5 28.8

Re-measurement gains on non-debt related derivative financial instruments3 (1.7) (11.2) Re-measurement losses on non-debt related derivative financial instruments3 7.4 3.2 5.7 (8.0) Economic hedging adjustment on foreign exchange (1.7) (5.2) Total net exceptional items – continuing, certain re-measurement items and economic hedge adjustments 33.5 15.6

1 See Basis of Preparation. 2 Contingent operating lease rentals primarily arise with respect to airport rental desk concessions, and are primarily based on the level of revenue generated by the individual concession. 3 Net re-measurement (losses)/gains on non-debt related derivative financial instruments of €5.7 million (2008: gains of €8.0 million), comprises realised losses of €2.2 million (2008: gains of €5.1 million) and unrealised losses of €3.5 million (2008: gains of €2.9 million).

2009 2008 Auditors’ remuneration is analysed as follows: €m €m statements Fees payable to the Company’s auditor for the audit of the Company’s: – annual accounts 0.6 0.5 – subsidiaries pursuant to legislation 0.9 0.9 1.5 1.4 Financial Fees payable to the Company’s auditor and its associates for other services: – other services pursuant to legislation – 0.1 – taxation services 0.3 0.4 – litigation 0.1 0.1 – other 0.2 0.1 0.6 0.7

Auditors’ remuneration 2.1 2.1 58 avis-europe.com Annual Report 2009 Notes to the Consolidated Financial Statements continued for the year ended 31 December

5 Directors and employees 6 Net exceptional items 2009 2008 2009 2008 €m €m €m €m Staff costs Exceptional administrative expenses: Retirement benefit charges under defined contribution schemes 6.1 6.9 a) Restructuring costs – Avis 14.0 27.6 Retirement benefit charges under defined benefit schemes b) Restructuring costs – Budget 7.8 – (see Note 23) 8.0 9.6 c) Securitisation preparation costs 7.8 – Retirement benefit charges 14.1 16.5 d) Centrus receivables (0.1) (0.3) Wages and salaries 205.2 222.0 e) Goodwill impairment – 1.5 Social security costs 41.2 44.3 Net exceptional items before tax – continuing operations 29.5 28.8 Share-based payments 0.4 0.2 f) Discontinued operation – (1.3) Underlying Directors and employee costs 260.9 283.0 Net exceptional items before tax including discontinued operation 29.5 27.5 Exceptional staff costs (see Note 6) Tax on exceptional items1 (see Note 8) (5.8) – Retirement benefit charges – exceptional curtailments (see Note 6a) 0.1 0.5 Net exceptional items after tax including discontinued operation 23.7 27.5 Severance and other 15.6 20.2 15.7 20.7 1 Tax on exceptional items includes a €2.5 million credit in relation to the updated assessment of certain liabilities in respect of historic exceptional items. Directors and employee costs 276.6 303.7 a) Restructuring costs of €14.0 million were recognised, reflecting the rationalisation Further details of Directors’ remuneration for the year are provided in Note 38 and the of operations which commenced in the prior year. Actions included headquarter audited part of the Remuneration Report on pages 39 to 41. There were no Directors redundancies, the closure of certain low margin rental locations and vacant property and employee costs in respect of the Company (2008: nil). provisions following the relocation of the headquarters of the UK business into the 2009 2008 Group head office. In the prior year, restructuring costs of €27.6 million included Number Number €1.9 million incurred in respect of a redundancy programme that commenced in Staff numbers (average full time equivalent) December 2007. France 1,283 1,511 Germany 642 735 b) During the year, the Group took the decision to combine the corporately-owned Italy 528 564 operations of Budget with the respective Avis businesses. Restructuring costs of Spain 897 1,059 €7.8 million were recognised including redundancies, the rationalisation of certain United Kingdom 948 1,013 rental stations to reflect synergies with Avis, and vacant property provisions. Others 1,021 1,085 Staff numbers 5,319 5,967 c) During the year, the Group developed and prepared a structure for a potential securitisation of its fleet. Advisory, legal and other costs were incurred in the There were no staff employed by the Company (2008: nil). development of corporate and operational structures.

d) The activities associated with the closed Centrus credit hire business continue to recover a residue of receivables recognised as exceptional items in both the current and prior year, resulting in a further credit of €0.1 million (2008: €0.3 million).

e) During the prior year, the Group recognised an exceptional impairment provision against the goodwill arising on the acquisition of certain licensees in Holland (see Note 34). This followed a reappraisal of the business in conjunction with the restructuring referred to above.

f) In 2007, the Group disposed of its former subsidiary in Greece and in 2008 recognised an exceptional credit of €1.3 million to reflect the final settlement of a warranty provision. avis-europe.com Annual Report 2009 59

7 Finance income, finance costs and foreign exchange on net debt 8 Taxation 2009 2008 a) Analysis of tax charge Amounts Amounts excluded excluded 2009 2008 from from Amounts Amounts Underlying1 underlying Total Underlying1 underlying Total excluded excluded €m €m €m €m €m €m from from Underlying1 underlying Total Underlying1 underlying Total Finance income €m €m €m €m €m €m Interest receivable 1.0 – 1.0 2.0 – 2.0 Current UK tax Re-measurement gains UK corporation tax on on debt-related derivative profits for the year before 2 financial instruments – 4.4 4.4 – – – exceptional items 13.2 (0.3) 12.9 9.0 (1.9) 7.1 1.0 4.4 5.4 2.0 – 2.0 Tax on exceptional items – (3.0) (3.0) – 1.2 1.2 Finance costs Adjustments in respect Interest payable under of prior years 0.7 (0.4) 0.3 (4.7) (4.1) (8.8) finance lease obligations (10.6) – (10.6) (19.2) – (19.2) Current UK tax 13.9 (3.7) 10.2 4.3 (4.8) (0.5) Interest payable on Current foreign tax bank loans, overdrafts Foreign corporation tax on 3 and loan notes (49.2) – (49.2) (56.2) – (56.2) profits for the year before Interest payable on exceptional items 13.2 – 13.2 (2.1) – (2.1) deferred consideration (1.9) – (1.9) (2.2) – (2.2) Current tax on Re-measurement losses exceptional items – (0.1) (0.1) – – – on debt-related derivative Adjustments in respect 2 financial instruments – (6.7) (6.7) – (18.4) (18.4) of prior years (3.4) – (3.4) (1.6) – (1.6) Economic hedge adjustment Current foreign tax 9.8 (0.1) 9.7 (3.7) – (3.7) 3 on interest payable (7.6) 7.6 – 0.5 (0.5) – Current tax 23.7 (3.8) 19.9 0.6 (4.8) (4.2) Foreign exchange loss on net debt – (2.5) (2.5) – (0.5) (0.5) Analysed as: (69.3) (1.6) (70.9) (77.1) (19.4) (96.5) Corporation tax on profits for the year before Net finance costs (68.3) 2.8 (65.5) (75.1) (19.4) (94.5) exceptional items 26.4 (0.3) 26.1 6.9 (1.9) 5.0 Tax on exceptional items – (3.1) (3.1) – 1.2 1.2 1 See Basis of Preparation. Adjustments in respect 2 Net re-measurement losses on debt-related derivative financial instruments of €2.3 million (2008: €18.4 million) comprise realised losses of €19.3 million (2008: gains of €1.5 million) of prior years (2.7) (0.4) (3.1) (6.3) (4.1) (10.4) and unrealised gains of €17.0 million (2008: losses of €19.9 million). Current tax 23.7 (3.8) 19.9 0.6 (4.8) (4.2) 3 Economic hedging arrangements have been entered into for which the Group is unable to apply hedge accounting under IAS 39. To the extent that IAS 39 does not permit hedge accounting, Deferred tax interest payable on bank loans and overdrafts reflects actual interest rates applicable to debt, Origination and reversal regardless of any accrued cash flow paid at contracted rates within hedging derivatives. of temporary differences (14.2) – (14.2) 12.7 – 12.7 Deferred tax on exceptional items – (2.7) (2.7) – (1.2) (1.2) Adjustments in respect of prior years 0.9 0.4 1.3 2.9 4.0 6.9 Deferred tax (13.3) (2.3) (15.6) 15.6 2.8 18.4

Taxation 10.4 (6.1) 4.3 16.2 (2.0) 14.2

The Group’s share of tax charge on joint ventures and associate (included within Group profit/(loss) before taxation) is €0.3 million (2008: €0.4 million). statements

1 See Basis of Preparation. Financial 60 avis-europe.com Annual Report 2009 Notes to the Consolidated Financial Statements continued for the year ended 31 December

b) Tax charge/(credit) taken directly to the Statement of Comprehensive Income 10 Earnings per share 2009 2008 Amounts Amounts a) Basic and diluted excluded excluded Basic and diluted earnings/(loss) per share are based on the earnings/(loss) for the year from from Underlying1 underlying Total Underlying1 underlying Total attributable to equity holders of the Company, and the weighted average number of €m €m €m €m €m €m shares in issue for the year attributable to equity holders of the Company. Deferred tax credit on cash flow hedges – (0.3) (0.3) – (2.8) (2.8) Basic and diluted earnings/(loss) per share from continuing operations is as follows: Current tax credit on exchange

movements offset in reserves – (1.0) (1.0) – (3.8) (3.8) Continuing operations 2009 2008 2009 2008 Tax (credit)/charge on Earnings/(loss) from continuing operations €m €m £m £m actuarial gains – (5.3) (5.3) – 2.8 2.8 Earnings/(loss) for the year from continuing – (6.6) (6.6) – (3.8) (3.8) operations attributable to equity holders of the Company 0.2 (11.2) (0.2) (8.8) 1 See Basis of Preparation. 2009 2008 2009 2008 Earnings/(loss) per share from Euro Euro Sterling Sterling c) Reconciliation of tax charge continuing operations cents cents pence pence 2009 2008 Basic and diluted earnings/(loss) per share Amounts Amounts excluded excluded from continuing operations – (1.2) – (1.0) from from Underlying1 underlying Total Underlying1 underlying Total €m €m €m €m €m €m Basic and diluted including discontinued operation 2009 2008 2009 2008 Profit/(loss) before taxation 35.2 (30.7) 4.5 38.0 (35.0) 3.0 Earnings/(loss) €m €m £m £m Tax at the UK corporation Earnings/(loss) for the year attributable to tax rate of 28% equity holders of the Company 0.2 (9.9) 0.2 (7.8) (2008: 28.5%) 9.9 (8.6) 1.3 10.8 (10.0) 0.8 Differing rates applied 2009 2008 2009 2008 Euro Euro Sterling Sterling to overseas profits (4.3) (0.4) (4.7) (5.2) (0.2) (5.4) Earnings/(loss) per share cents cents pence pence Expenses not deductible Basic and diluted earnings/(loss) per share – (1.1) – (0.9) for tax purposes (0.1) 0.3 0.2 2.7 (0.1) 2.6 Utilisation of tax losses (1.5) 0.2 (1.3) – – – After adjusting for own shares held, the weighted average number of shares in issue for Adjustments in respect the year was 917,698,082 (2008: 918,921,314). of prior years (1.8) – (1.8) (3.4) (0.1) (3.5) Deferred assets Options have been granted to certain Directors and employees over ordinary shares of not recognised 9.0 4.9 13.9 11.1 7.7 18.8 the Company and constitute the only category of potentially dilutive ordinary shares. Other (0.8) (2.5) (3.3) 0.2 0.7 0.9 These options did not increase the weighted average number of shares in either 2008 or Taxation 10.4 (6.1) 4.3 16.2 (2.0) 14.2 2009, as either the option exercise prices were in excess of the prevailing market share price, or exercise of the options is subject to performance conditions which had not been 1 See Basis of Preparation. fully satisfied by the relevant period end.

9 Dividends b) Underlying The Directors do not propose the payment of an interim or final dividend for the year Underlying earnings per share is based on the underlying earnings for the year and the ended 31 December 2009 (2008: nil). weighted average number of shares in issue for the year attributable to equity holders of the Company.

Underlying earnings per share from continuing operations is as follows:

2009 2008 2009 2008 Earnings from continuing operations €m €m £m £m Underlying earnings for the year from continuing operations attributable to equity holders of the Company 24.8 21.8 22.1 17.0

2009 2008 2009 2008 Earnings per share from Euro Euro Sterling Sterling continuing operations cents cents pence pence Basic and diluted underlying earnings per share from continuing operations 2.7 2.4 2.4 1.8 avis-europe.com Annual Report 2009 61

11 Goodwill 12 Other intangible assets 2009 2008 Other intangible assets comprise internally generated software development costs and €m €m externally acquired software. Amortisation charged in the year is reported in the Income Cost Statement within “administrative expenses”. At 1 January 37.2 43.4

Additions (see Note 34) – 1.4 Software Software Disposals (1.5) – Internally Externally Internally Externally generated acquired Total generated acquired Total Exchange movements 1.5 (7.6) 2009 2009 2009 2008 2008 2008 At 31 December 37.2 37.2 €m €m €m €m €m €m Cost Accumulated impairment provisions At 1 January 17.0 11.1 28.1 12.5 12.2 24.7 At 1 January 37.0 43.1 Additions 0.9 1.3 2.2 8.7 1.2 9.9 Exceptional impairment losses for the year – 1.5 Disposals – – – (0.1) – (0.1) Disposals (1.5) – Exchange movements 1.0 0.3 1.3 (4.1) (2.3) (6.4) Exchange movements 1.5 (7.6) At 31 December 18.9 12.7 31.6 17.0 11.1 28.1 At 31 December 37.0 37.0 Amortisation Net book amount At 1 January 3.9 9.5 13.4 3.1 9.7 12.8 At 31 December 0.2 0.2 Charges for the year (see Note 4) 2.8 2.0 4.8 1.9 1.5 3.4 Goodwill of €1,080.4 million arising before 1 March 1998 is fully written off to reserves. Exceptional impairment loss (see Note 6) – 0.1 0.1 – – – In accordance with the requirements of IAS 36, Impairment of Assets, the Group Disposals – – – (0.1) – (0.1) ordinarily completes a review of the carrying value of goodwill at each year end. Goodwill Exchange movements – 0.2 0.2 (1.0) (1.7) (2.7) is allocated to cash-generating units for the purpose of impairment testing, each of these At 31 December 6.7 11.8 18.5 3.9 9.5 13.4 representing the Group’s investment where the goodwill originally arose. The impairment review is conducted to ensure that the carrying values of the assets within cash- Net book amount generating units for which goodwill has been allocated are stated at no more than their At 31 December 12.2 0.9 13.1 13.1 1.6 14.7 recoverable amount, being the higher of fair value less costs to sell and value in use. The exceptional impairment losses of €0.1 million (2008: €nil) have been classified Accumulated impairment provisions represent amounts provided in respect of acquired within “exceptional restructuring costs” in the Income Statement (see Note 6). former Budget operations, and certain former Avis licensee operations in France, Germany and Holland. During the year and as part of an overall network review, certain stations in Holland were closed. Goodwill in respect of these stations was already fully impaired and is deemed to be disposed during the current year.

The Directors review at each year end the carrying values of the remaining capitalised goodwill relating to the licensee acquisition in France (see Note 34) and the joint venture in China (see Note 15). This review (undertaken by calculating value in use) did not result in the need for any impairment provision to be recognised as at 31 December 2008 or 31 December 2009.

In determining the value in use, the Directors calculated the present value of the estimated future cash flows expected to arise from the continuing use of the assets using post-tax discount rates based upon the Group’s weighted average cost of capital with appropriate adjustment for the relevant risks associated with the businesses. Estimated future cash flows are based on management’s five-year plans for each cash-generating unit, with extrapolation thereafter based on long-term average nominal growth rate of 4.0% into statements perpetuity and the introduction of a notional royalty rate to Avis Budget Group, Inc. as from 2036. Financial 62 avis-europe.com Annual Report 2009 Notes to the Consolidated Financial Statements continued for the year ended 31 December

13 Vehicles 14 Other property, plant and equipment 2009 2008 Assets as restated1 Freehold Short Plant in the €m €m land and leasehold and course of buildings property equipment construction Total Cost €m €m €m €m €m At 1 January 526.5 525.8 Cost Additions 316.5 515.9 At 1 January 2008 37.8 45.1 60.0 0.7 143.6 Transfers to inventories (385.3) (564.5) Additions 1.1 3.1 7.8 4.4 16.4 Transfers from current assets 12.7 60.8 Disposals (0.5) (0.2) (0.6) – (1.3) Acquisitions – 0.2 Transfers 0.8 1.4 0.3 (2.5) – Exchange movements 2.5 (11.7) Acquisitions – – 0.1 – 0.1 At 31 December 472.9 526.5 Exchange movements (0.4) (6.0) (7.1) (0.4) (13.9) At 31 December 2008 38.8 43.4 60.5 2.2 144.9 Depreciation and impairment At 1 January 85.5 77.1 At 1 January 2009 38.8 43.4 60.5 2.2 144.9 Charges for the year 114.2 115.1 Additions 0.5 1.6 5.9 0.7 8.7 Transfers to inventories (97.4) (104.6) Disposals (0.7) (5.3) (4.0) – (10.0) Transfers from current assets 5.8 2.3 Transfers 0.3 0.2 2.2 (2.7) – Exchange movements 0.3 (4.4) Acquisitions – – – – – At 31 December 108.4 85.5 Exchange movements 0.1 1.2 1.3 0.1 2.7 At 31 December 2009 39.0 41.1 65.9 0.3 146.3 Net book amount At 31 December 364.5 441.0 Depreciation and impairment 1 Restated following the amendment to IAS 16 – see Basis of Preparation. At 1 January 2008 4.8 20.2 40.6 – 65.6 Charges for the year 2.1 4.2 10.8 – 17.1 Vehicles held under finance leases are included in the above at 31 December at the Exceptional impairment loss – 1.4 0.2 – 1.6 following amounts: Disposals (0.2) (0.1) (0.3) – (0.6) Transfers (0.1) – 0.1 – – 2009 2008 Exchange movements (0.5) (3.7) (6.3) – (10.5) €m €m At 31 December 2008 6.1 22.0 45.1 – 73.2 Cost 65.0 106.7 Depreciation and impairment (11.4) (20.1) At 1 January 2009 6.1 22.0 45.1 – 73.2 Net book amount 53.6 86.6 Charges for the year 1.9 4.1 8.9 – 14.9 Exceptional impairment loss – 0.4 0.1 – 0.5 At 31 December 2009, the Group had capital commitments for vehicles contracted, but Disposals (0.7) (5.1) (3.5) – (9.3) not provided for, amounting to €54.4 million (2008: €18.5 million). Exchange movements 0.1 0.8 1.2 – 2.1 At 31 December 2009 7.4 22.2 51.8 – 81.4

Net book amount At 31 December 2009 31.6 18.9 14.1 0.3 64.9 At 31 December 2008 32.7 21.4 15.4 2.2 71.7

The exceptional impairment losses of €0.5 million (2008: €1.6 million) have been classified within “exceptional restructuring costs” in the Income Statement (see Note 6).

Other property, plant and equipment held under finance leases are included in the above at 31 December at the following amounts:

2009 2008 €m €m Cost 4.1 4.1 Depreciation and impairment (1.5) (1.3) Net book amount 2.6 2.8

At 31 December 2009, the Group had capital commitments for other property, plant and equipment contracted, but not provided for, amounting to €1.2 million (2008: €1.6 million). avis-europe.com Annual Report 2009 63

15 Investments accounted for using the equity method 17 Deferred tax Joint Temporary differences ventures Associate Total Accelerated Losses €m €m €m tax Employee available At 1 January 2008 10.3 0.5 10.8 depreciation Fair value benefits Other for offset Total Deferred tax provided €m €m €m €m €m €m Acquisitions (see Note 34) 0.1 – 0.1 At 1 January 2008 (5.3) 1.8 19.8 (9.9) 8.2 14.6 Share of profit 0.3 0.1 0.4 Recognised in Income Exchange movements 1.0 (0.1) 0.9 Statement (see Note 8) (3.1) 0.1 (4.7) (16.5) 5.8 (18.4) At 31 December 2008 11.7 0.5 12.2 Transfer to current tax 7.1 – – 9.4 – 16.5 Recognised in Statement At 1 January 2009 11.7 0.5 12.2 of Comprehensive Acquisitions (see Note 34) – 0.4 0.4 Income (see Note 8) – 2.8 (2.8) – – – Share of profit 0.4 (0.3) 0.1 Exchange movements (5.2) (0.1) (3.5) 3.2 (1.5) (7.1) Exchange movements (0.7) 0.2 (0.5) At 31 December 2008 (6.5) 4.6 8.8 (13.8) 12.5 5.6 At 31 December 2009 11.4 0.8 12.2 At 1 January 2009 (6.5) 4.6 8.8 (13.8) 12.5 5.6 The Group has a 50% share in both of its joint ventures, ‘Anji Car Rental and Leasing Recognised in Income Company Limited’ and ‘OKIGO’, companies which are incorporated in China and France Statement (see Note 8) 19.2 – (1.6) 1.1 (3.1) 15.6 respectively. The Group also has a 33% share in its associate, Mercury Car Rentals Transfer to current tax (0.2) – – 10.1 – 9.9 Limited, a company which is incorporated in India. The Group’s share of results for the Recognised in Statement year were as follows: of Comprehensive Income (see Note 8) – 0.3 5.3 – – 5.6 Joint ventures Associate Total Exchange movements (0.4) 0.1 (0.2) (0.1) – (0.6) 2009 2008 2009 2008 2009 2008 Share of: €m €m €m €m €m €m At 31 December 2009 12.1 5.0 12.3 (2.7) 9.4 36.1 Revenue 19.9 13.5 3.7 3.8 23.6 17.3 Analysed as: Expenses (18.3) (12.1) (3.9) (3.4) (22.2) (15.5) At 31 December 2009 Operating profit/(loss) 1.6 1.4 (0.2) 0.4 1.4 1.8 Deferred tax assets 22.2 4.8 12.7 2.3 0.5 42.5 Net finance costs (0.8) (0.8) (0.2) (0.2) (1.0) (1.0) Deferred tax liabilities (10.1) 0.2 (0.4) (5.0) 8.9 (6.4) Profit/(loss) before tax 0.8 0.6 (0.4) 0.2 0.4 0.8 Net 12.1 5.0 12.3 (2.7) 9.4 36.1 Taxation (0.4) (0.3) 0.1 (0.1) (0.3) (0.4) Net profit/(loss) for the year 0.4 0.3 (0.3) 0.1 0.1 0.4 At 31 December 2008 Deferred tax assets 14.4 4.3 9.2 (0.3) 4.1 31.7 At the year end, the Group’s interest in Anji Car Rental and Leasing Company Limited, Deferred tax liabilities (20.9) 0.3 (0.4) (13.5) 8.4 (26.1) OKIGO and Mercury Car Rentals Limited, comprised: Net (6.5) 4.6 8.8 (13.8) 12.5 5.6

Joint ventures Associate Total 2009 2008 2009 2008 2009 2008 Deferred tax assets have been recognised in respect of tax losses and other temporary Share of: €m €m €m €m €m €m differences where it is probable that these assets will be recovered. Deferred tax assets Non-current assets 26.5 24.1 1.7 2.0 28.2 26.1 and liabilities are only offset where there is a legally enforceable right of offset and there Current assets 4.7 5.8 1.7 1.1 6.4 6.9 is an intention to settle the balances net. Current liabilities (20.7) (18.4) (0.8) (0.6) (21.5) (19.0) Non-current liabilities – (0.7) (1.8) (2.0) (1.8) (2.7) At the year end, the Group had unused tax losses of €236.8 million (2008: €204.8 million) 10.5 10.8 0.8 0.5 11.3 11.3 available for offset against future profits. A deferred tax asset has been recognised in Net book amount of respect of €33.1 million (2008: €44.1 million) of such losses. No deferred tax asset has goodwill arising upon been recognised in respect of the remaining unused tax losses of €203.7 million (2008: acquisition (see Note 11) 0.9 0.9 – – 0.9 0.9 €160.7 million) due to the unpredictability of future profit streams. 11.4 11.7 0.8 0.5 12.2 12.2 Deferred tax has not been recognised in respect of other temporary differences which statements At the year end the joint venture in China had capital commitments of €nil (2008: would give rise to deferred tax assets of €20.6 million (2008: €11.6 million) due to the €0.3 million). There were no capital commitments relating to the joint venture in France unpredictability of future profit streams. and the associate in India (2008: €nil). At the year end, the aggregate amount of other temporary differences associated with

At each year end, the joint ventures and associate had no contingent liabilities and no unremitted earnings of the Group’s overseas subsidiaries for which deferred tax liabilities Financial operating lease commitments of greater than €0.1 million per annum. have not been recognised was €246.2 million (2008: €252.8 million). No liability has been recognised in respect of these differences because the Group is in a position to 16 Other financial assets control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future. Temporary differences arising in 2009 2008 €m €m connection with interests in the joint ventures and associate are insignificant. Non-current assets – available for sale investments 0.4 0.4 Current assets – held for trading 2.7 –

Non-current financial assets of €0.4 million (2008: €0.4 million) primarily comprises an equity minority interest in an overseas company. Current financial assets comprise finance lease collateral of €2.7 million which attracted interest at 0.6%. 64 avis-europe.com Annual Report 2009 Notes to the Consolidated Financial Statements continued for the year ended 31 December

18 Inventories 19 Trade and other receivables 2009 2008 2009 2008 as restated1 €m €m €m €m Repurchase agreement receivables 530.9 777.9 Vehicles 3.1 10.3 Prepaid vehicle operating lease charges 43.6 63.3 Repurchase vehicles (during vehicle holding period) 574.5 841.2 Fuel 4.9 5.7 Other vehicle receivables (after the end of vehicle holding period) 141.4 203.7 Vehicle parts 0.4 1.2 Amounts due from leasing companies 35.8 61.6 Other inventories 5.3 6.9 Vehicle related receivables 751.7 1,106.5 Other trade debtors 136.4 162.3 8.4 17.2 Finance revenue debtors – 0.1 Other debtors 45.4 52.9 1 Restated following the amendment to IAS 16 – see Basis of Preparation. Other prepayments 56.1 29.9 989.6 1,351.7 Vehicles comprise ex-rental vehicles formerly used in the corporately-owned segment, where the Group is committed to the disposal of the vehicle. Adjustments arising on Other vehicle receivables include amounts due after exercising of manufacturer differences between sales proceeds and depreciated amounts totalled gains of repurchase agreements. The carrying amounts of trade and other receivables are €1.1 million (2008: losses of €10.3 million). denominated primarily in euros. The cost of fuel and vehicle parts inventories recognised as an expense in the Income Vehicle related receivables include €125.4 million (2008: €154.0 million) held under Statement in the year totalled €44.9 million (2008: €62.0 million). finance lease arrangements in respect of repurchase agreements.

Credit risk with regard to vehicle related receivables is concentrated with the main European vehicle manufacturers. Concentrations of credit risk with respect to non-vehicle related receivables are limited by the diversity of the Group’s customers. The maximum exposure to credit risk at the reporting date is the fair value of each class of receivable mentioned above. Carrying values are stated net of any provisions made for bad and doubtful debts, and accordingly, the Directors believe that the maximum credit risk exposure is the carrying amount of the receivables in the balance sheet, as shown below.

The main categories of trade and other receivables that are subject to credit risk are: other vehicle receivables (after the end of vehicle holding period), amounts due from leasing companies, other trade debtors and other debtors. These categories are analysed on an aged basis as follows: 2009 2008 €m €m Trade and other receivables subject to credit risk 385.2 500.3 Neither past due nor impaired (301.6) (390.8) Past due 83.6 109.5 Provision for bad and doubtful debts (26.2) (19.7) Past due but not impaired 57.4 89.8

The ageing analysis of past due but not impaired is as follows: 2009 2008 €m €m Up to three months past due 51.3 84.9 Three to six months past due 4.3 4.8 Over six months past due 1.8 0.1 57.4 89.8

The other classes within trade and other receivables do not contain impaired assets.

The provision for bad and doubtful debts has been determined by reference to past experience. Bad and doubtful debt expense of €8.7 million (2008: €2.4 million) has been recognised in the Income Statement in the year. avis-europe.com Annual Report 2009 65

20 Cash and short-term deposits Uninsured losses represent provisions for losses under third party liabilities or claims 2009 2008 primarily in respect of third party motor liability insurance programmes. Due to the €m €m timescales and uncertainties involved in such claims, provision is made based upon the Cash at bank and in hand 38.7 23.0 profile of claims experience, allowing for potential claims for a number of years after Short-term deposits 21.9 29.1 policy inception. 60.6 52.1 Dilapidation and environmental represents provisions to cover the costs of the Cash and short-term deposit balances are floating rate assets which earn interest at remediation of certain properties held under operating leases. These provisions are various rates set with reference to the prevailing EURIBID and LIBID or equivalent. The primarily euro denominated and non-interest bearing, and the ultimate expenditure is majority of the Group’s cash and short-term deposits are held with banks and financial expected to be coterminous with the underlying remaining lease periods (see Note 36). institutions that have a minimum Standard and Poor’s credit rating of AA-. The warranty provision was utilised in the prior year (see Note 6). Short-term deposits mature within three months (2008: three months) and include €0.6 million (2008: €2.7 million) of deposits required by insurers to be held by Other trading provisions have been discounted where applicable at the rate Aegis Motor Insurance Limited (a subsidiary of the Group) to settle claims. commensurate with the underlying risk, and comprise:

21 Trade and other payables a) Reorganisation and employee termination provisions of €1.2 million (2008: 2009 2008 €2.1 million) that are expected to crystallise within the next five years. €m €m b) Other provisions of €6.7million (2008: €7.7 million), which primarily comprise Vehicle payables 108.9 184.9 provision against the future redemption of benefits under customer loyalty Amounts due to leasing companies 27.2 43.4 programmes, onerous lease provisions, and provision against legal claims that arise in Vehicle related payables 136.1 228.3 the normal course of business. These provisions are expected to crystallise within the Other trade payables 46.6 54.1 next five years. In the Directors’ opinion, after taking appropriate legal advice, the Finance cost creditors 6.0 9.0 outcomes of these legal claims are not expected to give rise to any significant loss Other creditors 16.4 26.5 beyond amounts provided at 31 December 2009. Accruals and deferred income 217.6 201.4 Other taxes and social security 42.6 19.9 23 Retirement benefit obligations 465.3 539.2 a) Retirement benefit schemes operated 22 Provisions Where applicable, subsidiaries contribute to the relevant state pension scheme. Certain Dilapidation subsidiaries operate schemes which provide retirement benefits, including those of the Uninsured and Other losses environmental Warranty trading Total defined benefit type, which are in most cases funded by investments held outside €m €m €m €m €m the Group. At 1 January 2008 40.5 8.8 7.8 10.3 67.4 Charged/(credited) 22.8 (1.4) – 5.2 26.6 b) Defined benefit schemes Transfer from trade and other payables 1.3 – – – 1.3 There are funded defined benefit pension schemes for qualifying employees in the United Exceptional release (see Note 6f) – – (1.3) – (1.3) Kingdom, France, Spain and Austria. In addition there is an unfunded defined benefit Utilised in the year (19.8) – (6.5) (5.7) (32.0) pension scheme for employees in Germany and an unfunded defined benefit statutorily Exchange movements (1.8) (0.8) – – (2.6) determined termination scheme for employees in Italy. The principal schemes are in the At 31 December 2008 43.0 6.6 – 9.8 59.4 United Kingdom and Germany.

Non-current 25.6 The valuations used have been based on the most recent actuarial valuations available, Current 33.8 updated by the scheme actuaries to assess the liabilities of the scheme and the market At 31 December 2008 59.4 value of the scheme assets at each of the balance sheet dates.

Dilapidation Uninsured and Other Funded schemes Unfunded schemes losses environmental Warranty trading Total Main assumptions (weighted average) 2009 2008 2009 2008 €m €m €m €m €m Discount rate 5.7% 6.5% 6.0% 6.0% statements At 1 January 2009 43.0 6.6 – 9.8 59.4 Inflation rate 3.6% 3.2% 2.0% 2.0% Charged 19.6 0.7 – 4.3 24.6 Expected rate of salary increases 5.4% 4.7% 2.1% 2.0% Transfer from trade and other payables – 0.1 – – 0.1 Rate of pension increases in payment 2.8% 2.4% 1.6% 1.6% Utilised in the year (26.9) (0.4) – (6.5) (33.8) Rate of pension increases in deferment 3.7% 3.0% 0.0% 0.0% Exchange movements 0.5 0.2 – 0.3 1.0 Expected return on plan assets: Financial At 31 December 2009 36.2 7.2 – 7.9 51.3 – equities 8.0% 7.7% n/a n/a Non-current 32.7 – bonds 5.8% 5.7% n/a n/a Current 18.6 – other 5.5% 5.7% n/a n/a At 31 December 2009 51.3 – weighted average 7.1% 6.6% n/a n/a

The expected rates of return on plan assets are based on market expectations at the beginning of each year for returns over the expected period of the related obligation. The expected return on equities is based on a wide range of qualitative and quantitative market analysis including consideration of market equity risk premiums. The expected return on bonds is based on long-term bond yields. 66 avis-europe.com Annual Report 2009 Notes to the Consolidated Financial Statements continued for the year ended 31 December

23 Retirement benefit obligations continued Funded schemes 2009 2008 The key demographic assumption is longevity. By its very nature, longevity can be difficult Defined benefit scheme assets €m % €m % to predict. Assumptions regarding future longevity experience are set based on advice Equities 74.3 60% 45.8 47% from actuaries, published statistics and experience in each territory. In 2006, the Corporate bonds and index linked gilts 42.6 35% 44.2 46% longevity assumption for the principal funded scheme was updated to reflect the “2000” Other 6.5 5% 7.2 7% series tables along with certain improvements (known as “medium cohort”) which makes Fair value of scheme assets 123.4 100% 97.2 100% allowances for increases in longevity projections. Within the context of increasing life expectancy, the Group further strengthened the longevity improvement assumption in The fair value of scheme assets did not include any property or other assets used by the the principal funded scheme in 2007 by introducing a 1% per annum minimum level Group, nor any financial instruments of the Group. of improvement within the medium cohort allowance. The longevity assumption in the principal funded scheme applied a post retirement life expectancy for a member aged 2009 2008 Analysis of return on scheme assets €m €m 65 in 2009 of 21 years (2008: 21 years) for males, and 24 years (2008: 24 years) for Expected return on scheme assets 6.5 9.1 females. The post-retirement longevity assumption in the principal unfunded scheme Actual return less expected return on assets 11.3 (27.0) applied a life expectancy for a member aged 65 in 2009 of 18 years (2008: 18 years) Actual return on scheme assets 17.8 (17.9) for males, and 22 years (2008: 22 years) for females. The amounts recognised in the Income Statement are as follows: The amounts recognised in the balance sheet are summarised as follows: 2009 2008 2009 2008 Funded Unfunded Funded Unfunded Funded Unfunded Funded Unfunded schemes schemes Total schemes schemes Total schemes schemes Total schemes schemes Total €m €m €m €m €m €m €m €m €m €m €m €m Current service costs 2.9 0.5 3.4 5.0 0.6 5.6 Fair value of scheme assets 123.4 – 123.4 97.2 – 97.2 Past service costs 0.1 – 0.1 0.1 – 0.1 Present value of defined Interest on scheme liabilities 9.0 2.0 11.0 11.1 1.9 13.0 benefit obligations (177.5) (35.0) (212.5) (133.9) (34.2) (168.1) Expected return on Retirement benefit scheme assets (6.5) – (6.5) (9.1) – (9.1) obligation (54.1) (35.0) (89.1) (36.7) (34.2) (70.9) Underlying charge before

2009 2008 tax to Income Statement Funded Unfunded Funded Unfunded (see Note 5) 5.5 2.5 8.0 7.1 2.5 9.6 Analysis of movements schemes schemes Total schemes schemes Total in the scheme assets €m €m €m €m €m €m Exceptional curtailments At 1 January 97.2 – 97.2 146.7 – 146.7 (see Note 6) 0.1 – 0.1 0.5 – 0.5 Expected return on Exceptional charge before plan assets 6.5 – 6.5 9.1 – 9.1 tax to Income Statement 0.1 – 0.1 0.5 – 0.5 Actuarial loss: Net charge before tax – experience gain/(loss) to Income Statement 5.6 2.5 8.1 7.6 2.5 10.1 on assets 11.3 – 11.3 (27.0) – (27.0) Contributions by the Group 8.4 1.5 9.9 9.8 1.6 11.4 The scheme settlements in the year had no impact on the amounts recognised in the Contributions by employees 0.8 – 0.8 0.8 – 0.8 Income Statement. The charge before tax is reported in “administrative expenses” in the Benefits paid from the fund (6.1) (1.5) (7.6) (5.1) (1.6) (6.7) Income Statement. Settlements paid (0.8) – (0.8) (5.8) – (5.8) Exchange gain/(loss) 6.1 – 6.1 (31.3) – (31.3) Amounts recognised through the Statement of Comprehensive Income are as follows: At 31 December 123.4 – 123.4 97.2 – 97.2 2009 2008 Funded Unfunded Funded Unfunded Analysis of movements schemes schemes Total schemes schemes Total €m €m €m €m €m €m in the present value 2009 2008 Actual return less of defined benefit Funded Unfunded Funded Unfunded schemes schemes Total schemes schemes Total expected return on assets 11.3 – 11.3 (27.0) – (27.0) scheme obligations €m €m €m €m €m €m Experience gain/(loss) At 1 January (133.9) (34.2) (168.1) (209.2) (35.0) (244.2) on liabilities 3.2 0.4 3.6 1.5 (0.5) 1.0 Current service costs (2.9) (0.5) (3.4) (5.0) (0.6) (5.6) (Loss)/ Gain on change Past service costs (0.1) – (0.1) (0.1) – (0.1) of assumptions Exceptional curtailments (financial and demographic) (32.5) – (32.5) 35.3 1.9 37.2 (see Note 6) (0.1) – (0.1) (0.5) – (0.5) (18.0) 0.4 (17.6) 9.8 1.4 11.2 Interest on scheme liabilities (9.0) (2.0) (11.0) (11.1) (1.9) (13.0) Actuarial gain/(loss): Cumulative actuarial losses recognised in the Statement of Comprehensive Income since – experience gain/(loss) 1 January 2004 (the date of adoption of IAS 19) are €33.5 million (at 31 December on liabilities 3.2 0.4 3.6 1.5 (0.5) 1.0 2008: €15.9 million). – (loss)/gain on change of assumptions (32.5) – (32.5) 35.3 1.9 37.2 Contributions by employees (0.8) – (0.8) (0.8) – (0.8) Benefits paid from the fund 6.1 1.5 7.6 5.1 1.6 6.7 Other benefits paid – – – 0.4 – 0.4 Settlements paid 0.8 – 0.8 5.8 – 5.8 Exchange (loss)/gain (8.3) (0.2) (8.5) 44.7 0.3 45.0 At 31 December (177.5) (35.0) (212.5) (133.9) (34.2) (168.1) avis-europe.com Annual Report 2009 67

23 Retirement benefit obligations continued The fair value of the Group’s obligations under finance leases approximates to their carrying amount, and is secured by the lessors either having legal title or charges over The contributions paid by the Group into funded schemes during 2009 were €8.4 million the leased assets. In the current year, collateral was held against certain of the leases (2008: €9.8 million), which includes payments to fund the net actuarial obligations over (see Note 16). time. The best estimate of the cash contributions expected to be made by the Group into funded schemes during the 2010 annual period is €11.9 million, which includes payments to fund the net actuarial obligations over time. 25 Other financial liabilities a) Borrowings The indicative sensitivity of principal scheme liabilities as at 31 December 2009 to 2009 2008 changes in the above assumptions is as follows: €m €m Bank overdrafts 8.8 27.4 Change in Indicative increase in Bank loans and other loans 5.2 290.4 assumption scheme liabilities (€m) Assumption UK Germany Commercial paper 26.7 13.3 Discount rate -0.1% 3.4 0.5 Loan notes 542.8 555.3 Inflation rate +0.1% 3.2 0.3 583.5 886.4 Real rate of salary increases +0.5% 1.5 0.2 Analysed as: Longevity +1 year 3.9 0.7 Current liabilities (due for settlement within one year) 74.0 45.1 Non-current liabilities (due for settlement after more than one year) 509.5 841.3 The sensitivity of non-principal scheme liabilities to the changes in the assumptions 583.5 886.4 shown above is not material to the Group. All borrowings were unsecured as at both 31 December 2009 and 31 December 2008. An analysis of the retirement benefit obligation history is below: There are covenants attached to certain of the borrowings. Funded schemes 2009 2008 2007 2006 2005 Retirement benefit obligation history €m €m €m €m €m Bank overdrafts Fair value of scheme assets 123.4 97.2 146.7 140.4 124.1 Bank overdrafts are primarily denominated in euros and sterling and attract floating rate Present value of defined interest by reference to EURIBOR and LIBOR plus margins ranging from 1.3% to 5.3%. benefit obligation (177.5) (133.9) (209.2) (220.5) (206.2) Retirement benefit obligation (54.1) (36.7) (62.5) (80.1) (82.1) Bank loans and other loans Bank loans and other loans are primarily floating rate, with a weighted average cost at Actual return less expected 31 December 2009 of 2.1% (2008: 4.7%). return on assets 11.3 (27.0) (2.5) (0.6) 13.4 Percentage of scheme assets Commercial paper carried forward 9.2% (27.8)% (1.7)% (0.4)% 10.8% Avis Finance Company plc, an indirect wholly owned subsidiary of the Company, has a Experience gain/(loss) on liabilities 3.2 1.5 (0.5) (2.0) (5.6) commercial paper facility in Belgium, guaranteed by the Company, which can provide Percentage of scheme liabilities borrowings of up to €200.0 million (2008: €200.0 million). Amounts drawn under the carried forward (1.8)% (1.1)% 0.2% 0.9% 2.7% facility attract interest at floating rates by reference to EURIBOR plus a margin which varies depending upon market conditions at the time of issue. Unfunded schemes 2009 2008 2007 2006 2005 Retirement benefit obligation history €m €m €m €m €m Loan notes Retirement benefit obligation (35.0) (34.2) (35.0) (41.9) (47.2) At 31 December, Avis Finance Company plc has outstanding the following loan notes: Experience gain/(loss) on liabilities 0.4 (0.5) 0.1 1.5 0.2 Percentage of scheme liabilities 2009 2008 Principal Principal carried forward (1.1)% 1.5% (0.3)% (3.6)% (0.4)% Issued m Maturing m Maturing August 2000 $48.0 2010 $48.0 2010 24 Obligations under finance leases June 2002 €26.8 2012 €26.8 2012 Present value of minimum June 2004 $240.0 2011, $240.0 2011, Minimum lease payments lease payments 2012 2012

2009 2008 2009 2008 statements €m €m €m €m and and Amounts payable under finance leases 2014 2014 Within one year 172.6 239.9 167.9 232.7 June 2004 €65.0 2012 €65.0 2012 Between two and five years – – – – July 2006 €250.0 2013 €250.0 2013 172.6 239.9 Financial Less: future finance charges (4.7) (7.2) The US$ loan notes bear interest at an average fixed rate of 6.3% (2008: 6.3%). The Present value of finance lease obligations 167.9 232.7 167.9 232.7 euro denominated loan notes issued prior to July 2006 bear interest at an average fixed rate of 5.8% (2008: 5.8%). These loan notes are at fixed rates such that their contractual Analysed as: repricing profile is coterminous with their maturity profile. Current liabilities (due for settlement within one year) 167.9 232.7 Non-current liabilities (due for settlement after more than one year) – – The €250.0 million Senior Floating Rate Notes bear interest at EURIBOR plus 2.625%. 167.9 232.7 These notes reprice EURIBOR quarterly and include a call option, permitting the Group to repay the notes with effect from 31 July 2008. This option is separately recognised as an It is the Group’s policy to fund certain of its vehicles (including some vehicles held under embedded derivative at fair value (see Note 26). repurchase arrangements) and some plant and equipment under finance leases. The average lease term is less than one year. For the year ended 31 December 2009 the Proceeds from the loan notes issued in August 2000 totalling US$48.0 million (2008: average effective interest rate was 3.7% (2008: 5.0%). All finance leases are on a fixed US$48.0 million) and the loan notes issued in June 2004 totalling US$240.0 million repayment basis and interest rates are fixed at the contract date. No arrangements have (2008: US$240.0 million) are swapped to a fixed rate euro liability. Proceeds of the been entered into for contingent rental payments. Senior Floating Rate Notes issued in July 2006 totalling €200.0 million (2008: €200.0 million) are swapped into a fixed rate euro liability.

Further details are provided in Note 26. 68 avis-europe.com Annual Report 2009 Notes to the Consolidated Financial Statements continued for the year ended 31 December

25 Other financial liabilities continued Interest rate risk The Group’s interest rate risk arises from the Group’s borrowing which, after foreign b) Undrawn borrowings currency risk hedging, principally arises in euro and sterling. Borrowings issued at The committed borrowing facilities of the Group, drawn and undrawn, are as follows: variable rates expose the Group to cash flow interest rate risk whereas borrowings issued 2008 2009 at fixed rates expose the Group to fair value interest rate risk. Drawn Undrawn Total Drawn Undrawn Total €m €m €m €m €m €m Revolving syndicated To manage these risks, the Group is financed through a combination of fixed and floating credit facility 26.5 553.5 580.0 320.3 259.7 580.0 rate facilities and enters into various derivatives. The Group’s policy is to ensure that the Bilateral facilities and proportion of fixed rate debt to the annual average net debt (defined for this purpose to finance leases 172.2 296.1 468.3 245.7 348.3 594.0 include the net book value of fleet under operating leases) for the next three years will be 198.7 849.6 1,048.3 566.0 608.0 1,174.0 maintained in the range of 65% to 85%, 55% to 80%, and 45% to 75% respectively.

The drawn amount of the revolving syndicated credit facility includes €26.5 million in Liquidity risk respect of letters of credit (2008: €34.3 million). The seasonal nature of the business necessitates higher fleet levels in the summer months and hence proportionately higher debt requirements. Consequently, the Group The maturity profile of the Group’s undrawn committed borrowing facilities at ensures that it has a core level of long-term funding in place with maturities spread over 31 December is as follows: a wide range of dates. This funding is supplemented by shorter term committed revolving 2009 2008 facilities to cover requirements through the year, together with a range of uncommitted €m €m facilities, including operating leases. Expiring within one year 192.1 300.3 Expiring within one and two years 629.5 – Capital risk management Expiring within two and five years 28.0 307.7 The Group’s objectives when managing capital are to safeguard the ability to continue as 849.6 608.0 a going concern, help facilitate returns to shareholders and appropriate benefits for other stakeholders. The Group seeks to maintain an optimal debt and equity structure to At 31 December 2009 there were additional uncommitted facilities available to the Group minimise the overall cost of capital. To maintain or adjust the capital structure, the Group of €312.4 million (2008: €383.7 million). may issue new shares or acquire/sell assets to adjust debt levels where appropriate. c) Deferred consideration 2009 2008 The Group monitors the use of capital on the basis of return on capital employed €m €m (“ROCE”) and average fleet utilisation. The Group’s ROCE is based on the underlying Current liabilities (due for settlement within one year) 0.3 0.2 operating profit of the business plus the operating result of joint ventures and associates. Non-current liabilities (due for settlement after more than one year) 23.8 22.5 Underlying operating profit is adjusted to reverse: any non-exceptional goodwill 24.1 22.7 impairments; the interest cost of retirement benefit obligations; and the expected return on retirement benefit scheme assets. Capital employed is based on net assets with Deferred consideration comprises €24.1 million (2008: €22.7 million) arising on the adjustment for: all debt and related interest balances; all derivative financial instruments; acquisition of shares in Avis Europe Investment Holdings Limited from Avis Inc in 1997. tax balances; retirement benefit obligations; and capitalised goodwill, and is an average The liability is denominated in sterling, attracts an interest rate of 8.0% (2008: 8.0%) of the current and previous two period end closing balances. This definition of ROCE may fixed for 28 years (2008: 29 years) and is repayable in annual instalments (including not be comparable to other similarly titled measures used by other companies. Average interest) of £1.9 million. fleet utilisation is calculated as the average period of time during which vehicles are on rent as a percentage of their holding period. 26 Financial risk management a) Financial risk management objectives and policies Other price risks The Group’s financial risk management objective is to reduce the financial risks and As part of the presentation of market risks, IFRS 7 requires disclosures on how exposures facing the business with respect to changes in interest and foreign exchange hypothetical changes in risk variables affect the price of financial instruments. Important rates, and to ensure constant access to sufficient liquidity. To achieve this the Group risk variables include stock exchange prices or indices. As at 31 December 2008 and undertakes an active hedging policy, including the use of derivatives (interest rate and 31 December 2009 the Group did not hold any such material investments to be foreign exchange swaps, options, forward rate agreements and caps and collars), which classified as available for sale. are entered into under policies approved and monitored by a sub-committee of the Board, chaired by the Group Finance Director. These transactions are only undertaken to Credit risk reduce exposures arising from underlying commercial transactions and at no time are The Group’s principal financial assets comprise: vehicles classified within inventories; transactions undertaken for speculative reasons. other financial assets held for trading; trade and other receivables; derivative financial instrument assets; and cash and short-term deposits which in aggregate represent the Foreign currency risk Group’s maximum exposure to credit risk at each year end. The majority of the Group’s business is transacted in euros, sterling, US dollars and Swiss francs. The principal commercial currency of the Group is the euro. The Group The Group is exposed to credit risk from its operating activities and certain financing seeks to manage currency exposure wherever possible. activities. This risk is controlled from a treasury perspective by only entering into transactions involving financial instruments with authorised counterparties of strong In each country where the Group has a corporately-owned operation, revenue generated credit quality, and monitoring such positions regularly. With regard to trade and other and costs incurred are primarily denominated in the relevant local currency, so providing receivables, outstanding amounts are regularly monitored at an operational level. a natural currency hedge. In addition, intra-group trading transactions are netted and Bad debt provisions are made against known credit risks. settled centrally. Any remaining material foreign currency transaction exposures are hedged as appropriate into either euro or sterling. The credit ratings of vehicle manufacturers, the key suppliers, are monitored separately. With respect to certain vehicle manufacturers, the Group has a natural hedge to its With regard to translation exposures the policy is to match where possible the average exposure to credit risk as vehicle receivables (after the end of the holding period) (see Note assets to the equivalent average liabilities in each major currency and thus minimise any 19) are ordinarily less than vehicle payables (see Note 21) for the majority of the year. impact. To the extent that this cannot be effected, both foreign currency borrowings and forward exchange contracts are used. Long-term borrowings undertaken to benefit from the liquidity of the US dollar denominated capital markets are swapped into euros. avis-europe.com Annual Report 2009 69

26 Financial risk management continued Fair values of the derivative financial instruments are determined using a number of methods and assumptions based on conditions at the balance sheet date as none are The maximum exposure to credit risk is represented by the balance sheet values of the traded in an active market. The fair values of interest rate swaps, forward rate original loans and receivables that are carried in the balance sheet, including derivatives agreements and cross currency interest rate swaps are calculated as the present value with positive market values. Where derivatives are settled gross, International Swaps and of future estimated cash flows. The fair value of the embedded derivative, callable Derivatives Association (ISDA) based agreements are applied which include close-out interest rate swaps and interest rate caps and collars are valued using option valuation netting provisions which are effective if the counterparty defaults. At the reporting date techniques. The fair value of forward exchange contracts is determined using forward there were no other significant global offsetting agreements that reduce credit risk, nor exchange market rates at the balance sheet date. were there any significant financial guarantees for third-party obligations that increase this risk. Hedging instruments The effectiveness of hedging relationships is tested by means of statistical methods using b) Fair value of derivative financial instruments either regression analysis (for forward foreign exchange contracts and cross currency Recognised fair values interest rate swaps), or the closest offset method (for interest rate swaps). This involves 2009 2008 of derivative financial Assets Liabilities Net Assets Liabilities Net defining the performance of the hedged item as the independent variable and the instruments €m €m €m €m €m €m performance of the hedging item as the dependent variable. A hedging relationship is Hedging instruments: classified as effective when the value of the hedging item moves between 0.8% and – forward foreign 1.25% for each 1.0% movement in the hedged item. All hedging relationships, having exchange contracts 0.4 (1.1) (0.7) 0.7 (1.7) (1.0) been tested using statistical methods, were effective at the reporting date. Non-hedging instruments: – forward foreign Forward foreign exchange contracts exchange contracts 2.0 (1.1) 0.9 8.2 (4.2) 4.0 Forward foreign exchange contracts as at 31 December 2009 with aggregate values – forward foreign of US$6.0 million (2008: US$7.8 million), South African rand 69.1 million (2008: South exchange options – – – 0.2 – 0.2 African rand 79.6 million), Israeli shekel 7.2 million (2008: Israeli shekel 9.6 million), Non-debt derivatives 2.4 (2.2) 0.2 9.1 (5.9) 3.2 Norwegian krone 7.4 million (2008: Norwegian krone 10.5 million) and Swedish krona 6.9 million (2008: Swedish krona 10.1 million) were used to hedge expected foreign Hedging instruments: currency income of US$6.0 million (2008: US$7.8 million), South African rand – interest rate swaps – (13.0) (13.0) – (8.3) (8.3) 69.1 million (2008: South African rand 79.6 million), Israeli shekel 7.2 million – cross currency interest (2008: Israeli shekel 9.6 million), Norwegian krone 7.4 million (2008: Norwegian krone rate swaps – (46.4) (46.4) – (43.2) (43.2) 10.5 million) and Swedish krona 6.9 million (2008: Swedish krona 10.1 million) into Non-hedging instruments: sterling of £11.1 million (2008: £13.4 million). – interest rate swaps – (5.8) (5.8) 0.1 (6.2) (6.1) – callable interest rate swaps – (6.0) (6.0) – (5.7) (5.7) Forward foreign exchange contracts as at 31 December 2009 with aggregate values – forward rate agreements – – – – (3.1) (3.1) of US$23.4 million (2008: US$20.8 million), Hungarian forint 1,503.0 million – interest rate caps (2008: Hungarian forint 2,038.0 million) and sterling nil (2008: sterling £3.0 million) and collars – (0.5) (0.5) – (0.5) (0.5) were used to hedge expected foreign currency income of US$23.4 million – embedded derivatives 1.9 – 1.9 0.7 – 0.7 (2008: US$20.8 million), and expected foreign currency payments of Hungarian forint Debt derivatives 1.9 (71.7) (69.8) 0.8 (67.0) (66.2) 1,503.0 million (2008: Hungarian forint 2,038.0 million) and sterling nil (2008: sterling £3.0 million) into euro of €16.3 million (2008: €15.4 million), €5.2 million 4.3 (73.9) (69.6) 9.9 (72.9) (63.0) (2008: €7.7 million) and €nil (2008: €3.8 million) respectively. Non-current portion: Hedging instruments: These forward exchange contracts and corresponding foreign currency receipts will mature – interest rate swaps – (13.0) (13.0) – (8.3) (8.3) within 12 months of each year end. Movements in the fair value of these forward foreign – cross currency interest exchange contracts are recognised as cash flow hedges in the hedging reserve within rate swaps – (28.8) (28.8) – (43.2) (43.2) equity. These amounts are then transferred to the Income Statement when the amounts are Non-hedging instruments: received at various dates between one and 12 months after the year end. There was no – embedded derivatives 1.9 – 1.9 0.7 – 0.7 material ineffectiveness of these hedges recorded as at the balance sheet date.

Debt derivatives 1.9 (41.8) (39.9) 0.7 (51.5) (50.8) statements

Interest rate swaps Analysed as: Interest rate swaps of aggregate notional principal amounts of €200.0 million (2008: Current assets/(liabilities) €200.0 million) with average fixed interest payable of 4.03% (2008: 4.03%) were used (due for settlement within to hedge variable quarterly interest payments arising under the Senior Floating Rate one year) 2.4 (32.1) (29.7) 9.2 (21.4) (12.2) Financial Notes due 2013. The aim of the hedge relationship is to transform the variable interest Non-current assets/(liabilities) borrowing into a fixed interest borrowing, and result in cash flow hedges of €11.8 million (due for settlement after (2008: €8.5 million). Credit risks do not form part of the hedge. There was no material more than one year) 1.9 (41.8) (39.9) 0.7 (51.5) (50.8) ineffectiveness of these hedges recorded as at the balance sheet date. 4.3 (73.9) (69.6) 9.9 (72.9) (63.0)

Cross currency interest rate swaps Non-hedging derivatives (excluding the embedded derivative) are classified as a current Cross currency interest rate swaps of aggregate notional principal amounts of asset or liability. The full fair value of hedging derivatives is classified as a non-current US$288.0 million (2008: US$288.0 million) were used to hedge the Group’s asset or liability if the remaining maturity of the hedged item is more than 12 months, US$ denominated loan notes (see Note 25). and as a current asset or liability if the remaining maturity of the hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability. The embedded derivative is classified as a non-current asset consistent with the maturity of the borrowing in which it is embedded. 70 avis-europe.com Annual Report 2009 Notes to the Consolidated Financial Statements continued for the year ended 31 December

26 Financial risk management continued Embedded derivative The €250.0 million Senior Floating Rate Notes due 2013 include a call option permitting Fair value hedge adjustments of €(2.9) million (2008: €(9.6) million) arise from the the Group to repay the notes with effect from 31 July 2008. Under the option, the notes hedging of the principal value of the exposures to euro denominated liabilities. Equivalent may be redeemed at the following redemption prices (expressed as a percentage of (but opposite) fair value differences have been recognised on the hedging cross currency principal amounts) if repaid during the 12 month period beginning on 31 July 2008: interest rate swaps for the same underlying risk. The whole of this adjustment in both the 102%; 31 July 2009: 101%; 31 July 2010 and thereafter: 100%. In accordance with current and prior years relate to hedged items due for settlement after one year. Cash IAS 39, this option is separately recognised from underlying Senior Floating Rate Notes flow hedges of €3.6 million (2008: €5.4 million) arise from the conversion of the semi- as an embedded derivative. annual US$ denominated interest payments to euro denominated interest payments. Amounts recognised within equity are released to the Income Statement when the c) Risk and sensitivity analysis underlying fixed interest payments occur at various dates between the year end and Foreign currency risk 2014. There was no ineffectiveness of these hedges recorded at the balance sheet date. In accordance with IFRS 7, foreign currency risk sensitivities are calculated by reference to the currency profile of the Group’s balance sheet as at each year end, with all other Non-hedging instruments variables kept constant. These sensitivities do not therefore reflect any trading impacts In certain circumstances, transactions to reduce economic exposure do not qualify for arising from changes in exchange rates during the year, or any impacts arising from the hedge accounting. translation of monthly non-euro Income Statement results. Forward foreign exchange contracts The table below details the sensitivity of the Group’s total profit after tax from continuing Forward foreign exchange contracts as at 31 December 2009 were in place to convert the operations, translation reserve, and cash flow hedge reserve to a hypothetical 10% following foreign currency notional amounts into sterling balances totalling £178.0 million strengthening of the euro against sterling, US$ and Swiss francs from a translation (2008: £178.7 million); Swiss francs 41.4 million (2008: Swiss francs 54.3 million); perspective. Sensitivities to a 10% strengthening of the euro has been selected given the Singapore dollar 8.1 million (2008: Singapore dollar 13.0 million); Hungarian forint nil current level of exchange rates, exchange rate volatility observed on a historic basis and (2008: Hungarian forint 400.1 million); US$2.6 million (2008: US$2.5 million); and market expectations for future movements. Similar but opposite sensitivities would arise €232.3 million (2008: €241.3 million). upon a 10% weakening of the euro against sterling, US$ and Swiss francs:

Forward foreign exchange options Profit after tax Translation reserve Hedging reserve Forward foreign exchange option contracts as at 31 December 2008 were in place to 2009 2008 2009 2008 2009 2008 convert expected foreign currency income of US$19.3 million into €12.4 million. These (Profit)/loss €m €m €m €m €m €m option contracts matured during 2009. Euro/sterling 1.6 (4.8) 1.3 9.4 – (0.3) Euro/US$ 0.3 1.3 – – (1.3) (1.3) Interest rate swaps Euro/Swiss francs (3.6) (4.0) 2.4 2.2 – – The notional principal amount of outstanding interest rate swap contracts not qualifying for hedge accounting as at the year end was €50.0 million (2008: €50.0 million) with fixed Profit after tax sensitivities primarily arise from the revaluation of non-hedging derivatives interest rates payable at 4.4%. The notional principal amounts of outstanding interest rate comprising forward foreign contracts where the Group has not applied hedge accounting. caps and collars as at the year end was €100.0 million (2008: €100.0 million). The majority of these sensitivities do not affect the Group’s underlying profit after tax as they impact upon amounts excluded from the underlying result. Translation reserve The aggregate average notional principal amounts of outstanding variable principal sensitivities effectively arise from the retranslation of the net assets of head office and interest rate swaps as at the end of the year was €99.2 million (2008: €102.2 million) trading operations in the UK, and trading operations in Switzerland, from sterling and with average fixed rates payable at 4.3%. These variable principal interest rate swaps Swiss francs respectively, into euro. Hedging reserve sensitivities to sterling balances arise were put in place in 2008, but with a start date in January 2009. from the hedging of forward foreign exchange contracts, whilst the US$ sensitivities arise from both forward foreign exchange contracts and cross currency interest rate swaps. Callable interest rate swaps At the year end the Group had outstanding variable principal callable interest rate swaps Interest rate risk with aggregate average notional principals of €74.4 million (2008: €76.7 million). In each To manage interest rate risk the Group is financed through a combination of fixed and case the swap has an initial maturity in December 2011, at which time the counterparty floating rate facilities and enters into various interest rate derivatives. In accordance with has the option to extend the swap at no additional cost for a further three years. The IFRS 7, interest rate sensitivities are calculated by reference to the interest rate profile of fixed rate payable on the swaps is 3.9% if the swaps are not extended, and 4.1% if the the Group’s balance sheet as at each year end, with all other variables kept constant. extension option is exercised. These variable principal callable interest rate swaps were Sensitivities to a 1% increase in interest rates have been selected given the current level put in place in 2008, but with a start date in January 2009. of market interest rates, interest rate volatility observed on a historic basis and market expectations for future movements. Similar but opposite sensitivities would arise upon Forward rate agreements a 1% reduction in interest rates. The interest rate sensitivities are calculated based on In 2008 the Group had outstanding forward rate agreements with aggregate notional the following: principals of €450.0 million covering various three month periods during 2009. These converted the prevailing floating interest rate to an average fixed rate of 6.1%. (a) Changes in the market interest rates of non-derivative financial instruments with fixed interest rates only affect income if these are recognised at their fair value. As such, all financial instruments with fixed interest rates that are carried at amortised cost are not subject to interest rate risk as defined in IFRS 7.

(b) Changes in the market interest rate of financial instruments that were designated as hedging instruments in a cash flow hedge, to hedge payment fluctuations resulting from interest rate movements, affect the cash flow hedge reserve in shareholder’s equity and are therefore taken into consideration in the equity-related sensitivity calculations. avis-europe.com Annual Report 2009 71

26 Financial risk management continued Liquidity risk The following is an analysis of the contractual undiscounted cash flows payable under (c) Changes in market interest rates affect the interest income or expense of non- financial liabilities together with derivative financial instrument assets and liabilities at the derivative variable interest financial instruments. As a consequence, they are included balance sheet date: in the calculation of income-related sensitivities, other than where the interest Due Due between between payments are designated as part of a cash flow hedge against interest rate risk. Due within one and two and Due after one year two years five years five years Total At 31 December 2009 €m €m €m €m €m (d) Changes in the market interest rate of interest rate derivatives (interest rate swaps, Non-derivative financial liabilities callable interest rate swaps, forward rate agreements, caps and collars) that are not Borrowings (74.0) (82.6) (424.4) – (581.0) part of a hedging relationship as set out in IAS 39, affect other financial income or Interest payments on borrowings (33.4) (29.6) (33.1) – (96.1) expense (net gain/loss from remeasurement of the financial fair value) and are Trade and other payables therefore taken into consideration in the income-related sensitivity calculations. (including Finance cost creditors) (see Note 21) (465.3) – – – (465.3) (e) Currency derivatives are not directly exposed to interest rate risks and therefore do Obligations under finance leases (167.9) – – – (167.9) not affect the interest rate sensitivities. Interest payments on finance leases (4.7) – – – (4.7) Deferred consideration (0.3) (0.3) (0.9) (22.6) (24.1) The sensitivity of profit after tax, translation reserve and cash flow hedge reserve to a 1% Derivative financial instrument change in the interest rate are detailed in the table below: assets and liabilities – gross settled Profit after tax Translation reserve Hedging reserve 2009 2008 2009 2008 2009 2008 Derivative contracts – receipts 115.1 90.0 93.6 – 298.7 €m €m €m €m €m €m Derivative contracts – payments (133.7) (108.8) (104.9) – (347.4) Loss arising from 1% Derivative financial instrument increase in interest rates assets and liabilities – net settled (post tax) 1.6 1.9 – – 21.1 6.8 Derivative contracts – payments (16.8) (4.5) (7.8) – (29.1) (781.0) (135.8) (477.5) (22.6) (1,416.9) The decrease in total profit after tax partly arises due to the revaluation of non-hedging Due Due derivatives. The decrease in underlying profit after tax to a 1% increase in market interest between between Due within one and two and Due after rates is €0.7 million (2008: €2.0 million). one year two years five years five years Total At 31 December 2008 €m €m €m €m €m Non-derivative financial liabilities Borrowings (45.1) (34.0) (727.0) (70.9) (877.0) Interest payments on borrowings (47.7) (44.8) (64.7) (2.2) (159.4) Trade and other payables (including Finance cost creditors) (see Note 21) (539.2) – – – (539.2) Obligations under finance leases (232.7) – – – (232.7) Interest payments on finance leases (7.2) – – – (7.2) Deferred consideration (0.2) (0.2) (0.8) (21.5) (22.7) Derivative financial instrument assets and liabilities – gross settled Derivative contracts – receipts 178.3 46.8 115.9 73.1 414.1 Derivative contracts – payments (176.9) (65.2) (136.1) (86.1) (464.3) Derivative financial instrument assets and liabilities – net settled Derivative contracts – payments (18.1) (2.6) (7.2) – (27.9) (888.8) (100.0) (819.9) (107.6) (1,916.3) statements

Financial 72 avis-europe.com Annual Report 2009 Notes to the Consolidated Financial Statements continued for the year ended 31 December

27 Net debt Interest rate and currency profile The interest rate and currency profile of the Group’s net debt balances is as follows: The maturity profile of the Group’s net debt balances (excluding deferred consideration) is as follows: 2009 2008 Less than One to Two to More than Fixed Floating Fixed Floating one year two years five years five years Total rate rate Total rate rate Total At 31 December 2009 €m €m €m €m €m €m €m €m €m €m €m Derivative financial instrument assets Gross debt (excluding (see Note 26) – – 1.9 – 1.9 impact of derivatives) Derivative financial instrument liabilities Euro (91.8) (457.4) (549.2) (91.8) (813.8) (905.6) (see Note 26) (29.9) (11.8) (30.0) – (71.7) Sterling – (1.9) (1.9) – (0.6) (0.6) Derivative financial instruments US$ (197.4) – (197.4) (203.3) – (203.3) (see Note 26) (29.9) (11.8) (28.1) – (69.8) Other – – – – – – Bank overdrafts (see Note 25) (8.8) – – – (8.8) (289.2) (459.3) (748.5) (295.1) (814.4) (1,109.5) Bank loans and other loans Net impact of derivatives (see Note 25) (5.2) – – – (5.2) Euro (596.4) 338.6 (257.8) (621.2) 453.0 (168.2) Commercial paper (see Note 25) (26.7) – – – (26.7) Sterling – 14.0 14.0 – (72.2) (72.2) Loan notes (see Note 25) (33.3) (89.3) (420.2) – (542.8) US$ 198.2 1.8 200.0 204.1 1.8 205.9 Obligations under finance leases Other – (28.9) (28.9) – (41.3) (41.3) (see Note 24) (167.9) – – – (167.9) (398.2) 325.5 (72.7) (417.1) 341.3 (75.8) Gross debt (including net derivatives) (271.8) (101.1) (448.3) – (821.2) Gross debt (net of derivatives) Euro (688.2) (118.8) (807.0) (713.0) (360.8) (1,073.8) Current assets – held for trading Sterling – 12.1 12.1 – (72.8) (72.8) (see Note 16) 2.7 – – – 2.7 US$ 0.8 1.8 2.6 0.8 1.8 2.6 Cash and short-term deposits Other – (28.9) (28.9) – (41.3) (41.3) (see Note 20) 60.6 – – – 60.6 (687.4) (133.8) (821.2) (712.2) (473.1) (1,185.3) Interest bearing assets 63.3 – – – 63.3 Interest bearing assets Net debt – continuing operations (208.5) (101.1) (448.3) – (757.9) Euro – 55.6 55.6 – 45.6 45.6

Less than One to Two to More than Sterling – 6.3 6.3 – 5.3 5.3 one year two years five years five years Total Other – 1.4 1.4 – 1.2 1.2 At 31 December 2008 €m €m €m €m €m – 63.3 63.3 – 52.1 52.1 Derivative financial instrument assets (see Note 26) 0.1 – 0.7 – 0.8 Net debt Derivative financial instrument liabilities Euro (688.2) (63.2) (751.4) (713.0) (315.2) (1,028.2) (see Note 26) (15.5) (16.7) (25.0) (9.8) (67.0) Sterling – 18.4 18.4 – (67.5) (67.5) Derivative financial instruments US$ 0.8 1.8 2.6 0.8 1.8 2.6 (see Note 26) (15.4) (16.7) (24.3) (9.8) (66.2) Other – (27.5) (27.5) – (40.1) (40.1) Bank overdrafts (see Note 25) (27.4) – – – (27.4) (687.4) (70.5) (757.9) (712.2) (421.0) (1,133.2) Bank loans and other loans (see Note 25) (4.4) – (286.0) – (290.4) The net impact of derivatives in 2009 of €(72.7) million (2008: €(75.8) million), Commercial paper (see Note 25) (13.3) – – – (13.3) comprises the recognition of the fair value of the debt-related derivative financial Loan notes (see Note 25) – (34.9) (444.5) (75.9) (555.3) instruments of €(69.8) million (2008: €(66.2) million), adjusted for the fair value hedge Obligations under finance leases adjustment of €(2.9) million (2008: €(9.6) million) (see Note 26). (see Note 24) (232.7) – – – (232.7) Gross debt (including net derivatives) (293.2) (51.6) (754.8) (85.7) (1,185.3) The above fixed/floating rate analysis excludes the impact of interest rate caps and collars. Including the impact of such caps and collars, a further €100.0 million (2008: Cash and short-term deposits €100.0 million) of net debt would be classified as fixed rate. (see Note 20) 52.1 – – – 52.1 Interest bearing assets 52.1 – – – 52.1 The range of interest rates applicable to euro-denominated gross debt (net of derivatives) Net debt (241.1) (51.6) (754.8) (85.7) (1,133.2) is as follows: 2009 2008 % % Fixed interest rate charge 5.7–6.8 5.9–6.8 Floating rate interest charge margin above: – EURIBOR 0.3–2.6 0.3–2.6 – LIBOR n/a n/a avis-europe.com Annual Report 2009 73

28 Additional disclosures on financial instruments As of 1 January 2009 the Group has adopted the IFRS 7 amendments, which require disclosure of how the above fair value measurements fit within the fair value Measurement of financial instruments by category Fair value measurement hierarchy. The following table presents the Group’s financial assets and Fair value recognised Book Amortised recognised in Income liabilities measured at fair value within the hierarchy. amount cost in equity Statement At 31 December 2009 €m €m €m €m Other financial assets: Assets: Level 1 Level 2 Level 3 Total Other financial assets: €m €m €m €m Assets: Derivative hedging instruments Other financial assets: (held for trading) 0.4 – – 0.4 – forward foreign exchange contracts Derivative non-hedging instruments (cash flow hedges) – 0.4 – 0.4 (held for trading) 3.9 – – 3.9 Derivative hedging instruments Cash and short-term deposits 60.6 60.6 – – (held for trading) – 0.4 – 0.4 Trade and other receivables 989.6 989.6 – – 1,054.5 1,050.2 – 4.3 – forward foreign exchange contracts – 2.0 – 2.0 Liabilities and shareholders’ equity: – embedded derivative – – 1.9 1.9 Other financial liabilities: Derivative non-hedging instruments (held for trading) – 2.0 1.9 3.9 Derivative hedging instruments (held for trading) (60.5) – (16.2) (44.3) Liabilities and shareholders’ equity: Derivative non-hedging instruments Other financial liabilities: (held for trading) (13.4) – – (13.4) – forward foreign exchange contracts Bank overdrafts (8.8) (8.8) – – (cash flow hedges) – (1.1) – (1.1) Bank loans and other loans (5.2) (5.2) – – – interest rate swaps (cash flow hedges) – (13.0) – (13.0) Commercial paper (26.7) (26.7) – – – cross currency interest rate swaps Loan notes (542.8) (542.8) – – (cash flow hedges) – (3.0) – (3.0) Obligations under finance leases (167.9) (167.9) – – – cross currency interest rate swaps Deferred consideration (24.1) (24.1) – – (fair value hedges) – (43.4) – (43.4) Trade and other payables (465.3) (465.3) – – Derivative hedging instruments (1,314.7) (1,240.8) (16.2) (57.7) (held for trading) – (60.5) – (60.5)

Fair value Fair value recognised – forward foreign exchange contracts – (1.1) – (1.1) Book Amortised recognised in Income amount cost in equity Statement – interest rate swaps – (5.8) – (5.8) At 31 December 2008 €m €m €m €m – callable interest rate swaps – (6.0) – (6.0) Assets: – interest rate caps and collars – (0.5) – (0.5) Other financial assets: Derivative non-hedging instruments Derivative hedging instruments (held for trading) – (13.4) – (13.4) (held for trading) 0.7 – – 0.7 Derivative non-hedging instruments Total – (71.5) 1.9 (69.6) (held for trading) 9.2 – – 9.2 Cash and short-term deposits 52.1 52.1 – – Level 1 financial instruments Trade and other receivables 1,351.7 1,351.7 – – Level 1 comprises those financial instruments measured at fair value where the valuation 1,413.7 1,403.8 – 9.9 is based on quoted prices (unadjusted) in active markets for identifiable assets or liabilities. As at 31 December 2009 the Group had no such instruments. Liabilities and shareholders’ equity: Other financial liabilities: Level 2 financial instruments statements

Level 2 comprises those financial instruments measured at fair value where the valuation Derivative hedging instruments is based on inputs other than quoted prices included within Level 1 that are observable (held for trading) (53.2) – (14.9) (38.3) for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from Derivative non-hedging instruments prices). The fair values of all the Group’s derivative hedging instruments, and derivative (held for trading) (19.7) – – (19.7)

non-hedging instruments are determined using valuation techniques. These valuation Financial Bank overdrafts (27.4) (27.4) – – techniques maximise the use of observable market data where it is available, and rely as Bank loans and other loans (290.4) (290.4) – – little as possible on entity specific estimates. If all significant inputs required to fair value Commercial paper (13.3) (13.3) – – an instrument are observable, the instrument is included in Level 2. In cases where a Loan notes (555.3) (555.3) – – valuation technique for these instruments is based on one or more significant Obligations under finance leases (232.7) (232.7) – – unobservable inputs, such instruments are included in Level 3. Deferred consideration (22.7) (22.7) – – Trade and other payables (539.2) (539.2) – – The fair value of the Group’s derivative hedging instruments, and derivative non-hedging (1,753.9) (1,681.0) (14.9) (58.0) instruments (other than the embedded derivative) are calculated as the present value of the estimated future cash flows based on observable yield curves, and are therefore included in Level 2. 74 avis-europe.com Annual Report 2009 Notes to the Consolidated Financial Statements continued for the year ended 31 December

28 Additional disclosures on financial instruments continued 30 Own shares held Level 3 financial instruments Own shares are held by the Avis Europe Employee Share Trust, a discretionary trust, to Level 3 comprises those financial instruments measured at fair value where the valuation partially satisfy options and awards under a number of the Group’s share schemes. The is based on inputs for the asset or liability that are not based on observable data. The fair Company’s own shares have a nominal value of 1 pence per share. value of the embedded derivative contract is determined using option valuation techniques which are based on both observable market rates, but also assumptions with At 31 December 2009, the Trust held 7,307,735 shares (2008: 637,735), which has respect to future share price volatility (which is extrapolated from historic volatility trends). been recognised as a reduction in shareholders’ funds. The market price of the shares The embedded derivative is therefore included in Level 3. Movements in the fair value of as at 31 December 2009 was 26.3 pence per share (2008: 3.9 pence per share). the embedded derivative are recognised within gains/(losses) on debt-related financial The increase in own shares held during the year relates to share purchases by the Trust instruments in the Consolidated Income Statement. The following table presents the during the year. These shares were purchased in six separate tranches, totalling changes in Level 3 instruments for the year ended 31 December 2009. 6,670,000 shares (0.7% of the issued and fully paid up share capital of the Company) and the purchase price per share ranged from 19 pence to 32 pence per share. The total Non-hedging instruments consideration paid was £1.8 million (€2.0 million). None of the shares held at the year end – embedded derivative are under option to employees, nor have they been conditionally gifted to them. The Avis €m Europe Employee Share Trust has not waived its right to any dividends on these shares. At 1 January 2009 0.7 Gains reported in the year 1.2 31 Share and share option schemes At 31 December 2009 1.9 Details of the nature of all share and share option schemes can be found on pages 39 to 41 of the Remuneration Report. 2009 2008 Book Fair Book Fair amount value amount value At the year end, options outstanding under all schemes were as follows: €m €m €m €m At 31 December 2009 Fair value of financial assets and No of options Exercise price range Exercise period financial liabilities: Date of grant (’000) From To From To Non-current assets – available for Approved and Unapproved sale investments (see Note 16) 0.4 0.4 0.4 0.4 Share Option Schemes Trade and other receivables (see Note 19) 989.6 989.6 1,351.7 1,351.7 2003 314.4 75.7p 86.8p 2006 2013 Current assets – held for trading 2002 1,177.5 83.6p 174.2p 2005 2012 (see Note 16) 2.7 2.7 – – 2001 717.5 121.8p 136.4p 2004 2011 Cash and cash equivalents (see Note 20) 60.6 60.6 52.1 52.1 2000 371.0 166.6p 166.8p 2003 2010 Trade and other payables (see Note 21) (465.3) (465.3) (539.2) (539.2) 2,580.4 Obligations under finance leases (see Note 24) (167.9) (167.9) (232.7) (232.7) Share Retention Plan Financial liabilities – borrowings: 2009 1,055.7 – – 2010 2012 – Current (see Note 25) (74.0) (63.0) (45.1) (45.1) – Non-current (see Note 25) (509.5) (339.8) (841.3) (504.9) Long-Term Incentive Plan Financial liabilities – deferred consideration: 2009 25,766.9 – – 2012 2013 – Current (see Note 25) (0.3) (0.3) (0.2) (0.2) 2008 25,526.7 – – 2011 2012 – Non-current (see Note 25) (23.8) (23.9) (22.5) (22.1) 2007 3,133.1 – – 2010 2011 54,426.7 The Directors consider that the book value of non-current assets – available for sale investments; trade and other receivables; current assets – held for trading; cash and Total 58,062.8 cash equivalents; and trade and other payables, approximate to their fair value. At 31 December 2008 No of options Exercise price range Exercise period The fair value of obligations under finance leases approximates to their book value as the Date of grant (’000) From To From To majority of these obligations are due within one year (see Note 24). Approved and Unapproved Share Option Schemes The fair value of borrowings and deferred consideration for disclosures are based either 2003 364.5 75.7p 86.8p 2006 2013 on tradable market values, or where such market values are not readily available and are 2002 1,302.7 83.6p 174.2p 2005 2012 estimated by discounting the future contractual cash flows at the current market interest 2001 790.4 121.8p 136.4p 2004 2011 rate that is available to the Group for similar financial instruments. 2000 381.7 166.6p 166.8p 2003 2010 1999 59.9 197.3p 234.6p 2002 2009 29 Called-up share capital 2,899.2 2009 2008 Performance Share Plan Number €m Number €m 2003 514.9 – – 2006 2013 Authorised Ordinary shares of 1p each 940,000,000 940,000,000 Long-Term Incentive Plan 2008 27,575.6 – – 2011 2012 Issued and fully paid share capital 2007 3,698.7 – – 2010 2011 At 1 January and 31,274.3 31 December 920,524,047 13.1 920,524,047 13.1 Total 34,688.4 avis-europe.com Annual Report 2009 75

31 Share and share option schemes continued Approved Weighted average and Long-Term Long-Term Approved remaining contract Unapproved Performance Share Deferred Incentive Incentive and Share Share Share Share Retention Bonus Plan Plan Unapproved Retention Performance Retention Deferred Long-Term lives (years): Schemes Plan Plans Share Plan 2008 2009 Share Plan Share Plan Bonus Incentive Number (’000) Schemes 2009 Plan 2008 Share Plan Plans Total At 31 December 2009 2.1 n/a 1.3 1.0 2.3 2.3 Outstanding At 31 December 2008 2.4 1.3 n/a 2.0 3.3 n/a options as at 1 January IFRS 2, Share-Based Payment, requires that the fair value of all share options and 2008 3,530.7 – 702.7 238.6 3,124.4 4,908.1 12,504.5 conditional share awards issued after 7 November 2002 is charged to the Income Granted in Statement. Certain options from the approved and unapproved schemes were issued the year – – – – – 29,293.3 29,293.3 before 7 November 2002 and therefore the fair values of these granted options are not Forfeited in recognised. For options issued after 7 November 2002, the fair value of the option must the year (631.5) – (187.8) – (188.4) (2,927.1) (3,934.8) be assessed on the date of each issue. The Group uses a stochastic valuation model at Exercised in each issue date, re-assessing the input assumptions on each occasion. The weighted the year – – – (238.6) (2,936.0) – (3,174.6) average of the assumptions used in each valuation and the resulting weighted average Outstanding fair value per option, for options issued in the year, were as follows: options as at Long-Term Incentive Plan 31 December Weighted average 2009 2008 2008 2,899.2 – 514.9 – – 31,274.3 34,688.4 Share price (pence) 5.1 8.5 Exercisable Option exercise price (pence) – – options as at Vesting period (years) 3.0 3.0 31 December Option life (years) 3.5 3.5 2008 2,899.2 – – – – – 2,899.2 Expected volatility (%) 84.5% 51.0% Risk free rate of return (%) 3.0% 3.7% Outstanding Fair value per option (pence) 5.1 8.5 options as at 1 January Expected volatility was determined by reference to the volatility in the share price 2009 2,899.2 – 514.9 – – 31,274.3 34,688.4 using rolling one-year periods for the five years immediately preceding the grant date. Granted in The risk-free rate of return is based upon UK gilt rates with an equivalent term to the the year – 1,055.7 – – – 27,307.6 28,363.3 options granted. Lapsed in the year (318.8) – – – – (4,155.2) (4,474.0) For options issued prior to July 2003, an expected dividend yield of 6.4% was applied, Expired in based on historic dividend yield performance. For options issued after July 2003, future the year – – (514.9) – – – (514.9) dividend assumptions were aligned to the dividend expectations publicly announced by Outstanding the Group. options as at 31 December 32 Reconciliation of movements in shareholders’ equity 2009 2,580.4 1,055.7 – – – 54,426.7 58,062.8 2009 2008 Exercisable €m €m options as at Profit/(loss) after taxation attributable to the equity 31 December holders of the Company 0.2 (9.9) 2009 2,580.4 – – – – – 2,580.4 Net expense recognised directly in equity (see Statement of Comprehensive Income) (6.2) (17.7) All movements in the number of outstanding share options and conditional share awards Total comprehensive expense attributable to under the Share Retention Plans, Performance Share Plan, Deferred Bonus Share Plan equity holders of the Company (6.0) (27.6) and the Long-Term Incentive Plans during both the current and prior year had zero Increase in equity reserve arising from charge to income weighted average exercise prices. There were no share options exercised during the for share options in the period 0.4 0.2 current year. The weighted average share price at the date of exercise of share options Decrease in equity reserve arising from exercise of share options – (2.4) statements exercised during the prior year was 24 pence. Exercisable options comprise outstanding Purchase of own shares (2.0) – options where the vesting period has completed, irrespective as to whether the option Own shares released on vesting of share awards – 2.6 exercise price is above or below the current share price. Exchange movements on own shares (0.1) 0.3 Net decrease in shareholders’ equity (7.7) (26.9) Movements in the weighted average exercise prices of the Approved and Unapproved At 1 January 69.3 96.2 Financial Share Schemes during the year are as follows: At 31 December 61.6 69.3 Approved and Unapproved Weighted average exercise price (pence) Share Schemes Goodwill of €1,080.4 million arising before 1 March 1998 is fully written off to reserves. Outstanding options as at 1 January 2008 126.3 Forfeited in the year 120.1 The hedging reserve reflects changes in the fair value of derivative financial instruments Outstanding options as at 31 December 2008 127.6 that are designated and effective as hedges of future cash flows. Exercisable options as at 31 December 2008 127.6

Outstanding options as at 1 January 2009 127.6 Lapsed in the year 122.8 Outstanding options as at 31 December 2009 128.2

Exercisable options as at 31 December 2009 128.2 76 avis-europe.com Annual Report 2009 Notes to the Consolidated Financial Statements continued for the year ended 31 December

33 Notes to the condensed consolidated cash flow statement 34 Acquisitions a) Analysis of changes in net debt During the year, the Group further invested in its Indian associate undertaking, Mercury At 1 At 31 January Cash Non-cash Exchange December Car Rentals Limited, for cash consideration of €0.4 million. No goodwill arose upon this 2009 flow movements movements 2009 investment. The Group’s share of net assets are unchanged at 33% (see Note 15). €m €m €m €m €m Cash and short-term deposits 52.1 8.6 – (0.1) 60.6 In the prior year, the Group acquired the assets and activities of certain rental locations in Bank overdrafts (27.4) 18.6 – – (8.8) both Holland and France which were formerly Avis licensees. The results and cash flows Cash and cash equivalents 24.7 27.2 – (0.1) 51.8 arising subsequent to the acquisitions were not considered material and accordingly were Current assets – held for trading – 2.7 – – 2.7 not disclosed separately. The details of the net assets acquired, goodwill and Obligations under finance leases (232.7) 54.3 11.4 (0.9) (167.9) consideration are set out below: Borrowings (excluding overdrafts) Fair value (see Note 26) (859.0) 261.4 27.3 (4.4) (574.7) Book Book and value – value – accounting Provisional Derivative debt instruments Holland France Total book policy fair licensees licensees value adjustments value (see Note 27) (66.2) 19.4 (23.0) – (69.8) €m €m €m €m €m Net debt (1,133.2) 365.0 15.7 (5.4) (757.9) Vehicles – 0.2 0.2 – 0.2 Other property, plant and equipment 0.1 – 0.1 – 0.1 Non-cash movements represent the net effect of the inception and cessation of finance Trade and other receivables – 0.3 0.3 – 0.3 leases during the year and recognition of changes in the fair value of derivatives and Cash and short-term deposits – 0.1 0.1 – 0.1 hedged items. Trade and other payables – (0.1) (0.1) – (0.1) Other taxes and social security – (0.1) (0.1) – (0.1) b) Reconciliation of net increase/(decrease) in cash and cash equivalents to movement Net assets acquired 0.1 0.4 0.5 – 0.5 in net debt 2009 2008 Goodwill arising on acquisition 1.2 0.2 1.4 – 1.4 €m €m Consideration 1.3 0.6 1.9 – 1.9 Movement in net debt resulting from cash flows 365.0 (107.8) Consideration satisfied by: Net new finance leases 11.4 (23.2) Cash for acquisition of businesses 1.3 0.6 1.9 1.9 Re-measurement adjustments on borrowings and derivative debt instruments 4.3 (28.8) In the prior year, the Group also invested in a French joint venture, OKIGO, for cash Exchange movements (5.4) 7.5 consideration of €0.1 million. The Group’s 50% share of net liabilities acquired was Total movement in net debt 375.3 (152.3) €0.6 million. Net debt at 1 January (1,133.2) (980.9) Net debt at 31 December (757.9) (1,133.2) 35 Contingent liabilities Analysed as: The Company and certain subsidiaries have provided unsecured guarantees to certain Current net debt (208.5) (241.1) third parties within the normal course of business, the majority of which were in favour Non-current net debt (549.4) (892.1) of certain lenders in respect of some of the Group’s loan notes and borrowing facilities, (757.9) (1,133.2) together with guarantees provided to certain vehicle suppliers and property lessors. As at 31 December 2009, these guarantees totalled €852.0 million (2008: €1,045.9 million) Included in current net debt at 31 December 2009 are drawings of €40.0 million under of which €693.5 million (2008: €937.9 million) related to the Group’s financing facilities. a new long-term committed €120 million revolving facility, which permits the inception of finance leases at any time up to the end of June 2011. Certain Group companies are defendants in a number of claims and legal proceedings incidental to their operations. The Directors do not expect that any of these contingencies will have a material negative impact on the results or financial position of the Group.

Save as disclosed herein and excluding intra-group indebtedness and guarantees, no member of the Group had at the close of business on 31 December 2009 any outstanding loan capital (including loan capital created but unissued), term loans or any other borrowings or indebtedness in the nature of borrowings, including bank overdrafts, liabilities under acceptances (other than normal trade bills) or acceptance credits, hire purchase commitments, obligations under finance leases, guarantees or other contingent liabilities.

36 Financial commitments At 31 December, the Group had the following minimum lease payment commitments under non-cancellable operating leases: 2009 2008 Land and Land and Buildings Vehicles Other Buildings Vehicles Other €m €m €m €m €m €m Expiring: Within one year 49.2 13.6 0.1 51.2 11.3 0.1 Later than one year and less than five years 100.3 3.4 0.1 111.7 0.8 0.1 After five years 36.2 – – 52.0 – – Total 185.7 17.0 0.2 214.9 12.1 0.2

At each year end the Group also had prepaid various other operating lease commitments in relation to manufacturer repurchase agreements, as detailed in Note 19. avis-europe.com Annual Report 2009 77

37 Majority shareholder 40 Principal subsidiaries The Company’s ultimate majority shareholder is s.a. D’Ieteren n.v. which is incorporated A list of the principal subsidiaries including the name, country of incorporation, in Belgium. The ultimate controlling party of s.a. D’Ieteren n.v. is the D’Ieteren family. and proportion of ownership is detailed below: Avis Europe plc is the smallest company that consolidates the results of the Company 2009 2008 % of % of and its subsidiaries. indirect indirect ownership ownership Name of company Country of incorporation interest interest s.a. D’Ieteren n.v. is the largest company that consolidates the results of the Company Avis Location de Voitures SAS France 100 100 and its subsidiaries. Copies of s.a. D’Ieteren n.v.’s financial statements are available from: Avis Autovermietung GmbH & Co KG Germany 100 100 The Investor Relations Department, Avis Europe plc, Avis House, Park Road, Bracknell, Avis Autonoleggio SpA Italy 100 100 Berkshire, RG12 2EW. Avis Alquile un Coche SA Spain 100 100 Avis Rent A Car Limited England and Wales 100 100 38 Related party transactions Avis Europe International Reinsurance Limited Isle of Man 100 100 2009 2008 Avis Finance Company Limited England and Wales 100 100 €m €m Avis Europe Holdings Limited England and Wales 100 100 Sales to joint ventures 1.4 0.6 Avis Management Services Limited England and Wales 100 100 Net current amounts owing from joint ventures 2.4 0.1 Purchases from majority shareholder 20.8 51.6 In addition, the assets and liabilities of Europe Leisure Holdings NV and its subsidiary are Sales to majority shareholder 49.0 56.4 consolidated in these Consolidated Financial Statements in accordance with SIC 12, Purchases from a subsidiary of majority shareholder 2.2 1.7 Consolidation – Special Purpose Entities. Interest payable to a subsidiary of majority shareholder 0.2 0.5 Current amounts owing to majority shareholder 12.6 16.5 A complete list of all Group subsidiaries is available from: The Investor Relations Current amounts owing from majority shareholder 13.0 17.7 Department, Avis Europe plc, Avis House, Park Road, Bracknell, Berkshire, RG12 2EW. Current amounts owing to a subsidiary of majority shareholder – 0.1

The remuneration of the Directors, and other key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24, Related Party Disclosures. Salaries and short-term employee benefits include wages, salaries and social security costs.

Further information about the remuneration of individual Directors is provided in the audited part of the Remuneration Report on pages 39 to 41.

2009 2008 Key Key Directors management Total Directors management Total €m €m €m €m €m €m Salaries and short-term employee benefits 2.4 4.3 6.7 2.5 3.2 5.7 Post-employment benefits – 0.1 0.1 0.1 0.4 0.5 Termination amounts – – – 0.4 2.1 2.5 Share-based payments 0.1 0.3 0.4 (0.2) 0.4 0.2 2.5 4.7 7.2 2.8 6.1 8.9

39 Exchange rates Monthly income statements and other period statements of overseas operations are translated at the relevant rate of exchange for that month. Except for the Balance Sheet which is translated at the closing rate, each line item in these condensed Consolidated statements

Financial Statements represents a weighted average rate.

Euro to Sterling Sterling to Euro Year ended Year ended 31 December 31 December 2009 2008 2009 2008 Weighted average reported rate for revenue 1.125 1.274 0.889 0.785 Financial Weighted average reported rate for operating profit 1.161 1.248 0.861 0.801 Year end rate 1.118 1.048 0.894 0.954 78 avis-europe.com Annual Report 2009 Independent Auditors’ Report to the Members of Avis Europe plc

We have audited the Parent Company Financial Statements of Avis Europe plc Opinion on other matters prescribed by the Companies Act 2006 for the year ended 31 December 2009 which comprise the Parent Company In our opinion: Balance Sheet, the Parent Company Cash Flow Statement, the Significant • the part of the Directors’ Remuneration Report to be audited has been Accounting Policies and the related notes. The financial reporting framework properly prepared in accordance with the Companies Act 2006; and that has been applied in their preparation is applicable law and United Kingdom • the information given in the Directors’ Report for the financial year for Accounting Standards (United Kingdom Generally Accepted Accounting which the Parent Company Financial Statements are prepared is consistent Practice). with the Parent Company Financial Statements.

Respective responsibilities of Directors and auditors Matters on which we are required to report by exception As explained more fully in the Directors’ Responsibilities Statement set out on We have nothing to report in respect of the following matters where the page 34, the Directors are responsible for the preparation of the Parent Companies Act 2006 requires us to report to you if, in our opinion: Company Financial Statements and for being satisfied that they give a true and • adequate accounting records have not been kept by the Parent Company, fair view. Our responsibility is to audit the Parent Company Financial or returns adequate for our audit have not been received from branches not Statements in accordance with applicable law and International Standards on visited by us; or Auditing (UK and Ireland). Those standards require us to comply with the • the Parent Company Financial Statements and the part of the Directors’ Auditing Practices Board’s Ethical Standards for Auditors. Remuneration Report to be audited are not in agreement with the accounting records and returns; or This report, including the opinions, has been prepared for and only for the • certain disclosures of Directors’ remuneration specified by law are not Company’s members as a body in accordance with Chapter 3 of Part 16 of the made; or Companies Act 2006 and for no other purpose. We do not, in giving these • we have not received all the information and explanations we require for opinions, accept or assume responsibility for any other purpose or to any other our audit. person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Other matter We have reported separately on the Group Financial Statements of Avis Europe Scope of the audit of the Financial Statements plc for the year ended 31 December 2009. An audit involves obtaining evidence about the amounts and disclosures in the Financial Statements sufficient to give reasonable assurance that the Financial Stephen Wootten, Senior Statutory Auditor Statements are free from material misstatement, whether caused by fraud or for and on behalf of PricewaterhouseCoopers LLP error. This includes an assessment of: whether the accounting policies are Chartered Accountants and Statutory Auditors appropriate to the Parent Company’s circumstances and have been Reading consistently applied and adequately disclosed; the reasonableness of 3 March 2010 significant accounting estimates made by the Directors; and the overall presentation of the Financial Statements. Notes: a) The maintenance and integrity of the Avis Europe plc website is the responsibility of Opinion on Financial Statements the Directors; the work carried out by the auditors does not involve consideration of In our opinion the Parent Company Financial Statements: these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the Financial Statements since they were initially presented • give a true and fair view of the state of the Company’s affairs as at on the website. 31 December 2009; b) Legislation in the United Kingdom governing the preparation and dissemination of • have been properly prepared in accordance with United Kingdom Generally Financial Statements may differ from legislation in other jurisdictions. Accepted Accounting Practice; and • have been prepared in accordance with the requirements of the Companies Act 2006. avis-europe.com Annual Report 2009 79 Parent Company Balance Sheet as at 31 December

2009 2008 Notes £m £m Fixed assets Investments 1 202.0 202.0 Current assets Debtors 2 115.9 117.5 Creditors amounts falling due within one year Creditors 3 (6.0) (4.7) Other financial liabilities – financial guarantees 4 – (0.2) Current liabilities (6.0) (4.9) Net current assets 109.9 112.6 Total assets less current liabilities 311.9 314.6 Capital and reserves Called-up share capital 5 9.2 9.2 Share premium 6 294.8 294.8 Reserves 7 7.9 10.6 Total shareholders’ funds – equity 8 311.9 314.6

The accompanying Notes form an integral part of these Parent Company Financial Statements.

The Parent Company Financial Statements, including the accompanying Notes, were approved by the Board on 3 March 2010 and were signed on its behalf by:

Pascal Bazin Martyn Smith Chief Executive Finance Director Avis Europe plc Registered No. 3311438 statements

Financial 80 avis-europe.com Annual Report 2009 Parent Company Cash Flow Statement for the year ended 31 December

2009 2008 £m £m Operating loss (8.4) (114.8) Reverse impairment provision – 113.2 Decrease/(increase) in debtors 2.3 (2.5) (Decrease)/increase in creditors (1.2) 0.1 Net cash used in operating activities (7.3) (4.0) Finance revenue received 7.2 6.3 Decrease/(increase) in loans receivable from Group subsidiaries 1.9 (2.3) Purchase of own shares (1.8) – Net cash generated from financing activities 7.3 4.0 Movement in cash and cash equivalents – – Cash and cash equivalents at 1 January and 31 December – –

The accompanying Notes form an integral part of these Parent Company Financial Statements. avis-europe.com Annual Report 2009 81 Significant Accounting Policies Applicable to the Parent Company Financial Statements for the year ended 31 December 2009

Basis of preparation c) Deferred tax assets are recognised to the extent that they are regarded as The Company’s functional currency is sterling, and the Balance Sheet, Cash recoverable. Assets are regarded as recoverable when it is regarded as Flow Statement and related notes are presented in sterling. more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. The Parent Company Financial Statements set out on pages 79 to 83 have been prepared under the historical cost convention and in accordance with d) Deferred tax is not recognised on permanent differences. applicable UK accounting standards and the Companies Act 2006. A summary of the principal accounting policies is set out below, which are consistent with Foreign currency those followed in the preparation of the Company’s Financial Statements for Foreign currency assets and liabilities are translated at the rates of exchange the year ended 31 December 2008. ruling at the year end. Transactions during the year are recorded at rates of exchange in effect when the transaction occurs. Fixed asset investments Fixed asset investments are shown at cost less provision for any impairment Dividend distribution where the recoverable amount is less than cost. Fixed asset investments are Final dividends to the Company’s shareholders are recognised as a liability in initially stated at cost, being their purchase cost together with any incidental the Financial Statements in the period in which the dividends are approved by expenses of acquisitions. The carrying values of fixed asset investments are the Company’s shareholders. Interim dividends are recognised when paid. reviewed at each year end and if events or changes in circumstances indicate the carrying value may not be recoverable. Any impairment of fixed asset Share-based payments investments is charged to the Profit and Loss Account in the year in which Share-based payments are exclusively made in connection with employee it arises. share option plans (ESOPs).

Debtors FRS 20, Share-Based Payments, is not applied to shares, share options or other Debtors are recognised initially at fair value and subsequently measured equity instruments that were granted before or on 7 November 2002 and which at amortised cost using the effective interest method, less provision for had not vested at 1 January 2005. Equity-settled ESOPs granted after that date impairment. A provision for impairment of trade debtors is established when are accounted for in accordance with FRS 20, such that the fair value of the there is objective evidence that the Company will not be able to collect all employee service received in exchange for the grant of the option is recognised amounts due according to the original terms of the debt. The amount of the in the Profit and Loss Account over the related performance period. The total provision is the difference between the asset’s carrying amount and the amount to be expensed over the vesting period is determined by reference to the present value of estimated future cash flows. The carrying amount is reduced fair value of the options granted, excluding the impact of any non-market vesting through the use of an allowance account, and the amount is recognised in the conditions (for example profitability growth targets). Non-market vesting conditions Profit and Loss Account. When a trade debt is uncollectible, it is written off are included in assumptions about the number of options that are expected to against the allowance account for trade debtors. Subsequent recoveries of become exercisable. At each balance sheet date, the Group revises its estimates amounts previously written off are credited in the Profit and Loss Account. of the number of options that are expected to become exercisable. It recognises the impact of the revision of original estimates in the Profit and Loss Account, Creditors with a corresponding adjustment to equity. Creditors are initially measured at fair value and subsequently measured at amortised cost using the effective interest method. The proceeds received net of any directly attributable transaction costs are credited to share capital and share premium when the options are exercised. Deferred taxation Deferred tax is provided using the incremental liability approach and is Financial guarantees measured on a non-discounted basis at the average tax rates that are Financial guarantees, other than those previously asserted by the entity to be expected to apply in the periods in which the timing differences are expected insurance contracts, are initially recognised at their fair value and subsequently

to reverse, based on tax rates and laws substantively enacted at the balance measured at the higher of: (a) the unamortised balance of the related fees statements

sheet date. Deferred tax is recognised in respect of timing differences that received and deferred; and (b) the expenditure required to settle the have originated but not reversed by the balance sheet date except that: commitment at the balance sheet date.

a) Deferred tax is not recognised on the revaluation of non-monetary assets Financial such as property unless a binding sale agreement exists at the balance sheet date. Where rollover relief is available on an asset then deferred tax is in any case not recognised.

b) Deferred tax is not recognised on unremitted earnings of overseas subsidiaries, associates or joint ventures unless dividends have been accrued as receivable or there is a binding agreement to distribute past earnings at the balance sheet date. 82 avis-europe.com Annual Report 2009 Notes to the Parent Company Financial Statements for the year ended 31 December

1 Fixed asset investments 2 Debtors 2009 2008 2009 2008 Investment in subsidiaries £m £m £m £m Cost Amounts owed by Group subsidiaries 115.7 114.8 At 1 January 711.6 711.4 Other prepayments – 2.3 Additions – 0.2 Deferred tax 0.2 0.4 At 31 December 711.6 711.6 115.9 117.5

Provision for impairment Included within “Amounts owed by Group subsidiaries” are both current account and At 1 January 509.6 396.4 intercompany loan balances. The latter are repayable on demand, have no security and Charged in the year – 113.2 carry an interest rate of 6.3% (2008: 6.7%). At 31 December 509.6 509.6

Net book amount 3 Creditors At 1 January and 31 December 202.0 202.0 2009 2008 £m £m Details of the Company’s principal subsidiaries are provided in Note 40 of the Amounts falling due within one year Consolidated Financial Statements. Amounts due to Group subsidiaries 5.2 2.9 Other creditors 0.8 1.8 The Directors review at each year end the carrying value of the fixed asset investments in 6.0 4.7 the principal subsidiaries by undertaking a value in use calculation. No further provision for impairment has been recognised as a consequence of this review at 31 December Included within “Amounts due to Group subsidiaries” are both current account and 2009 (2008: £113.2 million) based on a value in use calculation. In determining the intercompany loan balances. The latter are repayable on demand, have no security and value in use, the Directors calculated the present value of the estimated future cash carry an interest rate of 6.3% (2008: 6.7%). flows expected to arise based on management’s latest five-year plans (2008: three-year plans), with extrapolation thereafter. The calculated value in use is sensitive to a number 4 Other financial liabilities of assumptions which are discussed in turn below. These potential changes in key 2009 2008 £m £m assumptions fall well within historic variations experienced by the business and are Financial guarantee contracts – 0.2 therefore considered reasonably possible:

The fair values of financial guarantee contracts are calculated by discounted cash flow EBIT margin – The long-term EBIT margin is fixed by reference to management’s analysis based upon the probability of default of the underlying subsidiary undertaking estimated EBIT margin as at 2015 (2008: 2011). An increase/(decrease) in the long-term and the expected loss to the Company arising upon default. EBIT margin by 50 basis points in 2015 and beyond would result in an increase/ (decrease) in the value in use of £47 million/£(47) million and would have no impact on 5 Called-up share capital the impairment provision. 2009 2008

Number £m Number £m Discount rate – Future cash flows are discounted using a pre-tax discount rate of 10.8%. Authorised An increase/(decrease) in the discount rate of 50 basis points would result in a Ordinary shares of 1p each 940,000,000 9.4 940,000,000 9.4 (decrease)/increase in the value in use of £(65) million/£64 million and would have no impact on the impairment provision. Issued and fully paid share capital At 1 January and Long-term growth rate – Cash flows beyond an initial five-year period are extrapolated 31 December 920,524,047 9.2 920,524,047 9.2 using a long-term average nominal growth rate of 4.0% (2008: 4.0%) comprising a real growth rate of 2.0% and inflationary rate of 2.0%. An increase/(decrease) in the nominal Details of the Company’s share option schemes are provided in Note 31 of the growth rate of 1.0%/(1.0%) to 5.0%/3.0% would result in an increase/(decrease) in the Consolidated Financial Statements. value in use of £41 million/£(37) million and would have no impact on the impairment provision. 6 Share premium 2009 2008 Exchange rate – The value in use calculation is performed in euros in line with the £m £m majority of the cash flows of the Company’s subsidiaries. The resultant euro valuation is At 1 January and 31 December 294.8 294.8 translated into sterling at the closing exchange rate. The main forecasted non-euro cash flows are denominated in sterling and are converted to euro based on a long-term euro/ sterling exchange rate expected to be in place at the time of the forecast transaction. Most sterling cash flows are forecast to be converted into euro at a forecast exchange rate of £1:€1.12. An increase/(decrease) in the euro/sterling exchange rate by one euro cent would result in a (decrease)/increase in the value in use of £(7) million/£6 million arising upon the translation of sterling cash flows and would have no impact on the impairment provision. This analysis excludes any trading impacts which may arise from changes in exchange rates. avis-europe.com Annual Report 2009 83

7 Reserves 9 Auditor’s remuneration Own Retained shares held earnings Total Auditor’s remuneration is borne by Avis Management Services Limited, an indirect £m £m £m subsidiary undertaking. At 1 January 2008 (2.4) 119.9 117.5 Retained loss for the year – (107.1) (107.1) 10 Directors’ remuneration Increase in equity reserve arising from charge Details of Directors’ remuneration for the year are provided in Note 38 of the to income for share options in the year – 0.1 0.1 Consolidated Financial Statements and the audited part of the Remuneration Report on Decrease in equity reserve arising from pages 39 to 41. exercise of share options in the year – (1.9) (1.9) Own shares released on vesting of share awards 2.0 – 2.0 11 Majority shareholder At 31 December 2008 (0.4) 11.0 10.6 Details of the majority shareholder are provided in Note 37 of the Consolidated Financial At 1 January 2009 (0.4) 11.0 10.6 Statements. Retained loss for the year – (1.4) (1.4) Increase in equity reserve arising from charge 12 Related party transactions to income for share options in the year – 0.5 0.5 Purchase of own shares (1.8) – (1.8) The Company has taken advantage of the exemption within FRS 8, Related Party At 31 December 2009 (2.2) 10.1 7.9 Disclosures, not to disclose transactions with other entities within the same group. Details of related party transactions involving Group undertakings are provided in Note 38 of the As permitted under section 408 of the Companies Act 2006, no Profit and Loss Account Consolidated Financial Statements. is presented in respect of the Company. The loss of the Company for the year was £1.4 million (2008: loss of £107.1 million). 13 Contingent liabilities The Company and certain subsidiaries have provided unsecured guarantees to certain In accordance with FRS 20, for share options that were issued after 7 November 2002, third parties within the normal course of business, the majority of which were in and which had not vested at 1 January 2005, the fair value of the employee service favour of certain lenders in respect of some of the Group’s loan notes and borrowing received in exchange for the grant of the option is recognised in the Profit and Loss facilities, together with guarantees provided to vehicle suppliers and property lessors. Account over the related performance period. The Company recharges these expenses As at 31 December 2009, these guarantees in relation to drawn balances totalled to the relevant Group company in which the individual is employed. £396.7 million (2008: £998.0 million).

8 Reconciliation of movements in shareholders’ equity Certain Group companies are defendants in a number of claims and legal proceedings 2009 2008 incidental to their operations. The Directors do not expect that any of these contingencies £m £m will have a material impact on the results or financial position of the Company. Retained loss for the year (1.4) (107.1) Increase in equity reserve arising from charge to income for share options in the year 0.5 0.1 Decrease in equity reserve arising from exercise of share options in the year – (1.9) Purchase of own shares (1.8) – Own shares released on vesting of share awards – 2.0 Net decrease in shareholders’ equity (2.7) (106.9)

At 1 January 314.6 421.5 At 31 December 311.9 314.6 statements

Financial 84 avis-europe.com Annual Report 2009 Five Year Summary

Basis of preparation – continuing operations 2005 2006 2007 2008 2009 Rental income €m 1,202 1,256 1,327 1,314 1,162 Underlying profit before taxation €m 32 30 38 38 35 Net exceptional costs before taxation €m 13 29 7 29 30 Basic earnings per share: – as reported and adjusted for 2005 rights issue € cents 1.5 (0.2) 1.6 (1.2) – Adjusted/underlying earnings per share: – as reported and adjusted for 2005 rights issue € cents 2.6 2.3 2.9 2.4 2.7 Net debt €m 946 1,008 981 1,133 758 Shareholders’ funds €m 87 85 97 70 62 avis-europe.com Annual Report 2009 85 Avis at a glance Shareholder information

Registered office and head office Who we are Avis House, Park Road, Bracknell, Berkshire, RG12 2EW Tel: +44 (0) 1344 426644 We operate the Avis brand across four continents Avis Europe plc is a leading car rental Fax: +44 (0) 1344 485616 via a network of over 2,800 locations in 109 Registered number: 3311438 company in Europe, Africa, the Middle East countries, through wholly-owned subsidiaries in 13 countries complemented by franchisees in a and Asia operating the globally recognised Registrar further 96 countries. Avis and Budget brands. Shareholders with any queries relating to shareholdings, change of address, lost share certificates or dividend payments should contact the Company’s registrar, Equiniti, on 0871 384 2278 or write to Equiniti, Aspect House, Spencer Road, Lancing, West Sussex, BN99 6DA. The registrar provides a wide range of shareholder information online. Shareholders can check their holding and find practical help on transferring shares or updating their details at: Our market presence www.shareview.co.uk

Avis Europe plc Avis Budget Group, Inc.* We are a market leader in Europe with Website Europe Americas an aggregate 18.2% market share. Africa Australasia The Avis Europe website, www.avis-europe.com, includes an Investor Centre Middle East Asia and is continuously updated with announcements and Avis news. (Source: Datamonitor’s European Car Rental Report 2009 – based on 2008 revenues.) Territories: Asia Corporately-owned: ShareGift Countries 13 7 Shareholders with a small number of shares, the value of which makes it uneconomic to sell them, may wish to consider donating them to charity Locations 1,566 2,052 through ShareGift, a registered charity administered by The Orr Mackintosh Foundation. The share transfer form needed to make a donation may be obtained from the Company’s registrar, Equiniti. Further information about Licensees: ShareGift is available at www.sharegift.org or by telephone: 020 7930 3737. Avis Countries 96 50 Founders Club Budget Countries 65 54 Founders Club members and holders of other shareholder privileges should Avis Locations 1,305 933 use the following dedicated phone line for all reservations and enquiries including queries about discounts – 0844 581 0173. Budget Locations 1,002 1,034 Avis Europe plc no longer offers discounts for new shareholders with effect *Avis Budget Group, Inc., independently owned and quoted in the US, operates Avis and Budget brands in the Americas, Australasia and Asia. from 1 January 2005.

New BA partnership – “Be there sooner” Following a successful 11-year relationship, we have now entered a new exclusive five- year partnership with British Airways as the airline’s sole global car rental provider. This new partnership extends car hire benefits to all British Airways customers across the board, making the travel process easier and quicker for our joint customers. statements Financial

Designed by Tor Pettersen & Partners. Typesetting by Orb Solutions Printed by Park Communications on FSC certified paper. Park is an EMAS certified CarbonNeutral ® Company and its Environmental Management System is certified to ISO14001:2004. 100% of the inks used are vegetable oil based, 95% of press chemicals are recycled for further use and on average 99% of any waste associated with this production will be recycled. This document is printed on Revive 50:50 Silk, a paper containing 50% recovered waste and 50% virgin fibre sourced from well managed, sustainable, FSC certified forests. The pulp used in this product is bleached using a Totally Chlorine Free (TCF) process. Award winning Avisplc Europe Annual Report 2009 Report Annual

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Avis Europe plc Annual Report 2009 Avis Europe plc, Avis House, Park Road, Bracknell, Berkshire RG12 2EW

Telephone +44 (0)1344 426644 Facsimile +44 (0)1344 485616 www.avis-europe.com