2016 Annual Report Efficiency through Innovation and Technology Avis Budget Zipcar Payless Apex In 2016, we evolved our strategies under the three themes of winning customers through differentiated brands, increasing our margins and leveraging our strengths to succeed in the mobility landscape. Our margin strategies are supported by initiatives that use technology and innovation to drive operational efficiencies. Examples include providing our rental sales and customer service associates with mobile technology to facilitate faster vehicle pick-up and car return through our internally developed mobile applications, and a new management planning tool that allows our people to improve productivity and customer service, while controlling costs. Another important set of initiatives supporting our margin strategies focuses on optimizing our fleet to reduce costs, which includes strengthening our efforts to drive direct-to-dealer and direct-to-consumer sales of our vehicles. We currently sell online through Avis Car Sales’ Ultimate Test Drive, our “no haggle” consumer car sales program, which is now available in nearly 40 states, and are in the process of opening retail locations. In 2017, our global strategy will continue to be enabled by technology and innovation to ensure we are meeting the needs of consumers across our brands and doing so in ways that drive operational efficiency. March 21, 2017 Dear fellow shareholders: Avis Budget Group had a successful year in 2016, reporting its seventh consecutive year of positive revenue growth. Our revenues totaled $8.7 billion in 2016. We completed more than 39 million rental transactions, and our brands were represented in approximately 180 countries around the world. Unfortunately, the increased revenue did not translate into higher year-over-year earnings. Our reported net income was $163 million, or $1.75 per diluted share; and our Adjusted EBITDA declined to $838 million. We reported net cash provided by operating activities of $2.6 billion, generated $472 million of free cash flow and repurchased 12.3 million shares of common stock, or 13% of our outstanding shares, at a cost of $390 million. Faced with the challenges of softness in demand, a challenging competitive environment and industry over-fleeting, we focused on the long-term opportunities that lie ahead of us by investing in our brands and significantly enhancing the experience we offer to customers through innovation and technology. We also realized meaningful benefits from our strategic global initiatives to drive efficiency, strengthen processes and control costs. And we expect benefits from these initiatives to grow in future years. In 2016, we, in conjunction with of our Board of Directors, undertook a robust strategic planning process and delivered an important update of our corporate strategy, clarifying our focus on initiatives to win customers profitably, increase our margins and succeed in mobility. Innovation, technology and people will be key elements in enabling us to achieve our objectives. And, importantly, we expect our strategic efforts to allow us to expand our Adjusted EBITDA margin by three to five points, to 13% to 15%, over the next five years. We continue to make progress in the area of mobility, where we successfully launched our industry-leading Avis Now program, an app-enabled process that gives customers unprecedented control of their rental experience. In the eight months following the launch of Avis Now, we have seen more than 400,000 customers enroll in the program and complete some 300,000 transactions. We are excited about the future possibilities of Avis Now and believe that empowering our customers to interact with us how and when they want is the future of vehicle rental. In the evolving vehicle services landscape in which we operate, we strive to enhance the customer experience we offer, not only by meeting the needs of both business and leisure travelers, but also by anticipating, and even shaping, how those needs can and will change over time. As part of our focus on mobility services and the opportunity they represent, we continued to invest in our Zipcar brand, the world’s leading car sharing network. Now with over one million members, Zipcar is developing a new platform that will provide enhanced capabilities and opportunities for growth, and become the foundation for the future of Zipcar’s ONE>WAY and “floating” service offerings. We believe “pay-to-use” vehicle services will continue to supplant traditional car ownership models, and we expect to remain a critical part of the global mobility market. Another area where we have already seen substantial benefits is our global program to drive operational efficiencies, specifically with regard to manpower planning and shuttling. Our manpower-planning initiative has helped contribute to meaningful progress in employee productivity. We have adjusted our mix of part-time and full-time employees at many locations to increase our flexibility, and we plan to implement software in 2017 to further align staffing with activity levels. This will help drive both efficiency and service level improvements to better enhance the customer experience. In the past year, we were also able to realize significant cost savings from our shuttling initiative. Our new rule-based shuttling decision matrix has lowered our per-transaction shuttling costs by reducing idle time and enabling more efficient movement of vehicles between our local-market and airport locations. We are in constant pursuit of innovative ways to leverage technology to foster better global problem solving and decision making, generate profitable revenue growth, and effectively manage costs. From an operational perspective, we will continue to work toward managing our global workforce, optimizing our acquisition and disposition of vehicles, improving efficiency of vehicle movements, and much more. We also see potential growth opportunities in continuing our global expansion efforts through acquisitions as well as mutually beneficial strategic partnerships. In 2016, we acquired France Cars, a “tuck-in” acquisition that gives us an expanded footprint in the French off-airport sector and increases our presence in the important van segment of that market. We are also enthusiastic about our new partnership with DiDi Chuxing, the world’s largest mobile transportation platform, with over 300 million registered users. This partnership should prove to be a key opportunity for us to capitalize on the substantial growth of China’s outbound traveler community. And we believe our strategic initiatives are well-aligned with our objectives as a corporation. We will continue to focus intensely on expanding our margins over the next five years, as we view that as a strategic necessity for our business and as the best way for us to deliver value to our shareholders. Finally, these actions are only achievable through the hard work of our dedicated people. We are proud of the perseverance and dedication of our employees, who routinely go above and beyond in order to meet our customers’ needs. We are also proud of the way our people dedicated their time and resources to support our local communities and charities, such as the Make-A-Wish® Foundation, Alex’s Lemonade Stand Foundation and the American Cancer Society. This is a testament to the caring spirit of our people. On behalf of our 30,000 employees around the world, thank you for your continued support. Yours Sincerely, Larry D. De Shon Ronald L. Nelson Chief Executive Officer Executive Chairman of the Board This letter contains forward-looking statements that are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Important assumptions and other important factors that could cause actual results to differ materially from those in the forward-looking statements are specified in our Annual Report on Form 10-K for the year ended December 31, 2016 including under headings such as “Forward-Looking Statements,” “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in other filings and furnishings made by the Company with the Securities and Exchange Commission from time to time. This letter also includes financial measures such as Adjusted EBITDA and free cash flow that exclude certain items that are not considered generally accepted accounting principles (GAAP) measures as defined under SEC rules. Important information regarding such measures is contained in “Selected Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and other portions of our 2016 Form 10-K and on Tables 1, 4 and 5 of our earnings release issued on February 15, 2017 and available on our website at avisbudgetgroup.com. The Company believes that these non-GAAP measures are useful in measuring the comparable results of the Company period-over-period. The GAAP measures most directly comparable to Adjusted EBITDA and free cash flow are net income (loss) and net cash provided by operating activities, respectively. Our Adjusted EBITDA margin forecast for the next five years includes non-GAAP financial measures. The Company believes that it is impracticable to provide a reconciliation to the most comparable GAAP measures due to the forward-looking nature of this forecasted metric and the degree of uncertainty associated with forecasting the reconciling items and amounts. The Company further believes that providing estimates of the amounts that would be required to reconcile the forecasted adjusted measures to forecasted GAAP measures would imply a degree of precision that would be confusing or misleading to investors. UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2016 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to COMMISSION FILE NO.