<PAGE>   1
                                  F O R M 10-K

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

/X/      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [FEE REQUIRED]

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995    OR

/ /      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

COMMISSION FILE NUMBER 1-7541

                              THE HERTZ CORPORATION
             (Exact name of registrant as specified in its charter)

            Delaware                                 13-1938568
    ------------------------              ------------------------------------
    (State of incorporation)              (I.R.S. Employer Identification No.)


225 Brae Boulevard, Park Ridge, New Jersey                        07656-0713
------------------------------------------                        ----------
 (Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code:  201-307-2000

Securities registered pursuant to Section 12(b) of the Act:

                                                      Name of each exchange
           Title of each class                         on which registered
--------------------------------------------------   -----------------------
6-5/8% Junior Subordinated Notes due July 15, 2000   New York Stock Exchange
7% Junior Subordinated Notes due July 15, 2003       New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:  None

The registrant meets the conditions set forth in General Instruction J(1)(a) and
(b) of Form 10-K and is therefore filing this Form with the reduced disclosure
format permitted by General Instruction J(2) of Form 10-K.

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X  .   No       .
                                      -----        -----
State the aggregate market value of the voting stock held by non-affiliates of
the registrant: None (all of the voting stock of the registrant is owned by Ford
Motor Company).

Indicate the number of shares outstanding of each of the registrant's classes of
common stock as of December 31, 1995: Common Stock, $1 par value - Class A, 200
shares; Class B, 51 shares; and Class C, 490 shares.

                       Documents Incorporated By Reference

List hereunder the following documents if incorporated by reference and the Part
of the Form 10-K (e.g., Part I, Part II, etc.) into which the document is
incorporated: (1) Any annual report to security holders; (2) Any proxy or
information statement; and (3) Any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933: None.

                               Page 1 of 56 pages
                         The Exhibit Index is on page 50

                                       -1-
<PAGE>   2
                                     PART I

ITEM 1.  BUSINESS.

General

      The Hertz Corporation and its subsidiaries ("Hertz"), affiliates and
independent licensees are engaged principally in the business of renting
automobiles and renting and leasing trucks, without drivers, in the United
States and in approximately 150 foreign countries. Collectively, they operate
what the registrant believes is the largest rent a car business in the world and
one of the largest one-way truck rental businesses in the United States. In
addition, through its wholly-owned subsidiary, Hertz Equipment Rental
Corporation, Hertz operates what it believes to be the largest rental, lease and
sale of construction and materials handling equipment business in the United
States. Other activities of Hertz include the sale of its used vehicles, the
leasing of automobiles in Australia and New Zealand and in Europe through an
affiliate; and providing claim management and telecommunication services in the
United States.

      The registrant, which was incorporated in Delaware in 1967, is a successor
to corporations which were engaged in the automobile and truck leasing and
rental business since 1924. UAL Corporation ("UAL") (formerly Allegis
Corporation) purchased all of the registrant's outstanding capital stock from
RCA Corporation ("RCA") on August 30, 1985. Park Ridge Corporation ("Park
Ridge") purchased all of the registrant's outstanding capital stock from UAL on
December 30, 1987. On July 19, 1993, Park Ridge (which had no material assets
other than the registrant) was merged with and into the registrant, with the
prior stockholders of Park Ridge becoming the stockholders of the registrant. In
March 1994, Ford Motor Company ("Ford") acquired the registrant's common stock
owned by Commerzbank Aktiengesellschaft. On April 29, 1994, Ford purchased all
of the common stock of the registrant owned by Park Ridge Limited Partnership.
The registrant then redeemed the preferred and common stock of the registrant
owned by AB Volvo, borrowing the funds to pay for the redemption. In addition, a
subordinated promissory note of the registrant held by Ford Motor Credit Company
was exchanged for an equivalent amount of preferred stock of the registrant. See
Notes 1, 5, 7 and 14 of the Notes to Consolidated Financial Statements included
in this Report.

        For information with respect to business segments of Hertz, reference
should be made to Note 10 of the Notes to Consolidated Financial Statements
included in this Report.

Rent A Car

      Hertz provides rent a car service throughout the United States, including
virtually all major U.S. cities, and in major foreign countries. Rent a car
service is also provided through independent licensees (see Business -
Licensees). A wide variety of makes and models of automobiles are used for daily
rental purposes, nearly all of which are current year or the previous year's
models. Car rentals are made on a daily, weekly or monthly basis, the rental
charge being computed on a limited or unlimited mileage rate, or on a time rate
plus a mileage charge. Services provided to customers include public liability
and property damage protection. In addition to vehicle rentals and licensee
fees, revenues are generated from providing customers with ancillary products
such as loss or collision damage waiver, theft protection, liability insurance
supplement, personal accident insurance and personal effects coverage. Rent a
car operations are subject to seasonal factors with the greatest activity
occurring in the second and third calendar quarters (see Note 12 of the Notes to
Consolidated Financial Statements included in this Report).

                                       -2-
<PAGE>   3
ITEM 1.  BUSINESS (continued).

      Hertz and certain licensees, under the Hertz "Rent it Here-Leave it There"
program, offer customers in most parts of the world the convenience of leaving a
rented car at a Hertz or licensee location in a city other than the one in which
it was rented. Depending upon rental location and distance driven, a drop off
charge or a special intercity rate may be imposed if the vehicle is not returned
to the same location from which it is rented.

      A centralized reservations service is also offered within the continental
United States by use of a toll free telephone number. In addition, through "The
Hertz #1 Club", Hertz maintains a computerized data retrieval system on
participating customers' preferences as to type of car and other information
typically needed prior to the rental of a car, so that, when #1 Club members
make a reservation using their membership number, the renting location is able
to have a rental agreement prepared prior to the time of their arrival. A
similar service is available to Hertz' customers in certain foreign countries
under the name "Hertz No. 1 Club". In addition, a Hertz charge card is offered
for use by Hertz customers in connection with car rental services.

      At most major airport locations within the United States, Canada, Europe
and Australia, Hertz offers "Hertz #1 Club Gold," which is an expedited rental
service designed for the frequent traveler. Hertz #1 Club Gold encompasses two
services, canopied and counter service. When using #1 Club Gold canopy service,
which is available at a number of major airport locations within the United
States and the United Kingdom, the counter rental transaction is eliminated and
members are taken by the Hertz courtesy bus to a separate canopied rental area,
where an electronic sign board directs them to their assigned car, which is
ready to go. Usually, there is nothing to sign. After presenting their driver's
license and rental record at the gate, they are on their way.

      Hertz also participates in packaged tour plans in conjunction with
airlines, tour operators and hotels under which a certain period of rent a car
usage is included with air fare, and often hotel accommodations, at a combined
quoted price.

      Rent a car facilities are operated at virtually all major airports and at
downtown locations in major cities in the United States. Hertz estimates that
airport revenues accounted for approximately 90% of its rent a car revenues in
the United States in 1995. Arrangements are also in effect at hotels, motels and
railroad terminals to facilitate car rentals at such locations.

      The foreign rent a car operations of Hertz that generated the highest
volumes of business during 1995 are those conducted in France, Germany, the
United Kingdom, Italy, Canada, Spain, Australia and Switzerland. These
operations are conducted by wholly-owned subsidiaries of Hertz. In general,
Hertz' foreign rent a car operations are conducted along lines similar to those
of rent a car operations of Hertz in the United States. Hertz believes there are
no unusual risks associated with its foreign operations.

      Hertz' ability to withdraw earnings or investments from foreign countries
is, in some cases, subject to exchange controls and the utilization of foreign
tax credits. It may also be affected by fluctuations in exchange rates for
foreign currencies and by revaluation of such currencies in relation to the U.S.
dollar by the governments involved. Foreign operations have been financed to a
substantial extent through

                                       -3-
<PAGE>   4
ITEM 1.  BUSINESS (continued).


loans from local lending sources in the currency of the countries in which such
operations are conducted. Rent a car operations in foreign countries are, from
time to time, subject to governmental regulations imposing varying degrees of
restrictions. Hertz does not believe currency restrictions or other regulations
have had any material impact on its operations as a whole.

      In 1995, the registrant through its subsidiary, H.I.R.E. Corp., started
offering vehicle renting services principally in the insurance and auto repair
replacement market, and is presently operating this business in two states.

Equipment Rental and Sales

      Hertz also rents, leases and sells a wide range of construction and
materials handling equipment to construction, industrial and governmental users
through its subsidiaries, Hertz Equipment Rental Corporation ("HERC") in the
United States, a subsidiary of Hertz Equipment Rental International, Ltd. in
Spain, and a subsidiary in France owned 51% by Hertz International, Ltd. and 49%
by Equipment Rental Services Netherlands B.V., which operates under a license
from HERC.

      Rentals are made on a daily, weekly or monthly basis. Rates vary at
different locations depending on local market and competitive factors.

      HERC believes it operates the largest rental, lease and sale of
construction and materials handling equipment business in the United States and
has become so through providing superior equipment, operations and services.

      HERC operations are subject to seasonal factors with the greatest activity
occurring in the second and third calendar quarters and its operations have been
profitable.

Truck Leasing and Rental and Car Leasing

      In 1988, the registrant entered into a license agreement with Hertz Penske
Truck Leasing, Inc., which has been succeeded by Penske Truck Leasing Co., L.P.,
("Penske"), under which Penske has the right, as a Hertz System licensee, to
conduct a one-way truck rental business (including trailers) for a 10 year
period. The license agreement covers the entire United States, with certain
exclusions for those cities and towns that were licensed to other Hertz System
licensees, but under certain conditions, Penske may also operate in the
localities of other Hertz System licensees.

      Effective January 1, 1995, the registrant sold its European car leasing
and car dealership operations to Hertz Leasing International, Inc. ("HLI"), at
an amount equal to its book value of approximately $61 million. HLI is wholly
owned by Ford. In addition, except for Australia and New Zealand, Ford has
received the worldwide rights (subject to certain existing license rights) to
use and sublicense others to use the "Hertz" name in the conduct of motor
vehicle leasing businesses, and has agreed to pay the registrant a license fee
payable over five years. The registrant believes that this transaction will not
have a material effect on its financial position or future operations.

                                       -4-
<PAGE>   5
ITEM 1.  BUSINESS (continued).

Other Operations

      Through its subsidiary HCM Claim Management Corporation ("HCM"), Hertz
provides a claim administration service to numerous customers, which includes
investigating, evaluating, negotiating and disposing of a wide variety of claims
including third-party, first-party, bodily injury, property damage, general
liability, product liability and workers' compensation claims, but does not
include underwriting of risks. In 1992, HCM became the claims administrator for
workers' compensation claims of the registrant, which are underwritten by an
outside insurance carrier, and also became the administrator for the
registrant's medical, dental and other employee health related benefit plans.
HCM provides these services throughout the United States and its operations have
been profitable.

      In 1991, Hertz began providing telecommunication services through its
subsidiary Hertz Technologies, Inc. ("HTI"). HTI markets custom designed voice
and data telecommunication packages of rates and services and makes available to
customers throughout the United States the opportunity to take advantage of
Hertz' negotiated rates with its underlying carriers providing, among other
things, discounted long-distance services. HTI provides these services from
Oklahoma City and its operations have been profitable.

Insurance

      For its domestic operations, the registrant is a qualified self-insurer
against liability resulting from accidents under certificates of self-insurance
for financial responsibility in all states wherein its motor vehicles are
registered. The registrant also self-insures general public liability and
property damage for all domestic operations. For its foreign operations, Hertz
generally does not act as a self-insurer. Instead, Hertz purchases insurance to
comply with local legal requirements from unaffiliated carriers. Effective
January 1, 1993, motor vehicle liability insurance for claims arising on or
after January 1, 1993, purchased locally from unaffiliated carriers by Hertz
owned operations in Europe, has been reinsured by Hertz International RE
Limited, a reinsurer in Dublin, Ireland. Hertz also maintains insurance coverage
with unaffiliated carriers, or with unaffiliated carriers through Ford, for such
amounts in excess of those retained and borne by Hertz, as it determines to be
necessary.

      Provisions for public liability and property damage on self-insured
domestic claims and reinsured foreign claims are made by charges to expense
based upon evaluations of estimated ultimate liabilities on reported and
unreported claims. At December 31, 1995, this liability was estimated at $312
million for combined domestic and foreign operations.

      HERC generally requires its customers to provide their own liability
insurance on rented equipment with HERC held harmless under various agreements.

      Other types of insurance usually carried by business organizations, such
as workers' compensation, property (including boiler and machinery and business
interruption), commercial crime and fidelity and performance bonds, are
purchased from various insurance companies, or through unaffiliated carriers
with Ford, in amounts deemed adequate by Hertz for the respective hazards.

                                       -5-
<PAGE>   6
ITEM 1.  BUSINESS (continued).

Vehicle Acquisition and Disposition

      Hertz believes it is the largest single private purchaser of new vehicles
in the United States. The acquisition and disposition of vehicles are, thus,
important activities for Hertz and have a significant impact on profitability.
Hertz obtains, subject to availability, a majority of its cars pursuant to
various fleet programs established by original equipment manufacturers ("OEMs").
Such vehicles are deemed "nonrisk" because Hertz is able to return these
vehicles to the OEMs at pre-established prices and time frames. In 1995, in
Hertz' domestic and foreign operations, approximately 90% of the vehicles in the
fleet were "nonrisk". Hertz disposes of "at risk" vehicles, whereby Hertz bears
the economic risk of their eventual disposal, through wholesalers and
miscellaneous other channels such as auctions. Over the years, the dynamics of
the new and used car markets have had a negative impact on Hertz' sales efforts
and Hertz has responded by purchasing fewer risk vehicles and by refining the
vehicle mix of its fleet. Upon the sale of a vehicle, the difference between the
net proceeds from sale and the remaining book value is recorded as an adjustment
to depreciation in the period when sold (see Note 7 of the Notes to Consolidated
Financial Statements included in this Report.)

      The purchases of vehicles are financed through funds provided from
operations and by an active and ongoing global borrowing program. Domestic
short-term requirements are funded primarily in the commercial paper market,
while medium and long-term funds are obtained from the U.S. bond market or the
Euro-markets.

Licensees

      The Hertz Corporation's wholly-owned subsidiaries, Hertz System, Inc.
("System") and Hertz International, Ltd. ("International"), respectively, issue
licenses under franchise arrangements to independent licensees who are engaged
in the vehicle renting business in the United States and many foreign countries.
These licensees generally pay fees based on the number of vehicles they operate
and/or on revenues. Licensees also share in the cost of the Hertz advertising
program, reservations system, and certain other services. In return, licensees
are provided with the use of the "Hertz" name, management and administrative
assistance, training, the availability of Hertz charge cards, #1 Club,
reservations service, the "Rent it Here-Leave it There" program and other
services. System, which owns the Hertz service and trademarks and certain
proprietary knowhow used by licensees, establishes the uniform standards and
procedures under which all such licensees operate. The Hertz name has
significant value. It is well known domestically and in all major international
markets.

                                       -6-
<PAGE>   7
ITEM 1.  BUSINESS (continued).

      The establishment and operations of all licensees are financed
independently by the licensee with Hertz having no investment interest in the
licensee (except for two foreign licensees) or in the licensee's fleet. Licenses
outside the United States are granted by International, with the consent of
System. Initial license fees or the price for the sale to a licensee of a
corporate location may be payable over a term of several years. New licenses
continue to be issued and in some cases licensee businesses are purchased by
Hertz.

      Licensees are of importance since they enable Hertz to offer expanded
national and international service and a broader "Rent it Here-Leave it There"
program. License fees and other payments made by licensees do not contribute
materially to Hertz' income.

Employees

      On December 31, 1995, Hertz employed approximately 19,500 persons in its
domestic and foreign operations. Labor contracts covering the terms of
employment of approximately 4,500 employees in the United States are presently
in effect with 96 local unions, affiliated primarily with the International
Brotherhood of Teamsters and the International Association of Machinists
(AFL-CIO). Labor contracts which cover approximately 1,500 of these employees
will expire during 1996. Employee benefits in effect include group life
insurance, hospitalization and surgical insurance, pension plans, and an income
savings plan. Overseas employees are covered by a wide variety of union
contracts and governmental regulations affecting, among other things,
compensation, job retention rights and pensions. Hertz has had no work stoppage
as a result of labor problems during the last 10 years that has materially
affected its operations. Hertz believes its labor relations to be good.

Competition

      Hertz believes that its rent a car business, collectively with its
affiliates and independent licensees, is the largest in the world; that its
licensed one-way truck rental business is one of the largest in the United
States; and believes that its construction and materials handling equipment
rental, lease and sales business is the largest in the United States. Hertz has
substantial competitors with large resources in its rent a car and truck rental
activities who compete with Hertz in all principal aspects of these activities,
including price and service. Hertz is also faced with substantial competition
from a growing number of smaller operators. At substantially all of its airport
locations, it is faced with competition from one or more competitors on and off
the airport. Competition in all of Hertz' areas of business is now, and is
expected to continue to be, active and intense.

                                       -7-
<PAGE>   8
ITEM 1.  BUSINESS (continued).

Governmental Regulation

      Throughout the world, Hertz is subject to numerous types of governmental
controls, including those relating to price regulation and advertising, currency
controls, labor matters, charge card operations, environmental protection, used
vehicle sales and franchising.

      The use of automobiles and other vehicles is subject to various
governmental controls designed to limit environmental damage, including that
caused by emissions and noise. Generally, these controls are met by the
manufacturer, except in the case of occasional equipment failure requiring
repair by Hertz. To comply with environmental regulations, measures are being
taken at certain locations to reduce the loss of vapor during the fueling
process and to maintain and replace underground fuel storage tanks. Hertz is
also incurring and providing for expenses for the cleanup of fuel discharges and
other alleged violations of environmental laws arising from the disposition of
waste products. Hertz does not believe that it will be required to make any
material capital expenditures for environmental control facilities or to make
any other material expenditures to meet the requirements of governmental
authorities in this area.

      Hertz' operations, as well as those of its competitors, could be affected
by any limitation in the fuel supply or by any imposition of mandatory
allocation or rationing regulations. In the event of a severe disruption of fuel
supplies, the operations of all vehicle renting and leasing companies could be
adversely affected.

ITEM 2.  PROPERTIES.

      Hertz' operations are carried on at rental and sales offices and service
facilities located at airports and in downtown and suburban areas. Most of such
premises are leased. Substantially all airport locations are leased from
governmental authorities charged with the operation of such airports under
arrangements generally providing for payment of rents and a percentage of
revenues with a guaranteed annual minimum (see Note 9 of the Notes to
Consolidated Financial Statements included in this Report).

      Hertz has facilities in the vicinity of Oklahoma City at which
reservations for its worldwide car rental operations are processed and major
domestic accounting functions are performed. Hertz maintains its executive
offices in a facility in Park Ridge, New Jersey.

                                       -8-
<PAGE>   9
ITEM 3.  LEGAL PROCEEDINGS.

      Various legal actions, governmental investigations and proceedings, and
claims are pending or may be instituted or asserted in the future against the
registrant and its subsidiaries. Litigation is subject to many uncertainties,
and the outcome of the individual litigated matters is not predictable with
assurance. It is reasonably possible that certain of the actions, investigations
or proceedings could be decided unfavorably to the registrant or the subsidiary
involved. Although the amount of liability at December 31, 1995 with respect to
these matters cannot be ascertained, such liability could approximate up to $1
million (net of income tax benefits), and the registrant believes that any
resulting liability should not materially affect the consolidated financial
position, results of operations or cash flows of the registrant.

      On January 9, 1995, Newark International Airport, in Newark, N.J.,
suffered an electrical outage that caused significant operational problems for
one day due to a construction accident that occurred on the registrant's
property. A subcontractor of the registrant was involved in this accident. The
registrant believes that it has adequate defenses, indemnities and insurance
coverage against existing and anticipated litigation.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

      Omitted.

                                        PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

      There is no market for the registrant's common stock. The registrant is a
wholly-owned subsidiary of Ford.

ITEM 6.  SELECTED FINANCIAL DATA.

      Omitted.

                                       -9-
<PAGE>   10
ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATION.

1995 vs. 1994

      Revenues in 1995 of $3,401 million increased by $106 million as compared
to 1994. This increase was primarily attributable to gains in the car rental
operations resulting from a greater number of transactions, rate increases and
changes in foreign exchange rates; and improvements in construction equipment
rental and sales due to increased volume resulting from the opening of new
locations and increased activity in construction and industrial related markets.
These increases were partly offset by lower revenues in car leasing and car
dealerships resulting from the sale of these operations in Europe effective
January 1, 1995.

      Total expenses increased $97 million to $3,228 million in 1995 as compared
to $3,131 million in 1994. Direct operating expense decreased in amount and as a
percent of revenues principally due to lower expenses relating to the sales of
the European car leasing and car dealership operations in 1995 and lower costs
in the domestic car rental operations for public liability and property damage
claims, partly offset by higher costs relating to the increase in the volume of
business. Depreciation of revenue earning equipment increased primarily due to
an increase in vehicles and equipment operated, higher prices for automobiles,
and lower net proceeds received on disposal of revenue earning equipment in
excess of book value due to a softness in the domestic vehicle resale markets;
these increases were partly offset by lower depreciation relating to the sale of
the European car leasing operation in 1995, and a reduction in depreciation of
$12.0 million in 1995 due to changes made effective July 1, 1994 increasing
certain lives being used to compute the provision for depreciation to reflect
changes in the estimated residual values to be realized when the equipment is
sold. Selling, general and administrative expense increased primarily due to
higher advertising and sales promotion costs and changes in foreign exchange
rates. The increase in interest expense was primarily due to higher debt levels
and interest rates in 1995, partly offset by higher interest income in 1995 and
$8.6 million included in 1994 relating to interest receivable from Park Ridge
Limited Partnership which was not collected.

      The tax provision of $67 million in 1995 was lower than the tax provision
of $72 million in 1994, primarily due to a lower effective tax rate in 1995. See
Notes 1 and 8 of the Notes to Consolidated Financial Statements included in this
Report.

                                      -10-
<PAGE>   11
ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATION (continued).

1994 vs. 1993

      Revenues in 1994 of $3,294 million increased by $440 million as compared
to 1993. This increase was primarily attributable to increases in the car
rental operations resulting from a greater number of transactions due to
increased travel, an increase in market share, and changes in foreign exchange
rates; improvements in construction equipment rental and sales in the United
States due to increased volume resulting from improvements in the economy and
increased volume from industrial related markets; and higher revenues in car
leasing due to an acquisition made in July 1994 in Europe and changes in foreign
exchange rates. These increases were partly offset by lower revenues in claim
administration and telecommunication services due to decreases in volume.

      Total expenses increased $379 million to $3,131 million in 1994 as
compared to $2,752 million in 1993. Direct operating expense increased
principally due to the higher volume of business and changes in foreign exchange
rates, but was lower in 1994 as a percent of revenues due to more efficient
fixed cost coverage. Depreciation of revenue earning equipment increased in 1994
primarily due to an increase in vehicles and equipment operated, higher prices
for automobiles, and credits recorded in 1993 resulting from valuing certain
pre-acquisition assets on a net of tax basis; these increases were partly offset
by a reduction in depreciation of $9.6 million due to changes made effective
July 1, 1994 increasing certain lives being used to compute the provision for
depreciation to reflect changes in the estimated residual values to be realized
when the equipment is sold. Selling, general and administrative expense
increased primarily due to higher advertising costs and changes in foreign
exchange rates. The increase in interest expense was primarily due to higher
debt levels and lower interest income in 1994 and an $8.6 million write-off of
interest receivable from Park Ridge Limited Partnership, partly offset by lower
interest rates in 1994 in the foreign operations.

      The tax provision of $72 million in 1994 was higher than the tax provision
of $49 million in 1993, primarily due to the increase in income before income
taxes in 1994 and changes in effective tax rates. See Notes 1 and 8 of the Notes
to Consolidated Financial Statements included in this Report.

                                      -11-
<PAGE>   12
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

      The Consolidated Balance Sheet of the registrant at December 31, 1995 and
1994, and the related Consolidated Statement of Income and Reinvested Earnings
and Consolidated Statement of Cash Flows for the years ended December 31, 1995,
1994 and 1993, and other financial statement schedules are set forth under Item
14 hereof.

      Selected quarterly data for each quarter of the years 1995 and 1994 is set
forth in Note 12 of the Notes to Consolidated Financial Statements included in
this Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE.

      None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

      Omitted.

ITEM 11.  EXECUTIVE COMPENSATION.

      Omitted.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Omitted.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Omitted.

                                      -12-
<PAGE>   13
                                     PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               -----
<S>                                                                                                            <C>
(a)      1. Financial Statements:

                 (i)  The Hertz Corporation and Subsidiaries -

                               Reports of Independent Public Accountants                                       18-19

                               Consolidated Balance Sheet at December 31, 1995
                                   and 1994                                                                    20-21

                               Consolidated Statement of Income and Reinvested
                                   Earnings for the years ended December 31, 1995,
                                   1994 and 1993                                                                 22

                               Consolidated Statement of Cash Flows
                                   for the years ended December 31, 1995, 1994
                                   and 1993                                                                    23-24

                               Notes to Consolidated Financial Statements                                      25-47

         2. Financial Statement Schedules:

                 (i)  The Hertz Corporation and Subsidiaries -

                               Schedule II - Valuation and qualifying accounts
                                   for the years ended December 31, 1995, 1994
                                   and 1993                                                                      48
</TABLE>

         3. Exhibits:

                 (3)  Articles of Incorporation and By-Laws.

                          (i)   Restated Certificate of Incorporation of The
                                Hertz Corporation -- incorporated herein by
                                reference to Exhibit (3)(i) to the registrant's
                                report on Form 8-K dated July 20, 1993 (File No.
                                1-7541).

                         (ii)   Certificate of Amendment of Restated
                                Certificate of Incorporation of The Hertz
                                Corporation filed with the Secretary of State
                                of Delaware on April 28, 1994 -- incorporated
                                by reference to Exhibit (3)(ii) to the
                                registrant's report on Form 10-K dated March
                                13, 1995 (File No. 1-7541).

                        (iii)   Certificate of Amendment of Restated
                                Certificate of Incorporation of The Hertz
                                Corporation filed with the Secretary of State
                                of Delaware on December 18, 1995.

                         (iv)   By-Laws of The Hertz Corporation adopted by 
                                its Board of Directors on July 19, 1993 -- 
                                incorporated by reference to Exhibit (3)(ii) 
                                to the registrant's report on Form 8-K dated 
                                July 20, 1993 (File No. 1-7541).

                                      -13-
<PAGE>   14
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
     (continued).

     3.  Exhibits (continued):

            (4)  Instruments defining the rights of security holders, including
                 indentures.

                      (iii)    At December 31, 1995, Hertz had various
                               obligations which could be considered as
                               long-term debt, none of which exceeded 10% of the
                               total assets of Hertz on a consolidated basis.
                               Hertz agrees to furnish to the Commission upon
                               request a copy of any such instrument defining
                               the rights of the holders of such long-term debt.

            (10)      Material Contracts.

                       (i)   (a)        Agreement dated December 30, 1985
                                        between The Hertz Corporation and
                                        Allegis Corporation incorporated herein
                                        by reference to Exhibit (10)(i)(a) to
                                        the registrant's report on Form 10-K for
                                        the year ended December 31, 1985 (File
                                        No. 1-7541).

                             (b)        Use Agreement dated December 30, 1985
                                        between The Hertz Corporation and
                                        Allegis Corporation incorporated herein
                                        by reference to Exhibit (10)(i)(b) to
                                        the registrant's report on Form 10-K for
                                        the year ended December 31, 1985 (File
                                        No. 1-7541).

                      (ii)(B)(a)        Agreement dated January 1, 1988 between
                                        The Hertz Corporation and Ford Motor
                                        Company (portions of this Exhibit have
                                        been omitted and granted confidential
                                        treatment under Rule 24b-2) incorporated
                                        herein by reference to Exhibit
                                        (10)(ii)(B)(a) to the registrant's
                                        report on Form 10-K for the year ended
                                        December 31, 1987 (File No. 1-7541).

                             (b)        Agreement dated January 1, 1988 between
                                        Hertz System, Inc. and Ford Motor
                                        Company (portions of this Exhibit have
                                        been omitted and granted confidential
                                        treatment under Rule 24b-2) incorporated
                                        by reference to Exhibit (10)(ii)(B)(b)
                                        to the registrant's report on Form 10-K
                                        for the year ended December 31, 1987
                                        (File No. 1-7541).

                                      -14-
<PAGE>   15
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
     (continued).

     3.  Exhibits (continued):

              (10)    Material Contracts (continued):

                  (ii)(B)         (c)   Agreement dated September 25, 1992 
                                        between Hertz System, Inc. and Ford
                                        Motor Company. (Portions of this Exhibit
                                        have been omitted and granted
                                        confidential treatment under Rule 24b-2)
                                        incorporated by reference to Exhibit
                                        (10)(ii)(B)(c) to the registrant's
                                        report on Form 10-Q for the quarterly
                                        period ended September 30, 1992 (File
                                        No. 1-7541).

                  (iii)(A)        (a)   Employment contract with Frank A.
                                        Olson dated April 16, 1987, as amended
                                        December 30, 1987, incorporated by
                                        reference to Exhibit (10)(iii)(A)(a) to
                                        the registrant's report on Form 10-K for
                                        the year ended December 31, 1987 (File
                                        No. 1-7541).

                                  (b)   Employment contract with Craig R. Koch
                                        dated April 16, 1987, as amended
                                        December 30, 1987, incorporated by
                                        reference to Exhibit (10)(iii)(A)(b) to
                                        the registrant's report on Form 10-K for
                                        the year ended December 31, 1987 (File
                                        No. 1-7541).

                                  (c)   Employment contract with William Sider
                                        dated July 1, 1992, incorporated by
                                        reference to Exhibit (10)(iii)(A)(c) to
                                        the registrant's report on Form 10-K for
                                        the year ended December 31, 1992 (File
                                        No. 1-7541).

                                  (d)   Employment contract with Brian J.
                                        Kennedy dated July 1, 1992, incorporated
                                        by reference to Exhibit (10)(iii)(A)(d)
                                        to the registrant's report on Form 10-K
                                        for the year ended December 31, 1992
                                        (File No. 1-7541).

                                  (e)   Employment agreement with Daniel I.
                                        Kaplan dated February 17, 1995,
                                        incorporated by reference to Exhibit
                                        (10)(iii) (A)(e) to the registrant's
                                        report on Form 10-K dated March 13, 1995
                                        (File No. 1-7541).

                                  (f)   Employment contract with Antoine E. Cau
                                        dated January 1, 1990, as amended April
                                        4, 1990, December 13, 1990 and December
                                        18, 1990 (portions of this Exhibit have
                                        been omitted and granted confidential
                                        treatment under Rule 24b-2) incorporated
                                        by reference to Exhibit (10)(iii)(A)(f)
                                        to the registrant's report on Form 10-K
                                        for the year ended December 31, 1990
                                        (File No. 1-7541).

                                  (g)   Executive Incentive Compensation Plan,
                                        incorporated by reference to Exhibit 
                                        (10)(iii)(A)(g) to the registrant's
                                        report on Form 10-K dated March 13, 1995
                                        (File No. 1-7541).

                                  (h)   Long Term Incentive Plan, incorporated
                                        by reference to Exhibit (10)(iii)(A)(h)
                                        to the registrant's report on Form 10-K
                                        for the year ended December 31, 1991
                                        (File No. 1-7541).

                                      -15-
<PAGE>   16
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
     (continued).

    3.   Exhibits (continued):

         (12)     Computation of Consolidated Ratio of Earnings to Fixed Charges
                  for each of the five years in the period ended December 31,
                  1995.

         (21)     Subsidiaries of the registrant.  Listing of subsidiaries of
                  the registrant at December 31, 1995.

         (23)     Consents of experts and counsel. Consent to the incorporation
                  by reference of report of independent public accountants in
                  previously filed registration statements under the Securities
                  Act of 1933.

         (27)     Consolidated Financial Data Schedule for the year ended 
                  December 31, 1995.

(b)      Reports on Form 8-K:

         The registrant did not file any reports on Form 8-K during the quarter
ended December 31, 1995.

         Schedules and exhibits not included above have been omitted because the
information required has been included in the financial statements or notes
thereto or are not applicable or not required.

                                      -16-
<PAGE>   17
                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                           THE HERTZ CORPORATION
                                                  (Registrant)

                                           By:  /s/ William Sider
                                               ---------------------------------
                                               William Sider
                                               Executive Vice President and
                                               Chief Financial Officer
                                               March 13, 1996

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the indicated capacities, on March 13, 1996.

 /s/ Frank A. Olson                       /s/ Craig R. Koch
---------------------------------        --------------------------------------
Frank A. Olson                           Craig R. Koch
Chairman of the Board, Chief             President, Chief Operating Officer and
Executive Officer and Director           Director
(Principal Executive Officer)

 /s/ William Sider                        /s/ Leo A. Massad, Jr.
---------------------------------        --------------------------------------
William Sider                            Leo A. Massad, Jr.
Executive Vice President, Chief          Staff Vice President and Controller
Financial Officer and Director           (Principal Accounting Officer)
(Principal Financial Officer)

 /s/ Malcolm S. Macdonald                 /s/ David N. McCammon
---------------------------------        --------------------------------------
Malcolm S. Macdonald                     David N. McCammon
Assistant Treasurer and Director         Director

 /s/ Peter J. Pestillo
---------------------------------     
Peter J. Pestillo
Director

                                      -17-
<PAGE>   18
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Hertz Corporation:

     We have audited the accompanying consolidated balance sheet of The Hertz
Corporation (a Delaware corporation and wholly-owned subsidiary of Ford Motor
Company) and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income and reinvested earnings and cash flows and the
financial statement schedule listed in Item 14(a)2(i) for each of the two years
ended December 31, 1995. These consolidated financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.

     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of The Hertz Corporation and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the two years ended December 31,
1995, in conformity with generally accepted accounting principles. In addition,
in our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects, the information required to be
included therein.

                                                        COOPERS & LYBRAND L.L.P.

Parsippany, New Jersey
January 26, 1996

                                      -18-
<PAGE>   19
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To The Hertz Corporation:

     We have audited the accompanying consolidated statements of income and
reinvested earnings and cash flows of The Hertz Corporation (a Delaware
corporation) and subsidiaries for the year ended December 31, 1993. These
consolidated financial statements and the schedule referred to below are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and schedule based on our
audit.

     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the results of operations of The Hertz Corporation and
subsidiaries and their cash flows for the year ended December 31, 1993, in
conformity with generally accepted accounting principles.

     Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedule listed
in Item 14(a)2(i) for the year ended December 31, 1993, is presented for
purposes of complying with the Securities and Exchange Commission's rules and is
not part of the basic financial statements. This schedule has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.

                                                            ARTHUR ANDERSEN LLP

New York, New York
February 7, 1994

                                      -19-
<PAGE>   20
                     THE HERTZ CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                            (IN THOUSANDS OF DOLLARS)


                                     ASSETS

<TABLE>
<CAPTION>
                                                                                            December 31,
                                                                                  -------------------------------
                                                                                     1995                 1994
                                                                                  ----------           ----------
<S>                                                                               <C>                  <C>
CASH AND EQUIVALENTS (Note 13)                                                    $  137,257           $   99,749


RECEIVABLES, less allowance for doubtful accounts
  of $7,985 (1994 - $10,026) (Schedule II)                                           789,801              641,595


DUE FROM AFFILIATES (Notes 1, 7 and 14)                                              407,442              371,599


INVENTORIES, at lower of cost or market                                               17,930               35,092


PREPAID EXPENSES AND OTHER ASSETS (Note 4)                                            83,345               94,880


REVENUE EARNING EQUIPMENT, at cost (Notes 5 and 7):
  Vehicles                                                                         3,951,351            4,257,835
    Less accumulated depreciation                                                   (324,193)            (403,476)
  Other equipment                                                                    705,084              553,345
    Less accumulated depreciation                                                   (162,073)            (147,340)
                                                                                  ----------           ----------

        Total revenue earning equipment                                            4,170,169            4,260,364
                                                                                  ----------           ----------


PROPERTY AND EQUIPMENT, at cost:
  Land, buildings and leasehold improvements                                         473,930              416,477

  Service equipment                                                                  507,640              451,059
                                                                                  ----------           ----------
                                                                                     981,570              867,536

    Less accumulated depreciation                                                   (485,680)            (427,859)
                                                                                  ----------           ----------

      Total property and equipment                                                   495,890              439,677
                                                                                  ----------           ----------

FRANCHISES, CONCESSIONS, CONTRACT COSTS AND
  LEASEHOLDS, net of amortization                                                      7,722                6,708


COST IN EXCESS OF NET ASSETS OF PURCHASED
  BUSINESSES, net of amortization (Note 5)                                           547,074              571,182
                                                                                  ----------           ----------

                                                                                  $6,656,630           $6,520,846
                                                                                  ==========           ==========
</TABLE>

         The accompanying notes are an integral part of this statement.

                                      -20-
<PAGE>   21
                     THE HERTZ CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                            (IN THOUSANDS OF DOLLARS)


                      LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                           December 31,
                                                                                  -------------------------------
                                                                                     1995                 1994
                                                                                  ----------           ----------
<S>                                                                               <C>                  <C>
ACCOUNTS PAYABLE (Note 7)                                                         $  585,663           $  417,619


ACCRUED SALARIES AND OTHER COMPENSATION                                              142,096              136,255


OTHER ACCRUED LIABILITIES                                                            330,923              381,624


ACCRUED TAXES                                                                         74,714               81,862


DEBT (Notes 2 and 13)                                                              4,297,484            4,413,915


PUBLIC LIABILITY AND PROPERTY DAMAGE (Schedule II)                                   311,669              304,328


DEFERRED TAXES ON INCOME (Note 8)                                                     77,800               49,300


COMMITMENTS AND CONTINGENCIES (Notes 9, 11 and 13)

SHAREHOLDERS' EQUITY (Note 2):
   Preferred stock --
       Series A, 10% cumulative                                                      236,000              236,000
       Series B, various rates cumulative                                            249,900              249,900

   Common stock, par value $1 per share, shares 
      issued -- 200 Class A, 51 Class B
         and 490 Class C (Note 1)                                                          1                    1

  Additional capital paid-in (Note 1)                                                 59,008               59,008

  Reinvested earnings                                                                276,733              196,527

  Translation adjustment (Note 3)                                                     14,539               (5,271)

  Unrealized holding gains (losses) for
     available-for-sale securities (Note 4)                                              100                 (222)
                                                                                   ---------            ---------

    Total shareholders' equity                                                       836,281              735,943
                                                                                   ---------            ---------


                                                                                  $6,656,630           $6,520,846
                                                                                   =========            =========
</TABLE>


         The accompanying notes are an integral part of this statement.

                                      -21-
<PAGE>   22
                     THE HERTZ CORPORATION AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF INCOME AND REINVESTED EARNINGS
                            (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                                                   Years Ended December 31,
                                                                 ---------------------------------------------------------
                                                                    1995                    1994                    1993
                                                                 ----------              ----------             ----------
<S>                                                              <C>                     <C>                    <C>
REVENUES:
  Car rental                                                     $2,883,164              $2,553,142             $2,155,612

  Construction equipment rental
     and sales                                                      332,328                 263,154                215,760

  Car leasing (Note 14)                                              35,548                 231,372                209,308

  Car dealerships, claim administration,
     etc. (Note 14)                                                 149,548                 246,733                274,187
                                                                 ----------              ----------             ----------

                                                                  3,400,588               3,294,401              2,854,867
                                                                 ----------              ----------             ----------

EXPENSES:
  Direct operating                                                1,724,791               1,766,228              1,647,104

  Depreciation of revenue earning
     equipment (Note 7)                                             803,862                 702,644                523,876

  Selling, general and administrative                               392,518                 385,470                336,037

  Interest, net of interest income of
     $16,798, $7,210 and $11,318 (Note 2)                           307,073                 277,228                245,400
                                                                 ----------              ----------             ----------

                                                                  3,228,244               3,131,570              2,752,417
                                                                 ----------              ----------             ----------

INCOME BEFORE INCOME TAXES                                          172,344                 162,831                102,450

PROVISION FOR TAXES ON INCOME (Note 8)                               67,138                  71,749                 49,022
                                                                 ----------              ----------             ----------

NET INCOME                                                          105,206                  91,082                 53,428

CASH DIVIDEND PAID TO FORD MOTOR
  COMPANY                                                           (25,000)                    -                      -

REINVESTED EARNINGS AT BEGINNING OF
  YEAR                                                              196,527                 105,445                 52,017
                                                                 ----------              ----------             ----------

REINVESTED EARNINGS AT END OF YEAR
  (Note 2)                                                       $  276,733              $  196,527             $  105,445
                                                                 ==========              ==========             ==========
</TABLE>

         The accompanying notes are an integral part of this statement.

                                      -22-
<PAGE>   23
                     THE HERTZ CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                            (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                                                    Years Ended December 31,
                                                                       ---------------------------------------------------
                                                                           1995              1994                  1993
                                                                       -----------        -----------          -----------
<S>                                                                    <C>                <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income                                                       $   105,206        $    91,082          $    53,428
      Non-cash expenses:
         Depreciation of revenue earning
              equipment                                                    803,862            702,644              523,876

         Depreciation of property and equipment                             79,696             68,646               63,887

         Amortization of intangibles                                        19,978             19,401               19,365

         Provision for public liability and
           property damage                                                 134,926            159,049              147,387

         Provision for losses for doubtful
           accounts                                                          4,926              6,813                6,714

         Write-off of interest on Park Ridge
           Limited Partnership promissory note                                 -                8,586                  -

         Deferred income taxes                                              28,500              4,700                7,400

      Revenue earning equipment expenditures                            (7,255,250)        (6,873,281)          (4,845,084)


      Proceeds from sales of revenue earning
         equipment                                                       6,163,455          4,747,409            3,685,946


      Changes in assets and liabilities, net of 
         effects from sale of the European car
         leasing and car dealership operations
         and purchases of various operations-

              Receivables                                                 (180,613)          (181,439)             138,782

              Due from affiliates                                           (35,843)          (43,087)            (300,564)

              Inventories and prepaid expenses
                 and other assets                                           (1,422)            30,463               20,864

              Accounts payable                                             311,498             70,001               (33,708)

              Accrued liabilities                                            9,785             74,633               57,383

              Accrued taxes                                                  6,067              6,656                6,424

      Payments of public liability and
         property damage claims and expenses                              (127,814)          (118,380)            (109,706)
                                                                       -----------        -----------          -----------

              Net cash flows provided from (used
                 for) operating activities                             $    66,957        $(1,226,104)         $  (557,606)
                                                                       -----------        -----------          -----------
</TABLE>


         The accompanying notes are an integral part of this statement.

                                      -23-
<PAGE>   24
                     THE HERTZ CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                            (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                                                                        Years Ended December 31,
                                                                           -----------------------------------------------
                                                                               1995              1994               1993
                                                                           ----------         ----------         ---------
<S>                                                                        <C>                <C>                <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
  Property and equipment expenditures                                      $ (178,279)        $ (150,569)        $ (92,173)
  Proceeds from sales of property and
    equipment                                                                  34,148             35,839            36,116
  Available-for-sale securities -
    Purchases                                                                  (6,375)            (8,145)              -
    Sales                                                                       6,625              5,221               -
  Proceeds from sale of the European car
    leasing and car dealership operations, 
    net of cash and equivalents in 1995; and 
    purchases of various operations, net of 
    cash acquired (see supplemental disclosures
    below)                                                                     56,560             (2,044)           (3,578)
                                                                           ----------         ----------         ---------
      Net cash flows used for investing
         activities                                                           (87,321)          (119,698)          (59,635)
                                                                           ----------         ----------         ---------


CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of long-term debt                                    329,157            719,289           845,758
  Repayment of long-term debt                                                 (340,442)         (207,195)         (868,810)
  Short-term borrowings:
    Proceeds                                                                  984,870            736,430           698,261
    Repayments                                                               (945,283)          (614,439)         (504,703)
    Ninety day term or less, net                                               54,487            864,816           271,071
  Cash dividend paid to Ford Motor Company                                    (25,000)               -                 -
  Payment for the redemption of common and
    preferred stock and related expenses                                          -             (145,091)              -
                                                                           ----------         ----------         ---------
      Net cash flows provided from
         financing activities                                                  57,789          1,353,810           441,577
                                                                           ----------         ----------         ---------

EFFECT OF FOREIGN EXCHANGE RATE CHANGES
  ON CASH                                                                          83              3,184            (3,798)
                                                                           ----------         ----------         ---------

NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS
  DURING THE YEAR                                                              37,508             11,192          (179,462)

CASH AND EQUIVALENTS AT BEGINNING OF YEAR                                      99,749             88,557           268,019
                                                                           ----------         ----------         ---------

CASH AND EQUIVALENTS AT END OF YEAR                                        $  137,257         $   99,749         $  88,557
                                                                           ==========         ==========         =========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
  INFORMATION:
  Cash paid during the year for -
    Interest (net of amounts capitalized)                                  $  313,139         $  257,652         $ 240,316

    Income taxes                                                               33,775             36,341            11,221
</TABLE>


      In connection with acquisitions made during the years 1994 and 1993,
liabilities assumed were $27 million and $2.1 million, respectively.


         The accompanying notes are an integral part of this statement.

                                      -24-
<PAGE>   25
                     THE HERTZ CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Summary of Significant Accounting Policies

      Merger, Change in Ownership and Capitalization -- the registrant, which
was incorporated in Delaware in 1967, is a successor to corporations which were
engaged in the automobile and truck leasing and rental business since 1924. UAL
Corporation ("UAL") (formerly Allegis Corporation) purchased all of the
registrant's outstanding capital stock from RCA Corporation ("RCA") on August
30, 1985. Park Ridge Corporation ("Park Ridge") purchased all of the
registrant's outstanding capital stock from UAL on December 30, 1987. On July
19, 1993, Park Ridge (which had no material assets other than the registrant)
was merged with and into the registrant, with the prior stockholders of Park
Ridge becoming the stockholders of the registrant. The merger has been recorded
as a "pooling of interests". Under this method of accounting, when the entities
before and after a merger are under common control with the same management, the
operations are combined at historical cost. Consequently, the consolidated
financial statements of the registrant included herein have been restated for
all periods prior to the effective date of the merger, and are identical to the
audited consolidated financial statements of Park Ridge for such periods. On the
date of the merger, the registrant refinanced $334.3 million promissory notes of
Park Ridge through the public issuance of $400 million aggregate principal
amount of junior subordinated debt securities of the registrant; and a $150
million loan to Park Ridge from Ford Motor Credit Company ("FMCC") in the form
of subordinated debt was assumed by the registrant (the "FMCC Note"). The FMCC
Note, which had a scheduled maturity date of May 17, 2000, was subordinated in
right of payment to all "Superior Indebtedness" (as defined for purposes of the
FMCC Note) of the registrant including the junior subordinated debt securities
referred to above.

      In March 1994, Ford Motor Company ("Ford") acquired the registrant's
common stock owned by Commerzbank Aktiengesellschaft. On April 29, 1994, the
registrant redeemed its preferred and common stock owned by AB Volvo for $145
million, borrowing the funds from Ford to pay for the redemption, and Ford
purchased all of the common stock of the registrant owned by Park Ridge Limited
Partnership ("Partnership"). This resulted in the registrant becoming a
wholly-owned subsidiary of Ford. In addition, the $150 million subordinated
promissory note of the registrant held by FMCC, was exchanged for $150 million
of Series B Preferred Stock of the registrant, and a promissory note in the
amount of $18.5 million, owed by the Partnership to the registrant was assumed
by Ford ("Ford Note"). In connection with these transactions, notes payable were
increased by $145 million, Series A Preferred Stock was reduced by $104 million,
and additional capital paid-in was reduced by $41 million; interest expense was
increased by $8.6 million and provision for taxes was decreased by $3.0 million;
and subordinated promissory notes were reduced by $150 million and Series B
Preferred Stock was increased by $150 million. The Ford Note is payable on
demand, with interest payable quarterly on the outstanding principal balance at
a fluctuating rate per annum equal to LIBOR (London Interbank Offered Rate). At
December 31, 1995, the registrant's receivable relating to the Ford Note was
$18.7 million and is included in Due From Affiliates in the consolidated balance
sheet, and will be repaid in 1996.

                                      -25-
<PAGE>   26
                     THE HERTZ CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Summary of Significant Accounting Policies (continued)

      As of December 31, 1995, 100% of the Common Stock of the registrant was
owned by Ford and 100% of the outstanding Preferred Stock was owned by FMCC.

      The capital stock of the registrant authorized and issued as of December
31, 1995, 1994 and 1993 and the additional capital paid-in for the years ended
December 31, 1994 and 1995 are set forth below. There were no changes to the
capital stock and additional capital paid-in during 1993.

<TABLE>
<CAPTION>
                                                                         Number of Shares
                                                   Par Value       ---------------------------
                                                   Per Share       Authorized           Issued              Amount
                                                   ---------       ----------           ------              ------
<S>                                                <C>             <C>                 <C>               <C>
Series A Preferred Stock:
Balance December 31, 1993                            $100          4,500,000           3,400,000         $ 340,000,000

Redemption in 1994                                                     -              (1,040,000)         (104,000,000)
                                                                   ---------          -----------        -------------

Balance December 31, 1994 and 1995                   $100          4,500,000           2,360,000         $ 236,000,000
                                                     ====          =========           =========         =============

Series B Preferred Stock
Balance December 31, 1993                            $100          1,000,000             999,000         $  99,900,000

Issued in exchange for subordinated
  promissory note in 1994                             100          1,500,000           1,500,000           150,000,000
                                                                   ---------          ----------         -------------

Balance December 31, 1994 and 1995                   $100          2,500,000           2,499,000         $ 249,900,000
                                                     ====          =========          ==========         =============


Class A Common Stock
Balance December 31, 1993, 1994
  and 1995                                           $  1                200                 200                 $ 200
                                                     ====          =========          ==========         =============

Class B Common Stock
Balance December 31, 1993                            $  1                800                 311                 $ 311

Redemption in 1994                                                        -                 (260)                 (260)
                                                                   ---------          ----------         -------------

Balance December 31, 1994 and 1995                   $  1                800                  51                 $  51
                                                     ====          =========          ==========         =============

Class C Common Stock
Balance December 31, 1993, 1994
  and 1995                                           $  1                800                 490                 $ 490
                                                     ====                ===                ====         =============

Additional Capital Paid-In
Balance December 31, 1993                                                                                $ 100,098,999

Redemption of common and preferred stock 
  in excess of par value
  and related expenses in 1994                                                                             (41,091,049)
                                                                                                         -------------

Balance December 31, 1994 and 1995                                                                       $  59,007,950
                                                                                                         =============
</TABLE>


                                      -26-
<PAGE>   27
                     THE HERTZ CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note 1 - Summary of Significant Accounting Policies (continued)

     The holders of the Series A Preferred Stock ("Series A Stock") and the
Series B Preferred Stock ("Series B Stock") are entitled, when, as and if
declared by the Board of Directors of the registrant, to cumulative annual
dividends, but payable only out of funds legally available therefor, compounded
annually (if in arrears). The annual dividend rate through December 31, 1998 is
10% for the Series A Stock and at various rates which average 4.5% for the
Series B Stock. Commencing January 1, 1999 the annual dividend rate for the
Series A Stock and Series B Stock are subject to adjustment and are reset on an
annual basis. The Series A Stock and the Series B Stock are redeemable by their
terms at the option of the registrant at any time, and do not have any voting
rights, except that the holders of the Series A Stock shall have the right to
elect two directors in the event of default, and the holders of the Series B
Stock will be granted voting rights in the event of significant and continuing
net operating losses.

     The holders of the Class A Common Stock and Class B Common Stock have one
vote per share and no special preferences. The holders of the Class C Common
Stock have one vote per share and have the right to designate three directors,
until such time as fewer than 40 shares thereof (adjusted for stock splits and
the like) shall be outstanding, provided, however, that the Class C Common Stock
shall in any event have 40% of the general voting power and the right to elect
not less than 40% of the members of such Board of Directors, until such time as
fewer than 40 shares thereof (as so adjusted) shall be outstanding. The Class C
Common Stock is convertible into Class B Common Stock on a share for share basis
at any time at the holder's option.

     Principles of Consolidation -- the consolidated financial statements
include the accounts of The Hertz Corporation and its domestic and foreign
subsidiaries. All significant intercompany transactions are eliminated.

     Consolidated Statement of Cash Flows -- for purposes of this statement, the
registrant considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. See page 25
for Noncash Investing and Financing Activities.

                                      -27-
<PAGE>   28
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 1 - Summary of Significant Accounting Policies (continued)

     Depreciable Assets -- the provisions for depreciation and amortization are
computed on a straight-line basis over the estimated useful lives of the
respective assets, as follows:

<TABLE>
<S>                                                              <C>
     Revenue Earning Equipment:
       Vehicles                                                  4 to 6 years
       Other equipment                                           3 to 11 years
     Buildings                                                   20 to 50 years
     Leasehold improvements                                      Term of lease
     Service vehicles and service equipment                      3 to 10 years
     Franchises, concessions, contract costs and leaseholds      3 to 40 years
     Cost in excess of net assets of purchased businesses        20 to 40 years
</TABLE>

Hertz follows the practice of charging maintenance and repairs, including the
cost of minor replacements, to maintenance expense accounts. Costs of major
replacements of units of property are charged to property and equipment accounts
and depreciated on the basis indicated above. Gains and losses on dispositions
of property and equipment are included in income as realized. Upon disposal of
revenue earning equipment, depreciation expense is adjusted for the difference
between the net proceeds from sale and the remaining book value.

     Environmental Conservation -- the use of automobiles and other vehicles is
subject to various governmental controls designed to limit environmental damage,
including that caused by emissions and noise. Generally, these controls are met
by the manufacturer, except in the case of occasional equipment failure
requiring repair by Hertz. To comply with environmental regulations, measures
are being taken at certain locations to reduce the loss of vapor during the
fueling process and to maintain and replace underground fuel storage tanks.
Hertz is also incurring and providing for expenses for the cleanup of fuel
discharges and other alleged violations of environmental laws arising from the
disposition of waste products. Hertz does not believe that it will be required
to make any material capital expenditures for environmental control facilities
or to make any other material expenditures to meet the requirements of
governmental authorities in this area. Liabilities for these expenditures are
recorded when it is probable that obligations have been incurred and the amounts
can be reasonably estimated.

     Public Liability and Property Damage -- provisions for public liability and
property damage on self-insured domestic claims and reinsured foreign claims are
made by charges to expense based upon evaluations of estimated ultimate
liabilities on reported and unreported claims. For its domestic operations, the
registrant is a qualified self-insurer against liability resulting from
accidents under certificates of self-insurance for financial responsibility in
all states wherein its motor vehicles are registered. The registrant also
self-insures general public liability and property damage for all domestic
operations. Effective July 1, 1987, all claims are retained and borne by the
registrant up to a limit of $5,000,000 for each accident. Self-insurance
retention borne by the registrant for each accident prior to July 1, 1987 was as
follows: $10,000,000 from September 1, 1986 to June 30, 1987; $1,000,000 and 50%
of claims for amounts exceeding $1,000,000 up to $6,000,000 from February 17,
1985 to August 31, 1986; and $1,000,000 prior to February 17, 1985. For its
foreign operations, Hertz generally does not act as a self-insurer. Instead,
Hertz purchases insurance to comply with local legal requirements from
unaffiliated carriers. Effective January 1, 1993, motor vehicle liability
insurance for claims arising on or after January 1, 1993, purchased locally from
unaffiliated carriers by

                                      -28-
<PAGE>   29
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Note 1 - Summary of Significant Accounting Policies (continued)

Hertz owned operations in Europe, has been reinsured by Hertz International RE
Limited ("HIRE"), a reinsurer in Dublin, Ireland. HIRE effectively responds to
the first $1,500,000 of motor vehicle liability for each accident. Excess
liability insurance coverage is maintained by Hertz with unaffiliated carriers,
or through unaffiliated carriers with Ford.

     Effective January 1, 1993, the registrant adopted the provisions of
Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes
("FAS No. 109"), which requires the recognition of deferred tax assets, net of
applicable reserves, related to net operating loss carryforwards and certain
temporary differences. The changes made in FAS No. 109, as they relate to the
registrant, did not have a material effect on the registrant's consolidated
financial position, results of operations or cash flows.

     Effective April 30, 1994, the registrant and its domestic subsidiaries are
filing consolidated Federal income tax returns with Ford. The registrant and its
domestic subsidiaries filed consolidated Federal income tax returns after
December 31, 1987; prior to that, from September 1, 1985 to December 31, 1987
they were included in the consolidated Federal income tax return of UAL, and
prior thereto in the consolidated Federal income tax return of RCA. Pursuant to
arrangements with Ford, UAL and RCA, the registrant provides for current and
deferred taxes as if it filed a separate consolidated tax return with its
domestic subsidiaries, except that if any items are subject to limitations in
the registrant's consolidated return calculations, such as foreign tax credits,
investment tax credits, capital losses and net operating losses, such
limitations are determined on the basis of the entire Ford, UAL or RCA
consolidated group, as appropriate. To the extent that items which would be
subject to limitation at the registrant's consolidated return level are not
limited in the Ford, UAL and RCA consolidated return, the registrant and its
domestic subsidiaries receive credit for such items. The registrant and its
subsidiaries account for investment tax credits under the flow-through method.
As of December 31, 1995, U.S. income taxes have not been provided on $274
million in undistributed earnings of subsidiaries that have been or are intended
to be permanently reinvested outside the United States or are expected to be
remitted free of taxes.

     Hertz is a party to a cooperative advertising agreement with Ford pursuant
to which Ford participates in some of the cost of certain of Hertz' advertising
programs in the United States and abroad which feature the Ford name or
products. The amounts contributed by Ford for the years ended December 31, 1995,
1994 and 1993 were (in millions) $44.1, $42.0 and $40.3, respectively. This
program will continue in the future.

                                      -29-
<PAGE>   30
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 1 - Summary of Significant Accounting Policies (continued)

     Pension and Income Saving Plans -- substantially all domestic employees,
after completion of specified periods of service, are eligible to participate in
the Retirement Plan for the Employees of The Hertz Corporation ("Hertz
Retirement Plan") and in the Income Savings Plan of The Hertz Corporation
("Hertz Income Savings Plan") as of August 30, 1985, and prior thereto in the
Retirement Plan and in the Income Savings Plan of RCA. Payments are made to
pension plans of others pursuant to various collective bargaining agreements.
Under the Hertz Retirement Plan, through June 30, 1987 employees contributed a
part of the cost of current-service benefits while Hertz contributed the
remainder and all other costs under the projected unit credit cost method.
Effective July 1, 1987, the Hertz Retirement Plan was revised to an "Account
Balance Pension Plan" under which Hertz pays the entire cost and employees are
no longer required to contribute. The normal retirement benefits are based on
years of credited service and the five highest amounts of annual compensation
during the employee's last ten years of credited service up to July 1, 1987.
Effective July 1, 1987, the normal retirement benefit will be the value of their
cash balance account accrued after July 1, 1987. Hertz' funding policy is to
contribute at least the minimum amount required by the Employee Retirement
Income Security Act of 1974. Under the Hertz Income Savings Plan, as explained
below, Hertz contributes a fixed percentage of eligible employees' base salary.
Employees may also elect to have Hertz contribute on their behalf, subject to a
percentage limitation, any whole percentage of their base salary to the Plan, in
lieu of being paid such salary in cash under a qualified cash or deferred
arrangement described in Section 401(k) of the Internal Revenue Code. Prior to
July 1, 1987, employees could also make their own contributions of their base
salary, subject to a percentage limitation. Effective July 1, 1987, the Hertz
Income Savings Plan was amended whereby Hertz contributes a percentage of
eligible employees' salary only if the employee elects to contribute a portion
of his/her base salary. Hertz' contribution was 66% of the first 6% of the
employee's contribution for a maximum Hertz match of 4% of the employee's base
salary. Employee after tax contributions were eliminated. Effective January 1,
1988, the Plan was further amended to change Hertz' contribution from 66% to 50%
of the first 6% of the employee's contribution for a maximum Hertz match of 3%
of the employee's base salary. Effective July 1, 1991, Hertz' contribution was
suspended and was resumed on January 1, 1992.

     Most of the registrant's foreign subsidiaries have defined benefit
retirement plans or are required to participate in government plans. These plans
are all funded, except in Germany, where an unfunded liability is recorded. In
certain countries, when the subsidiaries make the required funding payments,
they have no further obligations under such plans.

     The American Institute of Certified Public Accountants issued in December
1993 Statement of Position No. 93-7, which requires, effective for financial
statements for years beginning after June 15, 1994, that advertising costs be
expensed in the periods in which those costs are incurred, or the first time the
advertising takes place. Implementation of this statement did not have a
material effect on Hertz' consolidated financial position, results of operations
or cash flows.

     Use of estimates and assumptions as determined by management is required in
the preparation of consolidated financial statements in conformity with
generally accepted accounting principles. Actual results could differ from those
estimates and assumptions. Certain amounts for prior periods have been
reclassified to conform with 1995 presentations.

                                      -30-
<PAGE>   31
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 2 - Debt

     Debt of the registrant and its subsidiaries (in thousands of dollars)
consists of the following:

<TABLE>
<CAPTION>
                                                                                                    December 31,
                                                                                         ----------------------------------
                                                                                            1995                    1994
                                                                                         ----------              ----------
<S>                                                                                      <C>                     <C>
     Notes payable, including commercial paper,
         average interest rate: 1995, 5.8%;
         1994, 6.0%                                                                      $1,036,215              $1,018,443

     Promissory notes, average interest rate:
         1995, 7.6%; 1994, 7.9%; (effective
         average interest rate:  1995, 7.7%; 1994,
         8.0%); net of unamortized discount: 1995,
         $3,019; 1994, $3,122; due 1996 to 2005                                           1,694,641               1,620,670

     Property and equipment lease obligations, average
         interest rate: 1995, 7.9%; 1994, 8.7%;
         due 1996 to 1998                                                                     3,572                   6,847

     Medium-term notes, average interest rate: 1995,
         9.4%; 1994, 9.3% (effective average interest
         rate: 1994, 9.6%); net of amortized discount,
         1994, $36; due 1996 to 1997                                                        119,175                 188,389

     Senior subordinated promissory notes, 
         average interest rate 9.5% (effective average 
         interest rate 9.6%); net of unamortized 
         discount: 1995, $313; 1994, $461; due 1996
         to 1998                                                                            249,687                 249,539

     Junior subordinated promissory notes, average 
         interest rate 6.9%; net of unamortized discount:
         1995, $286; 1994, $329; due 2000 to 2003                                           399,714                 399,671

     Subsidiaries' debt:
         Short-term borrowings -
              Banks, average interest rate: 1995, 6.0%;
                  1994, 6.5%, in foreign currencies                                         684,634                 693,020
              Commercial paper, average interest rate
                  5.8%, in foreign currencies                                                11,357                      -
              Others, average interest rate: 1995, 3.7%;
                  1994, 4.3%, in foreign currencies                                          51,200                  64,078

         Other borrowings, average interest rate: 1995, 
               7.0%; 1994, 8.1%; in domestic and foreign 
               currencies; net of unamortized discount:
               1995, $29; 1994, $47                                                          47,289                 173,258
                                                                                         ----------              ----------

         Total                                                                           $4,297,484              $4,413,915
                                                                                         ==========              ==========
</TABLE>


                                      -31-
<PAGE>   32
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Note 2 - Debt (continued)

     The aggregate amounts of maturities of debt, in millions, are as follows:
1996, $2,013.1 (including $1,783.4 of commercial paper, demand and other
short-term borrowings); 1997, $214.9; 1998, $371.6; 1999, $349.7; 2000, $249.7;
after 2000, $1,098.5.

     During the year ended December 31, 1995, short-term borrowings, in
millions, were as follows: maximum amounts outstanding $1,853.8 commercial
paper, $1,083.5 banks and $193.5 other; monthly average amounts outstanding
$1,292.6 commercial paper (weighted average interest rate 6.1%), $828.2 banks
(weighted average interest rate 6.4%) and $108.6 other (weighted average
interest rate 4.3%).

     During the year ended December 31, 1994, short-term borrowings, in
millions, were as follows: maximum amounts outstanding $1,021.3 commercial
paper, $1,247.6 banks and $194.1 other; monthly average amounts outstanding
$659.9 commercial paper (weighted average interest rate 4.9%), $975.5 banks
(weighted average interest rate 5.8%) and $95.5 other (weighted average interest
rate 5.3%).

     During the year ended December 31, 1993, short-term borrowings, in
millions, were as follows: maximum amounts outstanding $769.7 commercial paper,
$940.1 banks and $48.0 other; monthly average amounts outstanding $287.5
commercial paper (weighted average interest rate 3.3%), $722.4 banks (weighted
average interest rate 6.9%) and $25.2 other (weighted average interest rate
7.8%).

     The net amortized discount charged to interest expense for the years ended
December 31, 1995, 1994 and 1993 relating to debt and other liabilities was $.9
million, $1.3 million and $1.8 million, respectively. In addition, interest
expense for the years 1995, 1994 and 1993 was reduced by $1.3 million, $1.6
million and $8.2 million, respectively, of interest income, relating to refunds
of prior years' state, local and federal income taxes.

     In 1994, the registrant entered into the following two committed bank
facilities with a group of twenty-nine commercial banks, which will be utilized
to support commercial paper and other short-term borrowings in the aggregate
amount of $1.75 billion: (i) five year credit agreement for $1 billion is
committed until June 30, 2000. The termination date is automatically extended
for an additional one-year period each June 30, unless the bank gives notice to
the contrary. A commitment fee of .125% per annum is payable on the unused
available credit; and (ii) 364-day credit agreement for $751 million, renewed in
June 1995, is committed until June 27, 1996. A commitment fee of .065% per annum
is payable on the unused available credit.

     The registrant also entered into a revolving loan agreement with Ford on
June 8, 1994 under which the registrant may borrow from Ford from time to time
up to $250 million outstanding at any one time. Obligations of the registrant
under this agreement would rank pari passu with the registrant's senior debt
securities. This agreement by its terms expires on June 30, 1999, on which date
any amounts then outstanding thereunder are required to be repaid. A commitment
fee of .125% per annum is payable on the unused available credit. In addition,
at December 31, 1995, the registrant and a subsidiary had $268.9 million of
outstanding loans from Ford.

                                      -32-
<PAGE>   33
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Note 2 - Debt (continued)

     Hertz had consolidated unused lines of credit subject to customary terms
and conditions, which includes unused amounts under the three facilities
indicated above, of approximately $2.8 billion at December 31, 1995.

     The terms of the registrant's loan agreements limit the payment of cash
dividends. At December 31, 1995, approximately $158 million of consolidated
shareholders' equity was free of such limitations.

Note 3 - Foreign Currency

     Foreign currency exchange gains and losses included in net income were net
gains of $2.0 million, $1.2 million and $1.4 million for the years ended
December 31, 1995, 1994 and 1993, respectively. The cumulative translation
charge adjustment at December 31, 1992 was $12.5 million. The net translation
credit adjustments were $19.8 million and $23.5 million for the years ended
December 31, 1995 and 1994, respectively. The net translation charge adjustment
was $16.3 million for the year ended December 31, 1993.

Note 4 - Available-for-Sale Securities

     Effective January 1, 1994, the registrant adopted the provisions of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities", which requires a more detailed disclosure of debt
and equity securities held for investment, the methods to be used in determining
fair value, and when to record unrealized holding gains and losses in earnings
or in a separate component of shareholders' equity.

     As of December 31, 1995, Prepaid Expenses and Other Assets in the
consolidated balance sheet include available-for-sale securities at fair value
of $5.8 million (cost $5.7 million). The fair value is calculated using
information provided by outside quotation services. These securities include
various governmental and corporate debt obligations, with the following maturity
dates (in millions): fair value $.3 (cost $.3) in 1996; fair value $5.3 (cost
$5.2) 1997 through 2001; fair value $.2 (cost $.2) 2002 through 2014. For the
year ended December 31, 1995, proceeds of $6.6 million from the sale of
available-for-sale securities were received, and a gross realized gain of
$161,555 and gross realized loss of $56,647 were included in earnings. Actual
cost was used in computing the realized gain and loss on the sale. For the year
ended December 31, 1995, unrealized holding losses and unrealized holding
gains, net of taxes, included in Shareholders' Equity were $26,000 and
$126,000, respectively.                                         

                                      -33-
<PAGE>   34
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 5 - Acquisitions

     In 1992, the registrant entered into a lease agreement with a third party
lessor, Hertz Funding Corp. ("HFC"), providing for the lease of vehicles
purchased by HFC under a repurchase program offered by Ford. Under the lease,
which was accounted for as an operating lease, the registrant made payments
equal to the monthly depreciation and all expenses (including interest) of the
third party lessor and was responsible for the remaining net cost on any
vehicles that became ineligible under the repurchase program. At October 31,
1994, the net cost of the vehicles leased under this agreement was approximately
$300 million. On November 1, 1994, the registrant acquired all of the issued and
outstanding shares of HFC from PAZ ABS Corp. (an entity unaffiliated with the
registrant or any of its subsidiaries) for the purpose of winding-down the
activities of HFC. Commencing in November 1994, the accounts of HFC have been
included in the consolidated financial statements of the registrant, which did
not have a material effect on the registrant's consolidated financial position
or results of operations.

     On July 31, 1994, Axus, S.A., a car leasing company of the registrant which
operates in various countries in Europe, acquired an additional interest in
Locaplan S.A., a car leasing operation in France, increasing its ownership from
50% to 100%. The cost relating to this acquisition approximated $2.3 million,
which exceeded the net assets acquired by approximately $2.2 million. Commencing
in August 1994, the accounts of this operation have been included in the
consolidated financial statements of the registrant, which did not have a
material effect on the registrant's consolidated financial position or results
of operations. These operations were sold by the registrant effective January 1,
1995 (see Note 14).

     In connection with the acquisition of the registrant by Park Ridge in
December 1987 and UAL in August 1985, the excess of the purchase price over the
consolidated equity of the registrant at the time of these purchases was $658.3
million. These costs are being amortized by the registrant over 40 years. The
unamortized amount of such costs at December 31, 1995 was $517.8 million.

                                      -34-
<PAGE>   35
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 6 - Pension and Income Savings Plans and Postretirement Benefit Plans

     The following tables set forth the funded status and the net periodic
pension cost of the Hertz Retirement Plan covering its domestic ("U.S.")
employees and the retirement plans for foreign operations ("Non-U.S.") and
amounts included in the consolidated balance sheet and statement of income (in
millions of dollars):

<TABLE>
<CAPTION>
                                            December 31, 1995   December 31, 1994
                                            -----------------   -----------------
                                             U.S.     Non-U.S.    U.S.   Non-U.S.
                                            ------    -------   ------   -------
<S>                                         <C>       <C>       <C>      <C>
Actuarial present value of accumulated
   benefit obligation -
      Vested                                $(62.6)   $(27.9)   $(47.0)   $(19.8)
      Nonvested                               (8.4)     (3.7)     (9.3)     (3.1)
                                            ------    ------    ------    ------

          Total                             $(71.0)   $(31.6)   $(56.3)   $(22.9)
                                            ======    ======    ======    ======

Actuarial present value of projected
     benefit obligation                     $(98.9)   $(37.3)   $(92.7)   $(31.8)
Plan assets at fair value                     90.4      25.5      68.8      22.8
                                            ------    ------    ------    ------
Projected benefit obligation in excess
     of plan assets                           (8.5)    (11.8)    (23.9)     (9.0)
Unrecognized net (gain) loss                 (14.2)      5.0       2.6       3.5
Prior service cost not yet recognized in
     net periodic pension cost                  .2      --          .3      --
Remaining unrecognized net obligation          1.3      --         1.9      --
                                            ------    ------    ------    ------

Pension liability included in the
     balance sheet                          $(21.2)    $(6.8)   $(19.1)    $(5.5)
                                            ======    ======    ======    ======
</TABLE>


<TABLE>
<CAPTION>
                                                     Years ended December 31,
                                      -----------------------------------------------------
                                            1995               1994              1993
                                      ----------------   ----------------   ---------------
                                       U.S.    Non-U.S.   U.S.    Non-U.S.   U.S.   Non-U.S.
                                      -----    -------   -----    -------   -----   -------
<S>                                   <C>      <C>       <C>      <C>       <C>     <C>
Service cost - benefits
  earned during the period            $ 5.3     $ 2.2    $ 6.4     $ 2.3    $ 6.3    $ 1.8
Interest cost on projected
  benefit obligation                    6.1       2.1      7.2       1.5      6.7      1.4
Return on assets:
  Actual (gain) loss                  (21.3)     (1.5)      .7      (1.5)    (7.5)    (1.1)
  Deferred gain (loss)                 15.4      --       (6.1)     --        2.8     --
Net amortization and deferral            .2        .1      1.8        .1      1.6       .1
                                      -----     -----    -----     -----    -----    -----
Net periodic pension cost
  included in the income statement    $ 5.7     $ 2.9    $10.0     $ 2.4    $ 9.9    $ 2.2
                                      =====     =====    =====     =====    =====    =====
</TABLE>

     Significant assumptions used for the U.S. plan were as follows: weighted
average discount rate of 7.0% at December 31, 1995, 8.25% during 1995 (7% during
1994 and 7-3/4% during 1993); 5.1% rate of increase in future compensation
levels (5.5% for 1994 and 6.4% for 1993); and expected long-term rate of return
on assets of 9%. Assumptions used for the Non-U.S. plans vary by country and are
made in accordance with local conditions, but do not vary materially from those
used in the U.S. plan. Plan assets consist principally of investments in stocks,
government bonds and other fixed income securities.

                                      -35-
<PAGE>   36
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Note 6 - Pension and Income Savings Plans and Postretirement Benefit Plans
     (continued)

     The provisions charged to income for the years ended December 31, 1995,
1994 and 1993 for all other pension plans were approximately (in millions) $6.1,
$6.0 and $5.6, respectively.

     The provisions charged to income for the years ended December 31, 1995,
1994 and 1993 for the Hertz Income Savings Plan were approximately (in millions)
$3.4, $3.0 and $2.6, respectively.

     The estimated cost for postretirement health care and life insurance
benefits is accrued on an actuarially determined basis. The following sets 
forth the plans' status, reconciled with the amounts included in the 
consolidated balance sheet and statement of income (in millions):

<TABLE>
<CAPTION>
                                                                             December 31,
                                                                        ---------------------
                                                                        1995             1994
                                                                        ----             ----
<S>                                                                     <C>              <C>
   Actuarial present value of accumulated benefit
      obligation -
         Retirees                                                       $1.7             $1.5
         Active employees eligible to retire                             3.0              2.3
         Other active employees                                          3.5              2.3
                                                                        ----             ----
              Total accumulated benefit obligation                       8.2              6.1
   Unrecognized net gain                                                  .3              2.1
                                                                        ----             ----
   Accrued liability included in the balance
     sheet                                                              $8.5             $8.2
                                                                        ====             ====
</TABLE>


<TABLE>
<CAPTION>
                                                                                   Years Ended December 31,
                                                                            ------------------------------------
                                                                            1995          1994             1993
                                                                            ----          ----             ----
<S>                                                                         <C>           <C>              <C>
     Benefits attributed to employees' service                              $ .2          $ .2             $ .3
     Interest on accumulated benefit obligation                               .5            .4               .5
     Amortization of net gain                                                (.1)          (.3)             (.1)
                                                                            ----          ----             ----
       Net periodic postretirement benefit cost                             $ .6          $ .3             $ .7
                                                                            ====          ====             ====
</TABLE>


     The significant assumptions used for the postretirement benefit plans were
as follows: weighted average discount rate of 7.25% at December 31, 1995, 8.75%
during 1995 (7.5% in 1994 and 7.0% in 1993), 5.3% rate of increase in future
compensation levels (5.5% in 1994 and 6.4% in 1993), 8.3% weighted average
health care cost trend rate through 2000 (9% in 1994 and 10% in 1993), and 7.5%
weighted average trend rate in ten years (8% in 1994 and 8.6% in 1993). Changing
the assumed health care cost trend rates by one percentage point in each year
would change the accumulated postretirement benefit obligation as of December
31, 1995 by approximately $550,000, and the aggregate service and interest cost
components of net periodic postretirement benefit cost for 1995 by approximately
$70,000.

                                      -36-
<PAGE>   37
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Note 7 - Revenue Earning Equipment

     Revenue earning equipment is used in the rental of vehicles and
construction equipment and the leasing of vehicles under closed-end leases where
the disposition of the vehicles upon termination of the lease is for the account
of Hertz. Revenue is recorded when it becomes receivable and expenses are
recorded as incurred. Hertz' domestic revenue earning vehicles include
approximately 65% Ford products, which are acquired from dealers who are
independent from Ford. The percentage of Ford products acquired by Hertz is
expected to continue at approximately this level in the future, pursuant to a
long-term supply contract between the registrant and Ford. Hertz purchases the
vehicles from Ford dealers at competitive prices.

     Under operating leases, aggregate minimum future rentals for vehicles
leased at December 31, 1995 are receivable approximately as follows (in
millions): $29 in 1996, $18 in 1997, $7 in 1998, and $1 in 1999. Vehicles under
lease at December 31, 1995 which are owned by Hertz amounted to $80 million, net
of accumulated depreciation of $22 million. 

     The average holding periods of vehicles and other revenue earning equipment
are as follows: car rental vehicles 5 to 8 months, car leasing vehicles 36
months, and other equipment 18 to 60 months. At December 31, 1995, the average
ages of owned vehicles and other revenue earning equipment are as follows: car
rental vehicles 5-1/2 months, car leasing vehicles 18 months, and other
equipment 21 months. At December 31, 1995, approximately 15% of owned vehicles
and all other revenue earning equipment were "at risk."

     Depreciation of revenue earning equipment includes the following (in
thousands of dollars):

<TABLE>
<CAPTION>
                                                                          Years Ended December 31,
                                                                 ------------------------------------------
                                                                   1995             1994             1993
                                                                 --------         --------         --------
<S>                                                              <C>              <C>              <C>
     Depreciation of revenue earning equipment                   $753,999         $651,413         $461,708

     Adjustment of depreciation upon disposal
      of the equipment, which includes credits 
      in 1993 resulting from valuing certain pre-
      acquisition assets on a net of tax basis                     (6,356)         (22,983)         (28,144)
     Rents paid for vehicles leased                                56,219           74,214           90,312
                                                                 --------         --------         --------

         Total                                                   $803,862         $702,644         $523,876
                                                                 ========         ========         ========
</TABLE>

                                      -37-
<PAGE>   38
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Note 7 - Revenue Earning Equipment (continued)

     Effective July 1, 1994, certain lives being used to compute the provision
for depreciation of revenue earning equipment were increased to reflect changes
in the estimated residual values to be realized when the equipment is sold. As a
result of this change, depreciation of revenue earning equipment for the years
1995 and 1994 were decreased by $12.0 million and $9.6 million, respectively.

     The adjustment of depreciation upon disposal of revenue earning equipment
for the years ended December 31, 1995, 1994, and 1993 included (in millions) net
gains of $13.8, $13.2 and $16.1, respectively, on the sale of equipment in the
construction equipment rental operations in the United States; net losses of
$7.5 and net gains of $9.8, and $7.9, respectively, in the car rental and car
leasing operations; and in 1993, credits of $4.1 resulting from valuing
pre-acquisition assets on a net of tax basis.

     As of December 31, 1995 and 1994, Ford owed Hertz $358.6 million and $352.9
million, respectively, in connection with various vehicle repurchase and
warranty programs. As of December 31, 1995 and 1994, Hertz owed Ford $9.4
million and $41.4 million, respectively, (included under Accounts Payable in the
consolidated balance sheet) in connection with vehicles purchased. These
transactions were made and are being paid in the ordinary course of business.

     During the year ended December 31, 1995, the registrant purchased Ford
vehicles at a cost of approximately $4.1 billion, and sold Ford vehicles to Ford
or its affiliates under various repurchase programs for approximately $3.1
billion.

                                      -38-
<PAGE>   39
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Note 8 - Taxes on Income

     The provision for taxes on income consists of the following (in thousands
of dollars):

<TABLE>
<CAPTION>
                                                  Years Ended December 31,
                                            ----------------------------------
                                              1995         1994         1993
                                            --------     --------     --------
<S>                                         <C>          <C>          <C>
     Current:
       Federal                              $ 10,381     $ 38,797     $ 15,717
       Foreign                                29,422       20,016       23,186
       State and local                        (1,165)       8,236        2,719
                                            --------     --------     --------

           Total current                      38,638       67,049       41,622
                                            --------     --------     --------

     Deferred:
       Federal                                35,577        2,027        8,094
       Foreign                               (11,577)        (127)      (5,594)
       State and local                         4,500        2,800        4,900
                                            --------     --------     --------

           Total deferred                     28,500        4,700        7,400
                                            --------     --------     --------

           Total provision                  $ 67,138     $ 71,749     $ 49,022
                                            ========     ========     ========

     The principal items in the deferred
tax provision (benefit) are as follows
(in thousands of dollars):

     Differences between tax and book
       depreciation                         $ 34,790     $  9,234     $ 33,259

     Accrued and prepaid expense
       deducted for tax purposes when
       paid or incurred                       13,671      (14,517)     (20,171)

     Tax operating loss utilized
       (carryforwards)                         1,507       (2,636)      (2,585)

     Federal alternative minimum tax
       credit utilized (carryforwards)       (10,217)       1,072       (8,123)

     Foreign tax credit carryforwards        (11,251)        --           --


     Investment tax credit utilized             --         11,547        5,020
                                            --------     --------     --------

       Total deferred provision             $ 28,500     $  4,700     $  7,400
                                            ========     ========     ========
</TABLE>

                                      -39-
<PAGE>   40
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Note 8 - Taxes on Income (continued)

The principal items in the deferred tax liability at December 31, 1995 and 1994
are as follows (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                  1995                     1994
                                                                ---------                --------
<S>                                                             <C>                      <C>
     Differences between tax and book
       depreciation                                             $ 245,192                $210,402

     Accrued and prepaid expense
       deducted for tax purposes when
       paid or incurred                                          (109,099)               (122,770)

     Tax operating loss carryforwards                              (5,409)                 (6,916)

     Foreign tax credit carryforwards                             (11,251)                     -

     Federal alternative minimum tax
       credit carryforwards                                       (41,633)                (31,416)
                                                                ---------                --------


           Total                                                $  77,800                $ 49,300
                                                                =========                ========
</TABLE>


     The tax operating loss carryforwards at December 31, 1995 of $5.4 million
relate to certain foreign operations and have no expiration dates. It is
anticipated that such operations will become profitable in the future and the
carryforwards will be fully utilized.

     As of December 31, 1995, the alternative minimum tax credit carryforwards
of $41.6 million (which has no expiration date) will be utilized upon reversal
of timing differences and against future taxable income.

     As of December 31, 1995, the foreign tax credit carryforwards of $11.3
million ($.3 million will expire in 1999 and $11.0 million in 2000) is
anticipated to be utilized through the consolidated Federal income tax returns
filed with Ford.

                                      -40-
<PAGE>   41
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 8 - Taxes on Income (continued)

     The principal items accounting for the difference in taxes on income
computed at the U.S. statutory rate of 35% and as recorded are as follows (in
thousands of dollars):

<TABLE>
<CAPTION>
                                                                                         Years Ended December 31,
                                                                                    ----------------------------------
                                                                                      1995         1994         1993
                                                                                    --------     --------     --------
<S>                                                                                 <C>          <C>          <C>
     Computed tax at statutory rate                                                 $ 60,320     $ 56,991     $ 35,858

     State and local income taxes, net
         of Federal income tax benefit                                                 2,168        7,173        4,953

     Tax effect on the amortization of the
       cost in excess of the registrant's net
       assets acquired by Park Ridge and UAL                                           5,764        5,760        5,737

     Adjustments made to tax accruals in connection with tax audit evaluations
         and the effects of prior years' tax sharing arrangements between the
         registrant and its former parent
         companies, UAL and RCA                                                         --         (1,511)      (1,983)

     Provision relating to the increase in net deferred
         tax liabilities as of January 1, 1993 due to
         changes in tax laws enacted in August 1993                                     --           --          1,137

     Income taxes on foreign earnings at effective rates different from the U.S. 
         statutory rate, including the anticipated realization of certain
         foreign tax benefits and the effect of subsidiaries' gains and losses
         and exchange adjustments with no tax
         effect                                                                       (3,890)       1,987        1,883

     All other items, net, none of which
         exceeded 5% of computed tax                                                   2,776        1,349        1,437
                                                                                    --------     --------     --------


              Total provision                                                       $ 67,138     $ 71,749     $ 49,022
                                                                                    ========     ========     ========
</TABLE>

                                      -41-
<PAGE>   42
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 9 - Lease and Concession Agreements

     Hertz has various concession agreements which provide for payment of rents
and a percentage of revenue with a guaranteed minimum and real estate leases
under which the following amounts were expensed (in thousands of dollars):


<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                    --------------------------------------------------

                                                                      1995                 1994                 1993
                                                                    --------             --------             --------
<S>                                                                 <C>                  <C>                  <C>
     Rents                                                          $ 49,903             $ 50,066             $ 49,168
     Concession fees:
       Minimum fixed obligations                                     121,632              114,920              105,499
       Additional amounts, based on revenues                         121,461              107,685               89,792
                                                                    --------             --------             --------

          Total                                                     $292,996             $272,671             $244,459
                                                                    ========             ========             ========
</TABLE>


     As of December 31, 1995 minimum obligations under existing agreements
referred to above are approximately as follows (in thousands of dollars):

<TABLE>
<CAPTION>
                                                                          Rents                Concessions
                                                                          -----                -----------
<S>                                                                     <C>                    <C>
         Years ended December 31,
              1996                                                      $ 41,937                 $95,476
              1997                                                        35,408                  69,652
              1998                                                        30,905                  48,706
              1999                                                        26,913                  32,824
              2000                                                        23,315                  18,271

         Years after 2000                                                144,832                  45,799
</TABLE>


      In addition to the above, Hertz has various leases on vehicles and office
and computer equipment under which the following amounts were expensed (in
thousands of dollars):

<TABLE>
<CAPTION>
                                                                                 Years Ended December 31,
                                                                      -----------------------------------------------

                                                                        1995               1994                1993
                                                                      --------           --------            --------
<S>                                                                   <C>                <C>                 <C>
         Vehicles                                                     $ 56,219           $ 74,214            $ 90,312
         Office and computer equipment                                  23,965             23,679              25,229
                                                                      --------           --------            --------

            Total                                                     $ 80,184           $ 97,893            $115,541
                                                                      ========           ========            ========
</TABLE>


      As of December 31, 1995, minimum obligations under existing agreements
referred to above that have a maturity of more than one year are as follows (in
thousands): office and computer equipment 1996, $5,771; 1997, $2,944; 1998, 
$498; 1999, $63; 2000, $27.

                                      -42-
<PAGE>   43
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 10 - Segment Information

   Hertz' business consists of two significant segments: Rental and leasing of
automobiles and certain other activities ("car rental"); and rental, leasing,
and sales of construction and materials handling equipment ("construction
equipment rental and sales"). The contributions of these segments to revenues
are indicated in the Consolidated Statement of Income. The contribution of these
segments to other financial data (in millions of dollars) are as follows:

<TABLE>
<CAPTION>
                                                               Years Ended December 31,
                                                              --------------------------

                                                               1995      1994      1993
                                                              ------    ------    ------
<S>                                                           <C>       <C>       <C>
Operating Income (pretax income before interest):
    Car rental                                                $  356    $  353    $  307

    Construction equipment rental and sales                      123        87        41
                                                              ------    ------    ------


              Total                                           $  479    $  440    $  348
                                                              ======    ======    ======

Capital Expenditures (includes revenue earning equipment):
    Car rental                                                $7,144    $6,789    $4,783

    Construction equipment rental and sales                      290       235       154
                                                              ------    ------    ------

              Total                                           $7,434    $7,024    $4,937
                                                              ======    ======    ======


Depreciation and Amortization:
     Car rental                                               $  837    $  743    $  557

     Construction equipment rental and sales                      67        48        50
                                                              ------    ------    ------

              Total                                           $  904    $  791    $  607
                                                              ======    ======    ======


Identifiable Assets at December 31:
     Car rental                                               $5,993    $6,023    $4,321

     Construction equipment rental and sales                     664       498       367
                                                              ------    ------    ------

              Total                                           $6,657    $6,521    $4,688
                                                              ======    ======    ======
</TABLE>


                                      -43-
<PAGE>   44
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 10 - Segment Information (continued)

     Hertz operates in the United States and in foreign countries. The
operations within major geographic areas are summarized as follows (in millions
of dollars):

<TABLE>
<CAPTION>
                                              Years Ended December 31,
                                             --------------------------
                                              1995      1994      1993
                                              ----      ----      ----
<S>                                          <C>       <C>       <C>
Revenues

United States                                $2,510    $2,258    $1,932

Foreign operations (substantially Europe)       891     1,036       923
                                             ------    ------    ------

   Total                                     $3,401    $3,294    $2,855
                                             ======    ======    ======

Income Before Income Taxes

United States                                $   98    $   94    $   48

Foreign operations (substantially Europe)        74        69        54
                                             ------    ------    ------

   Total                                     $  172    $  163    $  102
                                             ======    ======    ======

Total Assets at End of Year

United States                                $4,971    $4,762    $3,447

Foreign operations (substantially Europe)     1,686     1,759     1,241
                                             ------    ------    ------

   Total                                     $6,657    $6,521    $4,688
                                             ======    ======    ======
</TABLE>

Note 11 - Litigation

     Various legal actions, governmental investigations and proceedings, and
claims are pending or may be instituted or asserted in the future against the
registrant and its subsidiaries. Litigation is subject to many uncertainties,
and the outcome of individual litigated matters is not predictable with
assurance. It is reasonably possible that certain of the actions, investigations
or proceedings could be decided unfavorably to the registrant or the subsidiary
involved. Although the amount of liability at December 31, 1995 with respect to
these matters cannot be ascertained, such liability could approximate up to $1
million (net of income tax benefits), and the registrant believes that any
resulting liability should not materially affect the consolidated financial
position, results of operations or cash flows of the registrant.

     On January 9, 1995, Newark International Airport, in Newark, N.J., suffered
an electrical outage that caused significant operational problems for one day
due to a construction accident that occurred on the registrant's property. A
subcontractor of the registrant was involved in this accident. The registrant
believes that it has adequate defenses, indemnities and insurance coverage
against existing and anticipated litigation.

                                      -44-
<PAGE>   45
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 12 - Quarterly Financial Information (Unaudited)

     A summary of the quarterly operating results during 1995 and 1994 were as
follows (in thousands):

<TABLE>
<CAPTION>
                                      Gross Profit    Income (Loss)
                                     (Pretax Income   Before Income      Net Income
                      Revenues      Before Interest)      Taxes            (Loss)
                     ----------     ---------------   -------------      ----------
<S>                  <C>              <C>              <C>               <C>
1995

First quarter        $  735,679       $   69,705       $     (646)       $     (365)

Second quarter          858,555          115,089           34,515            19,637

Third quarter           989,756          194,070          109,584            65,092

Fourth quarter          816,598          100,553           28,891            20,842
                     ----------       ----------       ----------        ----------

  Total Year         $3,400,588       $  479,417       $  172,344        $  105,206
                     ==========       ==========       ==========        ==========

1994

First quarter        $  694,803       $   54,636       $   (1,886)       $   (1,066)

Second quarter          825,912          118,796           46,367            26,361

Third quarter           958,189          184,051          108,384            61,482

Fourth quarter          815,497           82,576            9,966             4,305
                     ----------       ----------       ----------        ----------

  Total Year         $3,294,401       $  440,059       $  162,831        $   91,082
                     ==========       ==========       ==========        ==========
</TABLE>


Effective July 1, 1994, certain lives being used to compute the provision for
depreciation of revenue earning equipment were increased to reflect changes in
the estimated residual values to be realized when the equipment is sold. As a
result of this change, pretax income before interest includes credit adjustments
of $10.8 million in the first quarter of 1995 and $1.2 million in the second
quarter of 1995 as a result of decreasing depreciation of revenue earning
equipment.

The tax provision in the fourth quarter of 1995 includes $6.5 million credits
relating to foreign taxes paid which is anticipated to be offset against U.S.
income tax liabilities.

The tax provision in the fourth quarter of 1994 includes a $1.5 million credit
resulting from adjustments made to tax accruals in connection with tax audit
evaluations and the effects of prior years' tax sharing arrangements between the
registrant and its former parent company, RCA.

                                      -45-
<PAGE>   46
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 13 - Financial Instruments and Commitments

   Financial instruments which potentially subject the registrant to
concentrations of credit risk consist principally of cash equivalents and trade
receivables. The registrant places its cash equivalents with financial
institutions and limits the amount of credit exposure to any one financial
institution. Concentrations of credit risk with respect to trade receivables are
limited due to the large number of customers comprising the registrant's
customer base, and their dispersion across different businesses and geographic
areas. As of December 31, 1995, the registrant had no significant concentration
of credit risk.

     Cash and equivalents -- fair value approximates cost indicated on the
balance sheet at December 31, 1995, because of the short-term maturity of these
instruments.

     Debt -- fair value is estimated based on quoted market rates as well as
borrowing rates currently available to the registrant for loans with similar
terms and average maturities. Carrying value was used as fair value for
borrowings with an initial maturity of 92 days or less. The fair value of all
debt at December 31, 1995 approximated $4.4 billion compared to carrying value
of $4.3 billion.

     Public Liability and Property Damage -- provisions for public liability and
property damage on self-insured domestic claims and reinsured foreign claims are
made by charges to expense based upon evaluations of estimated ultimate
liabilities on reported and unreported claims. These liabilities are anticipated
to be paid in the future which range between one and five years. The present
(fair) value of these liabilities at December 31, 1995 approximates $284 million
compared to carrying value of $312 million.

     The registrant and its subsidiaries have entered into arrangements to
manage exposure to fluctuations in interest rates. These arrangements consist of
interest-rate swap agreements ("swaps") and forward rate agreements ("FRAs").
The differential paid or received on these agreements is recognized as an
adjustment to interest expense. These agreements are not entered into for
trading purposes. The effect of these agreements is to make the registrant less
susceptible to changes in interest rates by effectively converting certain
variable rate debt to fixed rate debt. Because of the relationship of current
market rates to historical fixed rates, the effect at December 31, 1995 of the
swap and FRA agreements is to give the registrant an overall effective
weighted-average rate on debt of 6.94%, with 31% of debt effectively subject to
variable interest rates, compared to a weighted-average interest rate on debt of
6.89%, with 42% of debt subject to variable interest rates when not considering
the swap and FRA agreements. At December 31, 1995, these agreements expressed in
notional amounts aggregated (in millions) $420.3 swaps, and FRAs in the amount
of $31.7 which were settled in 1995. Notional amounts are not reflective of the
registrant's obligations under these agreements because the registrant is only
obligated to pay the net amount of interest rate differential between the fixed
and variable rates specified in the contracts. The registrant's exposure to any
credit loss in the event of non-performance by the counterparties is further

                                      -46-
<PAGE>   47
                     THE HERTZ CORPORATION AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 13 - Financial Instruments and Commitments (continued)

mitigated by the fact that all of these financial instruments are with
significant financial institutions that are rated "A" or better by the major
credit rating agencies. At December 31, 1995, the fair value of all outstanding
contracts, which is representative of the registrant's obligations under these
contracts, assuming the contracts were terminated at that date, was
approximately a net payable of $4.8 million on the swaps. This relates to
notional principal (in millions) of $420.3 swaps maturing $156.6, $233.8, $19.8
and $10.1 in 1996, 1997, 1998 and 1999, respectively; and of notional principal
scheduled to start after December 31, 1995 of $13.4 swaps maturing $1.2, $.6,
$.4 and $11.2 in 1996, 1997, 1998 and 1999, respectively.

Note 14 - Sale of European Car Leasing and Car Dealership Operations

     Effective January 1, 1995, the registrant sold its European car leasing and
car dealership operations to Hertz Leasing International, Inc. ("HLI"), at an
amount equal to its book value of approximately $61 million. HLI is wholly owned
by Ford. In addition, except for Australia and New Zealand, Ford has received
the worldwide rights (subject to certain existing license rights) to use and
sublicense others to use the "Hertz" name in the conduct of motor vehicle
leasing businesses, and has agreed to pay the registrant a license fee payable
over five years -- $9.3 million was received for the year 1995. The unaudited
total assets as of December 31, 1994 and unaudited total revenues and net income
for the year ended December 31, 1994 of the registrant's European car leasing
and car dealership operations were (in millions) $482, $295 and $6,
respectively. The registrant believes that this transaction will not have a
material effect on its financial position or future operations.

     At December 31, 1995, a foreign subsidiary of the registrant had $30.1
million loan receivables and related interest from foreign subsidiaries of HLI,
which will be repaid in 1996 and 1997.

Note 15 - Impairment of Long-Lived Assets and Certain Identifiable Intangibles

     The registrant evaluates the carrying value of goodwill for potential
impairment on an ongoing basis. Such evaluations compare operating income before
amortization of goodwill to the amortization recorded for the operations to
which the goodwill relates. The registrant also considers projected future
operating results, trends and other circumstances in making such estimates and
evaluations.

     Statement of Financial Accounting Standards No. 121 ("FAS 121"),
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of," was issued in March 1995. FAS 121 requires that, effective
January 1, 1996, long-lived assets and certain identifiable intangibles to be
held and used by an entity be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying value of an asset may not be
recoverable. It also requires that long-lived assets and certain identifiable
intangibles to be disposed of be reported at the lower of carrying amount or
fair value less cost to sell. The effect of adopting FAS 121 is not expected to
have a material effect on the registrant's consolidated financial position,
results of operations or cash flows.

                                      -47-
<PAGE>   48
                                                                     SCHEDULE II

                     THE HERTZ CORPORATION AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
                            (IN THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
                                            Additions             Deductions
                             Balance at      Charged      -------------------------          Balance
                             Beginning         to         Translation                        at End
                             of Year         Income       Adjustments        Other           of Year
                             ----------     ---------     -----------      --------          --------
<S>                          <C>            <C>            <C>             <C>               <C>
1995

Allowance for doubtful
  accounts                   $ 10,026       $  4,926       $   (319)       $  7,286(a)       $  7,985
                             ========       ========       ========        ========          ========

Public liability and
  property damage            $304,328       $134,926       $   (229)       $127,814(b)       $311,669
                             ========       ========       ========        ========          ========

1994

Allowance for doubtful
  accounts                   $  6,862       $  6,813       $   (521)       $  4,170(a)       $ 10,026
                             ========       ========       ========        ========          ========

Public liability and
  property damage            $264,158       $159,049       $    403        $118,476(b)       $304,328
                             ========       ========       ========        ========          ========

1993

Allowance for doubtful
  accounts                   $  8,496       $  6,714       $    524        $  7,824(a)       $  6,862
                             ========       ========       ========        ========          ========

Public liability and
  property damage            $226,789       $147,387       $  1,076        $108,942(b)       $264,158
                             ========       ========       ========        ========          ========
</TABLE>

     (a)  Amounts written off, net of recoveries.  The year 1995 includes $2
million, which represents the balance at December 31, 1994 relating to the
European Car Leasing and Car Dealership operations sold by the registrant
effective January 1, 1995.

     (b)  Payments of claims and expenses.

                                      -48-
<PAGE>   49
                                INDEX TO EXHIBITS
                                -----------------

<TABLE>
<CAPTION>
 EXHIBIT
   NO.                                     DESCRIPTION
--------                --------------------------------------------------------
<S>                     <C>
3(III)                  CERTIFICATE OF AMENDMENT OF RESTATED CERTIFICATE OF
                        INCORPORATION OF THE HERTZ CORPORATION FILED WITH THE
                        SECRETARY OF STATE OF DELAWARE ON DECEMBER 18, 1995.

12                      COMPUTATION OF CONSOLIDATED RATIO OF EARNINGS TO FIXED
                        CHARGES FOR EACH OF THE FIVE YEARS IN THE PERIOD ENDED
                        DECEMBER 31, 1995.



21                      LISTING OF SUBSIDIARIES OF THE REGISTRANT AT DECEMBER
                        31, 1995.



23                      CONSENT TO THE INCORPORATION BY REFERENCE OF REPORT OF
                        INDEPENDENT PUBLIC ACCOUNTANTS IN PREVIOUSLY FILED
                        REGISTRATION STATEMENTS UNDER THE SECURITIES ACT OF
                        1933.

27                      CONSOLIDATED FINANCIAL DATA SCHEDULE FOR THE YEAR ENDED
                        DECEMBER 31, 1995.
</TABLE>






                                      -49-