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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                            ------------------------

                                   FORM 10-K

(MARK ONE)

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<C>        <S>
   /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, 1999
                                        OR
   / /     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
           THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
           FOR THE TRANSITION PERIOD FROM TO
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                        COMMISSION FILE NUMBER: 1- 13315

                            ------------------------

                           AVIS GROUP HOLDINGS, INC.

             (Exact Name Of Registrant As Specified In Its Charter)

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<S>                                              <C>
                DELAWARE                                      11-3347585
        (State of incorporation)                 (I.R.S. Employer Identification No.)

          900 OLD COUNTRY ROAD                                  11530
          GARDEN CITY, NEW YORK                               (Zip Code)
(Address of Principal Executive Offices)
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       Registrant's telephone number, including area code: (516) 222-3000

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

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<S>                                           <C>
         TITLE OF EACH CLASS                  NAME OF EACH EXCHANGE ON WHICH REGISTERED
--------------------------------------        -----------------------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE                 NEW YORK STOCK EXCHANGE
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          Securities registered pursuant to Section 12(g) of the Act:

                                      NONE
                                (Title of Class)

                         ------------------------------

    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 / /

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

    As of March 15, 2000, the registrant had 31,131,712 shares of Common Stock
outstanding and, at such date, the aggregate market value of the shares of
Common Stock held by non-affiliates of the registrant was approximately
$383,938,680.

                      DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the Registrant's Definitive Proxy Statement for the Annual
Meeting of Stockholders to be held May 16, 2000 are incorporated by reference in
Items 10-13 of Part III of this Annual Report on Form 10-K.

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                                     INDEX
                                  TO FORM 10-K

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                                                                          PAGE
                                                                         NUMBER
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                                PART I
Item 1.   Business....................................................    2-20
Item 2.   Properties..................................................   20-21
Item 3.   Legal Proceedings...........................................      21
Item 4.   Submission of Matters to a Vote of Security Holders.........      21

                               PART II
Item 5.   Market for the Registrant's Common Equity and Related             21
          Stockholder Matters.........................................
Item 5B.  Holders of Common Equity....................................      21
Item 6.   Selected Financial Data.....................................      22
Item 7.   Management's Discussion and Analysis of Financial Condition    23-32
          and Results Of Operations...................................
Item 7A.  Quantitative and Qualitative Disclosure about Market Risk...      33
Item 8.   Financial Statements and Supplementary Data.................      35
Item 9.   Changes in and Disagreements With Accountants on Accounting       35
          and Financial Disclosure....................................

                               PART III
Item 10.  Directors and Executive Officers of the Registrant..........      35
Item 11.  Executive Compensation......................................      35
Item 12.  Security Ownership of Certain Beneficial Owners and               35
          Management..................................................
Item 13.  Certain Relationships and Related Transactions..............      35

                               PART IV
Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form      35
          8-K.........................................................
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                                       1
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                                     PART I

ITEM 1. BUSINESS

    Effective March 27, 2000, Avis Rent A Car, Inc. changed its name to Avis
Group Holdings, Inc. Unless the context otherwise requires, each reference in
this Annual Report to (i) the "Company" refers to Avis Group Holdings, Inc. and
its operating subsidiaries, (ii) "ARACS" refers to Avis Rent A Car System, Inc.,
a wholly-owned subsidiary of the Company, (iii) "VMS" refers to the vehicle
management and fuel card businesses, a wholly-owned subsidiary of the Company
which, prior to their acquisition by the Company, were operated by Cendant
Corporation through its PHH subsidiaries in the United States and Canada ("PHH
North America"), its PHH subsidiaries in Europe ("PHH Europe") and Wright
Express ("WEX"), (iv) "Cendant" refers to Cendant Corporation and its
subsidiaries, and (iv) the "Franchisor" refers to Cendant Car Rental, Inc., a
wholly-owned subsidiary of Cendant. Statistical information contained herein
with respect to the domestic car rental industry and the domestic or
international vehicle leasing and fuel card markets have been derived from
publicly available sources, including trade publications, which the Company has
not independently verified but believes to be reliable.

    Cendant owns all of the outstanding equity of the Franchisor which, in turn,
owns the Avis worldwide vehicle rental system (the "Avis System"). In 1997, the
Franchisor entered into a 50-year franchise agreement with ARACS granting ARACS
the right to operate as a franchisee under the Avis System (the "Master License
Agreement"). Cendant, who is the owner of the data processing and information
system (the "Wizard System") used in connection with the Company's vehicle
rental business and which forms a part of the Avis System, also entered into a
50-year computer services agreement with ARACS with respect to the use of the
Wizard System.

    On June 30, 1999, the Company acquired VMS from Cendant for approximately
$1.8 billion, plus the refinancing of $3.5 billion of VMS indebtedness (the "VMS
Acquisition"). The acquisition financing included borrowings by the Company of
$1.0 billion of term loans, the issuance by the Company of $500 million of
senior subordinated notes, and the issuance of $362.0 million of preferred
stock. The VMS Acquisition establishes the Company as a leading worldwide
provider of comprehensive automotive transportation and vehicle management
solutions. The VMS Acquisition allows Avis to diversify its revenue base, create
significant revenue growth and cost savings opportunities, expand its current
car rental business, and bring together a senior management team that has
extensive knowledge of the car rental and vehicle management and financing
industries.

    Avis Group Holdings, Inc. is a holding company which, through its operating
subsidiary, ARACS, operates the second largest general use car rental business
in the world, based on total revenue and volume of rental transactions and
through its VMS subsidiaries provide integrated card payment, vehicle leasing
and value-added vehicle management services in North America and Europe, with
leading market shares across many of its product lines.

    The Company, through its operating subsidiary ARACS, rents vehicles to
business and leisure travelers through approximately 723 rental locations in
both airport and non-airport (downtown and suburban) markets in the United
States, Canada, Puerto Rico, the U.S. Virgin Islands, Argentina, Australia and
New Zealand. During 1999, the Company completed approximately 16.5 million
rental transactions with a fleet that averaged approximately 220,000 vehicles
and generated total vehicle rental revenue of approximately $2.5 billion, of
which approximately 90% was derived from its operations in the United States.

    VMS provides integrated card payment, vehicle leasing and value added
vehicle management services in North America and Europe, with leading market
shares across many of its product lines. VMS provides comprehensive vehicle
management solutions to its customers which include over 31,000 companies and
government agencies in North America and Europe, including nearly one-third of
the Fortune 500 and approximately one-half of the FTSE 100 companies. VMS'
services consist of vehicle leasing and related asset-based services and a broad
range of fee-based services which include fuel and maintenance cards, accident
management, and other vehicle-related services, all of which are designed to
allow clients to

                                       2
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effectively manage costs and enhance productivity. In 1999, asset-based products
and services accounted for 83% of VMS' total revenues, while fee-based products
and services accounted for the remaining 17%. At December 31, 1999, VMS had
approximately 840,000 vehicles under management and over 4.6 million fuel and
maintenance cards outstanding. At December 31, 1999, VMS' automotive fleet
consisted of approximately 360,000 leased vehicles worldwide, 84% of which were
leased subject to open-end leases under which the customer bears substantially
all of the vehicle residual risk. VMS' lease and card portfolios have
experienced low historical default as a result of the strong credit quality of
its customer base and VMS' credit underwriting procedures.

    The Avis brand name is owned by the Franchisor and is licensed for use by
its franchisees, including ARACS, which is the largest Avis System franchisee in
the world. As an Avis System franchisee, ARACS has entered into certain
arrangements with the Franchisor and its affiliates that require ARACS to make
payments to the Franchisor and its affiliates, including monthly payments under
the Master License Agreement consisting of a monthly base royalty of 3.0% of
ARACS' gross revenue and a supplemental royalty of 1.0% of gross revenue
(payable quarterly in arrears), which will ultimately increase to a maximum of
1.5% in 2003. Until July 30, 2002, the supplemental royalty or a portion thereof
may be deferred if the Company does not attain certain financial targets. The
Avis System is comprised of approximately 4,400 rental locations, including
locations at the largest airports and cities in the United States and
approximately 166 other countries and territories, and a fleet of approximately
430,453 vehicles during the peak season, all of which are operated by
franchisees. During 1999, the Company's 558 U.S. rental locations, produced
approximately 92.5% of the Avis System's revenue in the United States, with the
balance derived from 329 locations operated by 64 other Avis System franchisees,
of which five accounted for approximately 3.0% of the Avis System's U.S.
revenue. The Company is the sole franchisee of the Avis System in the
international markets in which it operates. The Avis System in Europe, Africa,
part of Asia and the Middle East is operated under franchise by Avis Europe plc,
which is not affiliated with the Company. Management believes that the strong
recognition of the Avis brand name, the breadth of the Avis System and the
sophistication of the Wizard System enable the Company and other Avis System
franchisees to provide consistent quality, pricing and service to business and
leisure customers worldwide.

    The Company has historically targeted its marketing efforts toward business
travelers, who accounted for approximately 64% of the Company's domestic vehicle
rental revenue in 1999. The Company believes that business travelers, many of
whom rent the Company's vehicles pursuant to agreements between the Company and
their employers, have represented an important factor in the growth and
stability of its business. While the Company continues to focus on business
travelers, it intends to leverage its strong airport presence by expanding its
marketing efforts toward the leisure travel market in order to increase its
fleet utilization during non-peak business periods and extend the average length
of its rentals. During 1999, leisure travelers accounted for approximately 36%
of the Company's domestic vehicle rental revenue.

    The Company utilizes the Wizard System, which it believes is one of the most
sophisticated information management systems in the vehicle rental industry. Key
functions of the Wizard System include: (i) global reservations processing,
(ii) rental agreement generation and administration and (iii) fleet accounting
and control. The Company has also developed software applications that utilize
the data gathered by the Wizard System and third party reservation systems to
achieve centralized control of its major business operations. These applications
include: (i) a yield management system that is designed to increase profit by
controlling vehicle availability by length of rental and providing decision
support for rate changes, (ii) a competitive rate information system that
monitors industry rate changes by market on a daily basis at different vehicle
rental locations, and (iii) a business mix model that analyzes potential profit
contribution data by segment based upon business mix and fleet optimization
recommendations.

    On October 17, 1996 the Franchisor (formerly Avis, Inc.) and its
subsidiaries were purchased by Cendant (formerly HFS Incorporated) for
approximately $806.5 million. The purchase price was comprised of approximately
$367.2 million in cash, $100.9 million in indebtedness and $338.4 million of
common stock (the "Acquisition"). The Company is the successor to the car rental
operations previously owned by the Franchisor and its subsidiaries (collectively
referred to as the "Predecessor Companies"). On

                                       3
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September 24, 1997, the Company completed an initial public offering (the "IPO")
of its Common Stock at a price of $17 per share and received proceeds of
approximately $359 million. On March 23, 1998, the Company sold 5,000,000 shares
of its common stock through a public offering (the "Offering") and received
proceeds of approximately $162 million. In addition, in the same offering,
Cendant reduced its ownership in the Company by selling 1,000,000 shares of the
Company's common stock and retained the proceeds. Prior to the Offering, Cendant
beneficially owned 8,500,000 shares of Common Stock. Following the Offering,
Cendant beneficially owned 7,500,000 shares of Common Stock representing
approximately 20.9% of the then outstanding shares of the Company. Pursuant to a
stock repurchase program approved by the Board of Directors on September 1, 1998
and amended on September 23, 1998, the Company repurchased 5,000,000 shares of
the Company's Common Stock, including the repurchase from Cendant of 1,300,000
shares on January 15, 1999 and 314,200 shares on April 26, 1999. As a result of
these re-purchases, Cendant's beneficial ownership of Common Stock was reduced
to 5,535,800 shares or approximately 18% as of January 1, 2000, excluding
potential conversion of preferred stock (see Notes 14, 16 and 24). As a result
of the VMS Acquisition, the Company issued, through a subsidiary, $362 million
of Preferred Stock to PHH Corporation (see Note 14 of the Notes to the
Consolidated Financial Statements) in the form of $360 million of Series A
Preferred Stock at a dividend rate of 5% of the Series A liquidation preference
of $360 million payable semi-annually in arrears. These dividends may be paid in
Series B Preferred Stock at the discretion of the Company until the fifth
anniversary of their issuance. Series B Cumulative Preferred Stock issued as
dividends to the Series A Preferred holders accrue dividends at a rate of 5% per
annum payable in cash semi-annually in arrears or paid in kind until the fifth
anniversary of the date of issuance. Cendant is one of the foremost providers of
real estate related, travel related and direct marketing consumer and business
services in the world. It operates in four principal divisions--travel related
services, real estate related services, direct marketing services (formerly
known as the alliance marketing division) and other consumer and business
services. Its businesses provide a wide range of complementary consumer and
business services, which together represent eight business segments. The travel
related services businesses facilitate vacation timeshare exchanges, manage
corporate and government vehicle fleets and franchise car rental and hotel
businesses; the real estate related services businesses franchise real estate
brokerage business provide home buyers with mortgages and assist in employee
relocation; and the direct marketing services businesses provide an array of
value driven products and services. Cendant's other consumer and business
services include tax preparation services franchise, information technology
services, car parks and vehicle emergency support and rescue services in the
United Kingdom, discount coupon books, credit information services, financial
products and other consumer-related services.

    Avis Group Holdings, Inc. (formerly Avis Rent A Car, Inc.) was incorporated
in Delaware on October 17, 1996. ARACS was incorporated in Delaware on September
18, 1956. The principal executive offices of the Company are located at 900 Old
Country Road, Garden City, New York 11530, and its telephone number at that
location is (516) 222-3000.

ACQUISITION HISTORY

    As a result of the acquisition noted in (a) through (e) below, the Company
has increased its' percentage of total domestic vehicle rental system revenues
from 77% in 1996 to 92.5% in 1999.

A) THE FIRST GRAY LINE MERGER

    On August 20, 1997, ARACS purchased all of the outstanding capital stock of
The First Gray Line Corporation ("First Gray Line"), the then largest (exclusive
of ARACS) Avis System franchisee in North America with 70 locations in Southern
California, Nevada and Arizona, including Los Angeles International Airport,
McCarran International Airport (Las Vegas) and San Diego International Airport.
On July 31, 1998, First Gray Line was merged into ARACS.

                                       4
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B) THE HAYES TRANSACTION

    On May 1, 1998, ARACS acquired the assets of the car rental business of
Hayes Leasing Company Inc. ("Hayes Leasing"), including the Avis System
franchises for the cities of Austin, Fort Worth and San Antonio, and the
counties of Dallas and Tarrant, Texas, for approximately $86 million in cash,
plus the refinancing of fleet related indebtedness which totaled approximately
$136 million for a total purchase price of approximately $222 million. At that
time, Hayes was the largest (exclusive of ARACS) Avis System franchisee in North
America, serving six locations in the state of Texas, including the Dallas/Fort
Worth Airport ("DFW"), San Antonio Airport and Austin Municipal Airport.

C) OTHER FORMER LICENSEE ACQUISITIONS

    During 1998, ARACS purchased the assets of various other former licensees
for approximately $15 million in cash.

D) THE RENT-A-CAR COMPANY, INCORPORATED ACQUISITION

    On March 19, 1999, ARACS purchased all of the outstanding capital stock of
Rent-A-Car Company, Incorporated for approximately $10.1 million. Rent-A-Car
Company, Incorporated was the then third largest (exclusive of ARACS) Avis
System franchisee in North America with locations in Delaware, Maryland and
Virginia, including Richmond International Airport.

E) THE MOTORENT, INC. ACQUISITION

    On June 30, 1999, the Company purchased all of the outstanding capital stock
of Motorent, Inc. of Nashville, Tennessee for approximately $49.3 million
including the Avis System franchises for the cities of Chattanooga, Knoxville,
Memphis and Nashville, Tennessee. This acquisition was financed through
internally generated funds.

F) THE VMS ACQUISITION

    On June 30, 1999, the Company completed the transaction contemplated by the
Agreement and Plan of Merger and Reorganization dated as of May 22, 1999 (the
"Merger Agreement") with PHH Corporation, a Maryland corporation and
wholly-owned subsidiary of Cendant, PHH Holdings Corporation ("PHH Holdings"), a
Texas corporation and wholly-owned subsidiary of PHH Corporation, and Avis Fleet
Leasing and Management Corporation, a Texas corporation and a wholly-owned
subsidiary of the Company ("the Acquisition Subsidiary").

    Pursuant to the Merger Agreement, the Acquisition Subsidiary and PHH
Holdings merged on June 30, 1999 and the Acquisition Subsidiary acquired VMS for
$1.8 billion and refinanced VMS indebtedness of approximately $3.5 billion. The
acquisition financing included borrowings by the Company of $1.0 billion of term
loans, the issuance by the Company of $500 million of senior subordinated notes,
and the issuance by the Acquisition Subsidiary of $362.0 million of preferred
stock.

    In connection with the VMS Acquisition, the Company received a perpetual,
royalty-free license to use the VMS trademarks, including the "PHH" name and
logo. PHH Corporation and PHH Holdings entered into a 5-year non-compete
agreement with Avis Group Holdings, Inc. and the Acquisition Subsidiary. The
Acquisition Subsidiary also received a limited license to use the Cendant name
in Europe and the United States for a period of up to one year. In addition, the
parties have entered into agreements under which Cendant agreed to provide VMS
with computer services and with transitional services with respect to various
administrative services, including payroll and benefits, which had previously
been provided to VMS by Cendant. In addition, the Acquisition Subsidiary has
entered into an agreement under which it will provide Cendant with certain
transitional administrative services which had previously been provided by VMS.

                                       5
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STRATEGY

    The Company's objective is to improve its vehicle rental and VMS
profitability through a strategy that consists of the following key elements:

    CAPITALIZING ON CHANGING INDUSTRY DYNAMICS.  The domestic car rental
industry is emerging from a period during which rental rates did not keep pace
with rising fleet and operating costs. Management believes that the recent
restructuring of ownership of the Company's major competitors is leading to an
increased focus on profitability and shareholder return, rather than upon
transaction volume and market share, and to more rational pricing behavior.
Management intends to use the proprietary software applications of the Avis
System, including its sophisticated yield management, rate information and
business mix modeling systems, to capitalize upon the improving pricing and
profit outlook in the industry.

    IMPROVING BUSINESS MIX AND FLEET UTILIZATION.  Historically, the Company has
capitalized on its strong network of airport rental locations by focusing its
sales and marketing resources principally toward business travelers. While this
has enabled the Company to leverage its overhead costs by capturing a large
share of transaction volume at relatively few locations, fleet utilization
historically has been characterized by peak business travel demand during the
middle of the week and reduced demand during and immediately before and after
the weekend. Management believes that the Company's substantial presence at the
nation's leading airports provides it with the opportunity, without significant
incremental cost, to capitalize on increased air travel by leisure travelers,
who tend to initiate air travel during or close to the weekend. Accordingly,
while continuing to concentrate on its core presence in the business travel
market, the Company has begun to increase its marketing efforts toward the
leisure market in order to improve fleet utilization and extend the average
length of rental. The Company's acquisitions of franchisees mentioned above has
better positioned the Company to improve its fleet management, primarily in the
United States. In addition, the Company believes that it can further enhance the
utilization of its fleet during non-peak periods by selectively expanding its
presence in non-airport markets through both internal growth and, if appropriate
opportunities arise, acquisitions of other car rental operations including,
where feasible, other Avis System franchises.

    INCREASING BRAND LOYALTY THROUGH TARGET MARKETING.  Management believes that
the domestic vehicle rental industry is becoming increasingly focused on such
factors as customer service and loyalty. The customer base of the major domestic
car rental companies, including the Company, has become increasingly diverse.
Management plans to utilize the Avis System's proprietary software applications
to analyze the Company's extensive customer database to identify distinguishing
characteristics and preferences of those customers who have been historically
associated with its most profitable rental transactions and to focus its sales
and marketing efforts and service features to attract additional customers with
similar characteristics and preferences. Management believes that this analysis
will enhance the quality of the car rental experience of such customers and
increase their loyalty to the Avis brand.

    CAPITALIZING ON CROSS-MARKETING AND OTHER SYNERGISTIC OPPORTUNITIES WITH
CENDANT.  The Company has initiated and is expanding cross-marketing
relationships with Cendant's corporate relocation and resort timeshare exchange
businesses, its lodging franchise systems, which include the Days
Inn-Registered Trademark-, Howard Johnson-Registered Trademark- and
Ramada-Registered Trademark- brands, its real estate brokerage franchise
systems, including the CENTURY 21-Registered Trademark- and Coldwell
Banker-Registered Trademark- brands and its membership-based consumer services.
The Company also has begun to reduce its costs of purchasing media and other
non-fleet goods and services through arrangements with Cendant.

    FURTHER PENETRATION OF BOTH THE SMALL AND LARGE FLEET VEHICLE LEASING
MARKETS.  The company will continue to profitably develop its business in both
segments of the market. In the large fleet segment, VMS remains a recognized
industry leader with a strong history of providing value added fleet management
services. While margins remain tight in this segment of the market, management
believes its focus on internal productivity improvements, product breadth
including internally developed and managed fee based products, and its
technology solutions significantly enhancing the clients' ability to manage its
fleet,

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will continue to provide opportunity. The small fleet leasing segment will
increase as an area of focus to VMS. Coordination of marketing efforts with
Avis' vehicle rental operations is providing significantly enhanced channels
into this market and leveraging the joint sales effort. This will result in
increased volumes in this market. Additionally, internally developed technology
solutions have resulted in an improved and more cost effective service delivery
method to this market by VMS.

    CROSS-SELLING PRODUCTS.  PHH North America continues to market and further
penetrate its asset based clients with an increased range of value added fee
based products. Additionally, growth will be realized through sales to prospects
who do not utilize the core asset product with a target market in both the fleet
segment and the retail segment through an affinity strategy. Products currently
sold by PHH North America are also being added to the WEX product offerings. PHH
Europe will continue to grow its asset based products to its extensive base of
fuel and maintenance cardholders. Growth is projected through marketing PHH
Europe's core fee based product offering to non-traditional markets such as
insurance companies and contract hire companies where PHH Europe would act as a
third party service provider.

    LEVERAGE STRENGTHS IN TECHNOLOGY.  VMS will apply its extensive technology
and information processing capabilities to take advantage of current trends in
the fleet management industry. Corporations continue to outsource vehicle
management, our strong technological capabilities allows PHH to offer state of
the art technology solutions at cost effective levels while enhancing the
client's ability to control fleet expenditures. We expect to increase customer
loyalty as our technology-based services becomes an integral part of our
customers' operations. In addition, VMS is evaluating ways to leverage its
technology investment to provide solutions to companies outside of the fleet
management market.

OPERATIONS

    GENERAL.  The Company's rental fleet includes various categories of
automobiles, most of which are of the current and immediately preceding model
years. Rentals are generally made on a daily, weekend, weekly or monthly basis.
Rental charges in the United States usually are computed on the basis of the
duration of the rental and may include a mileage charge and vary based upon
vehicle category, the day on which the rental begins and local competitive and
cost factors. Additional charges are made for optional refueling services, loss
damage waivers (a waiver of the Company's right to make a renter pay for damage
to the vehicle), concession fee recovery, personal accident insurance, personal
effects protection, optional products such as cellular phones, child seats and
ski racks and, in some instances, additional liability insurance. Most rentals
are made utilizing rate plans under which the customer is responsible for
gasoline used during the rental. The Company also generally offers its customers
the convenience of leaving a rented vehicle at an Avis location in a city other
than the one in which it was rented under Avis' "Rent it Here-Leave it There"
program, although, consistent with industry practices, a drop-off charge or
special intercity rate may be imposed.

    UNITED STATES VEHICLE RENTAL OPERATIONS.  At December 31, 1999, the Company
operated 558 vehicle rental facilities at airport, near-airport and downtown
locations throughout the United States. During 1999, approximately 83% of the
Company's United States revenue was generated at 211 airports in the United
States with the balance generated at the Company's 347 non-airport locations.
The Company's emphasis on airport traffic has resulted in a particularly strong
rental revenue market position at the major U.S. airports.

    At most airports, the Company is one of five to seven vehicle rental
concessionaires. In general, concession fees for airport locations are based on
a percentage of total concessionable revenues (as determined by each airport
location), subject to a minimum guaranteed amount. Concessions are typically
awarded by airport authorities every three to five years based upon competitive
bids. As a result of airport authority requirements as to the size of the
minimum guaranteed fee, smaller vehicle rental companies generally are not
located at airports. The Company's concession arrangements with the various
airport authorities generally include minimum requirements for vehicle age,
operating hours and employee

                                       7
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conduct, and provide for relocation in the event of future construction and
abatement of fees in the event of extended low passenger volume.

    INTERNATIONAL VEHICLE RENTAL OPERATIONS.  The Company operates in Canada,
Puerto Rico, the U.S. Virgin Islands, Argentina, Australia and New Zealand. Its
operations in Canada and Australia were the principal contributors of revenue,
accounting for 80% of international vehicle rental revenue in 1999. Revenue from
international vehicle rental operations in 1999 was approximately $256 million.

    The Company holds a solid market position in each of the countries in which
it operates. In terms of revenue, the operations in Australia and New Zealand
are acknowledged as the largest in their respective markets.

    VMS OPERATIONS.  VMS' operations in North America consists of the fleet
management companies and WEX which operates in both the United States and
Canada. VMS operates in Europe through wholly-owned companies in the United
Kingdom and Germany. Additionally, it operates through a joint venture in
Ireland. Services in other European countries are handled through marketing
alliances.

    VMS' vehicle management services are divided into two principal categories:
(1) asset-based products and services and (2) fee-based products and services.
Asset-based products are the services clients require to acquire, lease and
dispose of a vehicle. VMS leases more than 350,000 units on a worldwide basis
through both open-end and closed end lease structures. As is market convention,
financing of the vehicle leases is directly linked to several other asset-based
products and services, such as vehicle acquisition, title and registration,
vehicle remarketing, and vehicle management consultation, including fleet policy
and vehicle recommendation.

    Fee-based products are designed to allow clients to effectively manage costs
and enhance driver productivity. VMS' main fee-based products are fuel services,
maintenance services and accident management. VMS also offers a variety of other
fee-based vehicle management products and services, including
acquisition/remarketing of non-leased vehicles under management, vehicle
management outsourcing, and miscellaneous fee-based services. Payments in
respect of fuel cards and maintenance cards are generally due within 15 to 30
days of billing.

    Leasing and directly-related products and services are frequently combined
with other related fee-based products and services such as accident management,
vehicle maintenance cards and fuel cards. Through use of these related services,
customers (1) receive access to VMS' broad network of vehicle-related suppliers
and (2) are able to access comprehensive information on total fleet operating
costs and characteristics, enabling better management of total fleet operations.
VMS frequently cross-sells its asset-based and fee-based products and services.
Management estimates that approximately 65% of North American and 100% of U.K.
leasing customers use at least one fee-based product or service.

IMPACT OF SEASONALITY

    The Company's vehicle rental business is subject to seasonal variations in
customer demand, with the summer vacation period representing the peak season.
This general seasonal variation in demand, along with more localized changes in
demand at each of the Company's operations, causes the Company to vary its fleet
size over the course of the year. In 1999, the Company's average monthly rental
fleet ranged from a low of 200,785 vehicles in January to a high of 248,016
vehicles in July. Rental utilization, which is based on the number of hours
vehicles are rented compared to the total number of hours vehicles are available
for rental, ranged from 64% in December to 83% in August and averaged 75% for
all of 1999. VMS' business is generally not seasonal.

                                       8
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MANAGEMENT INFORMATION SYSTEMS

    VEHICLE RENTAL:  Under a long-term computer services agreement, ARACS, like
other Avis System franchisees, is provided with access to the Wizard System, a
reservations, data processing and information management system for the vehicle
rental business owned by Cendant. The Wizard System is linked to all major
travel networks on six continents through telephone lines and satellite
communications. Direct access with other computerized reservations systems
allows real-time processing for travel agents and corporate travel departments.
Among the principal features of the Wizard System are:

    - an advanced graphical interface reservation system;

    - "Roving Rapid Return," which permits customers who are returning vehicles
      to obtain completed charge records from radio-connected "Roving Rapid
      Return" agents who complete and deliver the charge record at the vehicle
      as it is being returned;

    - "Preferred Service," an expedited rental service that provides customers
      with a Preferred Service rental record printed and placed in their
      pre-assigned vehicle and a fast convenient check-out;

    - "Wizard on Wheels," which enables the Avis System locations to assign
      vehicles and complete rental agreements while customers are being
      transported to the vehicle;

    - "Flight Arrival Notification," a flight arrival notification system that
      alerts the Company's rental location when flights have arrived so that
      vehicles can be assigned and paperwork prepared automatically;

    - "Avis Link," which automatically identifies the fact that a user of a
      major credit card is entitled to special rental rates and conditions, and
      therefore sharply reduces the number of instances in which the Company
      inadvertently fails to give renters the benefits of negotiated rate
      arrangements to which they are entitled;

    - interactive interfaces through third-party computerized reservation
      systems described under "MARKETING".

    - sophisticated automated ready-line programs that, among other things,
      enable rental agents to ensure that a customer who rents a particular type
      of vehicle will receive the available vehicle of that type which has the
      lowest mileage.

    In 1999, the Wizard System enabled the Company to process approximately 30.8
million incoming customer calls, during which customers inquired about
locations, rates and availability and placed or modified reservations. In
addition, millions of inquiries and reservations come to the Company through
travel agents and travel industry partners, such as airlines. Regardless of
where in the world a customer may be located, the Wizard System is designed to
ensure that availability of vehicles, rates and personal profile information is
accurately delivered at the proper time to the customer's rental destination.

    The Company also uses data supplied from the Wizard System and third-party
reservation systems in certain management information systems proprietary to the
Avis System to maintain centralized control of major business processes such as
rental fleet acquisition and logistics, sales to corporate accounts and
determination of rental rates. The principal components of the systems employed
by the Company include:

    - FLEET PLANNING MODEL.  The Company has created a comprehensive decision
      tool to develop fleet plans and schedules for the acquisition and
      disposition of its fleet, along with fleet age, mix, mileage and cost
      reports based upon such plans and schedules. This tool allows management
      to monitor and change fleet volume and composition on a daily basis and to
      develop the lowest cost fleet alternative based on business levels and
      available Repurchase Programs.

    - YIELD MANAGEMENT.  The Company has also created a yield management system
      which is designed to optimize profit by providing greater control of
      vehicle availability and rate availability changes at

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<PAGE>
      its rental locations. The system monitors and forecasts supply and demand
      to insure that the Company is able to capture the combination of rentals
      that will produce the highest return over time at each location.
      Integrated into this yield management system is a fleet distribution
      module that takes into consideration the costs as well as the potential
      benefits associated with distributing vehicles to various rental locations
      within a geographic area to accommodate rental demand at these locations.
      The fleet distribution module makes specific recommendations for movement
      of vehicles between the locations.

    - PRICING DECISION SUPPORT SYSTEM.  Pricing in the vehicle rental industry
      is highly competitive and complex. To ensure its ability to respond to
      rental rate changes in the marketplace, the Company has developed
      sophisticated systems to gather and report competitive industry rental
      rate changes each day. The system, using data from third-party reservation
      systems as its source of information, automatically scans rate movements
      and reports significant changes to a staff of pricing analysts for
      evaluation. The system greatly enhances the Company's ability to gather
      and respond to rate changes in its markets.

    - BUSINESS MIX MODEL.  The Company has also developed a strategic planning
      model to evaluate the discrete segments of its business relative to each
      other. The model considers revenues and costs to determine the potential
      margin contribution of each discrete segment. Using data from the
      Company's financial systems, the Wizard System and the fleet and revenue
      management systems, along with management objectives and targets, the
      model develops business mix and fleet optimization recommendations.

    - PROFITABILITY MODEL.  The Company has developed a sophisticated model that
      blends a corporate customer's rentals into a pattern that determines fleet
      costs by developing a profile of such corporate customer's utilization.
      The model also combines local operations costs with division overhead
      expenses with a resulting benchmark profitability which is used to
      determine the financial merit of individual corporate accounts.

    - SALES AND MARKETING SYSTEM.  The Company has also developed a
      sophisticated system of on-line data screens which enables its sales force
      to analyze key account information of its corporate customers including
      historical and current rental activity, revenue and booking sources, top
      renting locations, rate usage categories and customer satisfaction data.
      This information, which is updated weekly and captured on a
      country-by-country basis, is utilized by management to determine
      opportunities for revenue growth, profitability and improvement.

    PHH North America's operation utilizes Cendant's Garden City, New York data
center for mainframe requirements through a service agreement. Client server
technology and systems are maintained internally at individual locations. The
Key Management Information System is an integrated data warehouse application
(titled SPIN), which aggregates information from other systems to provide a
consolidated base of all information related to the vehicle. With the
introduction of the data warehouse and PHH Interactive, an Internet-based
vehicle management program, PHH North America became the first company in its
industry to offer full capabilities in fleet data warehousing, reporting and
retrieval via the Internet.

    PHH North America initiated the development of a data warehouse in 1996 and
has since gathered and consolidated a large amount of historical fleet data,
which used to be clustered in various vehicle management departments and
mainframe computers. Management believes that the warehouse is the largest data
warehouse in the industry with 800 gigabytes of allocated space and contains
years of essential data, including vehicle acquisition costs, maintenance/repair
history, accident information, expense reports, driver history, safety records
and used vehicle sales reports.

    The value of the data warehouse to customers and PHH North America was
further enhanced by the recent introduction of PHH Interactive, which provides
customers "real-time" access to the essential data of their own fleet contained
in the data warehouse, down to the vehicle unit level. Through PHH

                                       10
<PAGE>
Interactive, vital statistics can be easily generated directly by customers in
customized reports to accommodate the particular business needs of each
customer. Fleet managers can also gauge the performance of their fleets by
benchmarking their own statistics against industry composites available from the
data warehouse database. As a result, PHH InterActive creates value for
customers by transforming raw data into usable information. PHH InterActive was
internally developed by VMS-affiliated web designers and developers, operation
experts and customer service professionals, and tested extensively with
customers before being officially introduced. The system registers an average of
100,000 hits per day.

    PHH EUROPE.  PHH Europe's operations also utilizes Cendant's Garden City,
New York data center, which utilizes the latest IBM mainframes and EMC storage
devices. This infrastructure is connected across the Atlantic by multiple leased
circuits. Within Europe, PHH Europe has a network of terminals which forms one
of the largest independent credit card data collection operations in the United
Kingdom and extends through Ireland and Germany.

    PHH Europe has developed significant databases which aggregates years of
essential data including vehicle acquisition costs, maintenance/repair history,
accident information, expense reports, driver history, safety records, and used
vehicle sales reports. Most customer transactions are fed into these reporting
databases for analysis and reporting to PHH Europe customers. The system allows
for the production of special output (magnetic tape and disk files with
transaction data) for clients who wish to do their own analysis. Extracts are
also produced to update Fleetcom, an on-line system for clients who require an
interactive screen-based reporting capability. Updates to Fleetcom are provided
weekly or monthly, depending on client needs.

    WEX.  WEX's processing platform interfaces with a merchant card network to
provide transaction authorization, and prompts for data capture (e.g., mileage,
type of fuel, etc.) at the point-of-sale. This merchant network then provides
WEX with the relevant transactional information, which is stored in WEX's
systems, and processed to produced management information reporting for
customers. WEX maintains its own data center.

FLEET ACQUISITION AND MANAGEMENT

VEHICLE RENTAL-FLEET PURCHASING

    The Company participates in a variety of vehicle purchase programs with
major domestic and foreign manufacturers, principally GM, although actual
purchases are made directly through franchised dealers. Since the late 1980's,
the Company has acquired vehicles primarily through vehicle repurchase programs
whereby the manufacturers repurchase the vehicles at prices based on either (1)
a specified percentage of original vehicle cost determined by the month the
vehicle is returned to the manufacturer, or (2) the original capitalization cost
less a set daily depreciation amount (the "Repurchase Programs"). The average
price for automobiles purchased by the Company in 1999 for its U.S. rental fleet
was approximately $18,700. For the 1999 model year, approximately 89% of new
vehicle purchases were GM vehicles, 6.0% Chrysler vehicles and 5% Toyota,
Nissan, Hyundai, Ford and Suzuki vehicles. In model year 2000, approximately 80%
of the Company's fleet in the United States will consist of GM vehicles,
approximately 9% will be Chrysler vehicles and the balance will be provided by
other manufacturers. Manufacturers' vehicle purchase programs sometimes provide
the Company with sales incentives for the purchase of certain models, and most
of these programs allow the Company to serve as a drop-ship location for
vehicles, thus enabling the Company to receive a fee from the manufacturers for
preparing newly purchased vehicles for use. There can be no assurance that the
Company will continue to benefit from sales incentives in the future. For its
international operations, vehicles are acquired by way of negotiated
arrangements with local manufacturers and dealers using operating leases or
Repurchase Programs.

    Under the terms of the Company's agreement with GM, which expires at the end
of GM's model year 2003, the Company is required to purchase at least 178,946 GM
vehicles for model year 2000 and maintain

                                       11
<PAGE>
at least 51% GM vehicles in the Company's U.S. fleet at all times. The GM
Repurchase Program is available for all vehicles purchased pursuant to the
agreement.

VEHICLE RENTAL DISPOSITION

    The Company's current operating strategy is to hold rental vehicles for not
more than 12 months with the average fleet age being approximately six months.
Approximately 99% of the vehicles purchased for its domestic fleet under the
model year 1999, including all GM vehicles, were eligible for Repurchase
Programs. These programs impose certain return conditions, including those
related to mileage and repair condition over specified allowances. Less than
3.4% of the Repurchase Program vehicles purchased by the Company and returned in
1999 were ineligible for return. Upon return of a Repurchase Program vehicle,
the Company receives a price guaranteed at the time of purchase and is thus
protected from a decrease in prevailing used car prices in the wholesale market.
The Company disposes of its used vehicles that are not repurchased by the
manufacturers to dealers in the United States through informal arrangements or
at auctions. The future percentage of Repurchase Program vehicles in the
Company's fleet will depend on the availability of Repurchase Programs, over
which the Company has no control.

VEHICLE RENTAL MAINTENANCE

    The Company places a strong emphasis on vehicle maintenance since quick and
proper repairs are critical to fleet utilization. To accomplish this task the
Company employs two full-time National Institute for Automotive Service
Excellence ("ASE") fully certified technician instructors at its headquarters
who have developed a unique training program for the Company's 318 technicians
who operate at 83 repair centers. The technicians also maintain a strong
relationship with General Motors Service Operations. The Company uses "state of
the art" diagnostic equipment including GM's "Techline" and "Tech 2" diagnostic
computers. The Company's technician training department also prepares their own
technical service bulletins that can be retrieved electronically at all of the
Company's repair locations. Approximately 80% of the Company's technicians are
ASE certified versus the national average of 45%.

VEHICLE LEASING

    Vehicle leases can be either open-end or closed-end. Open-end leases can be
structured on either a fixed rate or floating rate basis (where the interest
component of the lease payment changes month to month based upon an index)
depending upon client preference. Open-end leases are typically structured with
a 12 month minimum lease term, with month to month renewals thereafter. Open-end
leases are typically pursuant to a contract whereby VMS agrees to lease vehicles
to a customer in exchange for an interest markup and a separate monthly
management fee that covers a variety of related services (e.g., vehicle
remarketing, title and registration, etc.). The residual risk on the value of
the vehicle at the end of the lease term remains with the lessee under an
open-end lease, except for a small amount, which is retained by VMS. The average
open-end leased vehicle remains in service for approximately 41 months.
Closed-end leases are structured with a fixed term with the lessor retaining the
vehicle residual risk. The most prevalent closed-end lease terms are 24 months,
36 months, and 48 months.

    In North America, VMS offers customers a range of open-end vehicle leasing
products, representing 95% of the vehicles financed by VMS in North America.
VMS' North American vehicle lease portfolio has grown from $2.99 billion in 1997
to $3.06 billion in 1999.

    In North America, VMS generally structures open-end leases on a floating
rate basis (approximately 79% of total current North American portfolio), but
occasionally structures them under fixed rate terms. Interest payments under
floating rate leases vary month to month in accordance with changes in rates of
typically one-month commercial paper plus the agreed upon spread. Interest
payments under fixed rate leases are typically priced as a spread to two-year
Treasury bills and remain constant for the life of the

                                       12
<PAGE>
lease. The lessee under a floating rate lease generally has the option to
convert it to a fixed-rate lease on 30 days notice to VMS.

    In Europe, VMS offers customers traditional closed-end leases, representing
77% of the book value of total vehicles financed by VMS in Europe, and, to a
lesser extent, open-end vehicle leasing products. The closed-end lease structure
is preferred in Europe due to certain accounting regulations which permit off-
balance sheet treatment only for closed-end leases. VMS utilizes independent
third party valuations and internal projections to set the residuals utilized
for its closed-end leases. Closed-end lease revenues consist of the net interest
spread over VMS' cost of funds implicit in the lease and management fees.

    VMS' European vehicle lease portfolio has grown from $609 million,
representing approximately 37,000 vehicles, in 1997 to $954 million,
representing approximately 61,000 vehicles, in 1999. The market in the United
Kingdom has seen a considerable shift towards closed-end leases in recent years
driven by clients' desire for off-balance sheet financing.

    In order to maintain a strong overall credit risk portfolio and minimize bad
debt write-offs, VMS conducts extensive credit and financial analyses prior to
underwriting a lease or granting an extension, and monitors each customer's
credit and collection performance.

LEASED VEHICLE ACQUISITION

    VMS uses its relationships with major vehicle manufacturers, including the
"Big 3" (General Motors, Ford and Chrysler) in North America and General Motors,
Ford and Rover Group Limited in Europe, to facilitate the efficient purchase and
convenient delivery of leased vehicles.

    In North America, VMS assisted customers with the purchase of approximately
88,000 vehicles in 1999. In the United States, VMS typically orders vehicles to
be custom built by the manufacturer through dealers (principally its two owned
dealerships). In 1999, approximately 28%, 40%, and 25% of vehicles were
purchased through Chrysler, Ford and General Motors, respectively. The vehicle
acquisition process through the manufacturers generally takes 4 to 6 weeks and
is utilized on approximately 80% of the vehicles purchased by VMS in the United
States. VMS purchases the remaining 20% of U.S. vehicles "off-the-lot" generally
in order to satisfy customers' turnaround time requirements. VMS generally
charges customers a "network" fee for these purchases in order to offset the
loss of manufacturers' revenues.

    In Canada, which accounts for approximately 12% of VMS' North American
vehicles orders, VMS primarily orders vehicles through negotiated contracts with
third-party dealerships. On Canadian orders, VMS receives (1) a network fee from
the customer, and (2) in certain cases a discount from the individual
third-party dealership. In all cases, VMS arranges to have vehicles delivered to
dealerships located near customers' fleet drivers.

    In the United Kingdom, VMS typically orders vehicles to be built to its
customers' specifications through its preferred network of selected dealers
(unlike the situation in the United States, VMS does not own any vehicle
dealerships in Europe). In 1999, approximately 25%, 17%, and 15% of vehicles
were purchased from General Motors, Ford and Volkswagen Audi Group,
respectively. VMS receives fees from customers and, in certain cases, receives
revenue directly from the vehicle manufacturers in the form of rebates linked to
purchased volumes. In 1999, approximately 24,000 new vehicles were purchased for
customers in the United Kingdom.

LEASED VEHICLE REMARKETING

    In North America, VMS sells used vehicles for vehicle leasing customers
across the United States and Canada (where it leases two vehicle remarketing
centers located near Toronto and Montreal) through a wide range of remarketing
channels, such as independent and franchised dealers, dealer auctions, public
auctions, and salvage dealers, as well as to dealers themselves and the vehicle
leasing customer. In Europe, VMS sells used vehicles (both open-end leased and
company-owned), primarily through auctions as well as dealer groups. VMS
vehicles often command a premium when resold because of, among other things,
VMS' reputation for maintaining its vehicles. In both North America and Europe,
VMS handles the

                                       13
<PAGE>
complete administrative and documentation aspects of used vehicle sales, and it
also organizes programs whereby used vehicles are sold to customers' employees.
For leased vehicles under management, vehicle remarketing services are provided
as part of the lease contract and thus do not generally generate additional
fees.

FLEET MANAGEMENT CONSULTATION

    In North America, VMS provides customers with comprehensive fleet consulting
services, including fleet policy analysis and recommendations, tax and
regulatory analysis, benchmarking analysis, and vehicle recommendations and
specifications. VMS provides consulting services based mainly on (1) the
extensive knowledge and experience of its North American sales, marketing and
customer relations employees, and (2) its comprehensive vehicle management
database which evaluates vehicles and driver productivity based on performance,
cost and other criteria.

FUEL CARDS AND RELATED SERVICES

    VMS provides customers with fuel card programs which facilitate the payment,
monitoring, and control of fuel purchases. Fuel is typically the single largest
fleet-related operating expense, generally accounting for over 70% of total
operating expenses. By using fuel cards, VMS' customers receive the following
benefits from the fuel card: (1) access to more fuel brands and outlets than
other private label corporate fuel cards, (2) point-of-sale processing
technology for fuel card transactions that enhances customers' monitoring of
purchases, and (3) consolidated billing and access to other information on fuel
card transactions, which assists customers with evaluation of overall fleet
performance and costs.

    In North America, VMS provides fuel services through both WEX and PHH North
America. WEX is a leading provider of fuel cards and related services such as
information management and payment processing to car, van and truck fleets
throughout North America. WEX provides fuel cards and related value-added
services primarily through three distribution channels: (1) its proprietary
"Universal Card", (2) private label cards, and (3) co-branded cards marketing.
Total cards outstanding have increased from 1.7 million in 1997 to approximately
2.4 million in 1999 due to the success of the co-brand and private label
partners' marketing programs, as well as successful targeted marketing of large
fleets with WEX's Universal Card.

    PHH Europe manages over 1.3 million fuel cards. Its own brands include All
Star-TM- (approximately 672,000 cards outstanding) and Dial Card-TM-
(approximately 366,000 cards outstanding), which are accepted at over 12,000
fueling sites in the United Kingdom. In return for a fee, PHH Europe also
provides processing support for approximately 214,000 fuel cards on behalf of
third parties on a private label basis including 52,000 local account cards on
behalf of oil companies (the latter's usage being restricted to use at the
particular oil company's branded sites only).

    A percentage of the amount charged on each fuel card is deducted from
amounts remitted to retail fueling merchants and kept as revenue by PHH Europe.
Total fuel purchased on PHH Europe's fuel cards in 1999 equaled approximately
$3.3 billion, representing approximately 630 million gallons of fuel. In
addition, PHH Europe receives an annual per card fee negotiated on a per
customer basis.

MAINTENANCE CARDS AND RELATED SERVICES

    VMS offers customers vehicle maintenance charge cards that are used to
facilitate repairs and maintenance payments. The vehicle maintenance cards
provide customers with benefits such as (1) negotiated discounts of up to 40%
off full retail prices through VMS' supplier network, (2) access to VMS'
in-house team of certified maintenance experts that monitor each card
transaction for policy compliance, reasonableness, and cost effectiveness and
(3) inclusion of vehicle maintenance card transactions in a consolidated
information and billing database that helps evaluate overall fleet performance
and costs. VMS maintains an extensive network of service providers in the United
States, Canada and the United Kingdom to improve ease of use by the client's
drivers.

                                       14
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ACCIDENT MANAGEMENT SERVICES

    VMS provides clients with comprehensive accident management services such as
(1) providing prompt, assistance after receiving the initial accident report
from the driver (i.e. facilitating emergency towing services and car rental
assistance, etc.), (2) organizing the entire vehicle appraisal and repair
process through a network of preferred repair and body shops, (3) coordinating
and negotiating potential accident claims and (4) entering accident and repair
information into the data warehouse for future management use. Customers receive
benefits from these accident management services such as (1) convenient,
coordinated 24-hour assistance from VMS' call centers, (2) access to VMS'
leverage with the repair and body shops included in their preferred supplier
network (one of the largest in the industry), which typically provides customers
with favorable repair terms, (3) expertise of VMS' damage specialists, who
monitor vehicle appraisals and repairs for cost-efficiency and compliance with
each customer's specific repair policy, (4) services of VMS' claims experts, who
assess subrogation potential and, if necessary, attempt to negotiate maximum
recovery, and (5) significant additional information on vehicle and driver
performance (i.e., accident and claims history, etc.) that is consolidated into
the data warehouse or the European data warehouse, as applicable, and can be
used to help manage customers' overall vehicle management costs.

MARKETING

UNITED STATES VEHICLE RENTAL

    In the United States, approximately 76% of the Company's 1999 rental
transactions were generated by travelers who used the Avis System under
contracts between the Company and their employers or organizations of which they
were members. The Company's corporate sales organization is the principal source
of contracts with corporate accounts. Unaffiliated business travelers are
solicited by direct mail, telesales and advertising campaigns. The Company's
telesales department consists of a centralized staff that handles small
corporate accounts, travel agencies, meetings and conventions, tour operators
and associations. Working with a state-of-the-art system in Tulsa, Oklahoma, the
telesales operation produced revenue for the Avis System that exceeded $352
million in 1999. The Company solicits contractual arrangements with corporate
accounts by emphasizing the advantages of the Wizard System. It plays a
significant part in securing business of this type because the Wizard System
enables the Company to offer a wide variety of rental rate combinations, special
reports and tracking techniques tailored to the particular needs of each
account, access to a worldwide rental network and assurance of adherence to
agreed-upon rates.

    The Company's presence in the leisure market is substantially less than its
presence in the business market. Leisure rental activity is important in
enabling the Company to balance the use of its fleet. Typically, business
renters use vehicles from Monday through Thursday, while in most areas of the
United States leisure renters use vehicles primarily over weekends. The
Company's concentration on serving business travelers has led to excess capacity
from Friday through Sunday of most weeks. The Company intends to increase its
leisure market penetration by capitalizing on its strength at airports and by
increased focusing of its marketing efforts toward leisure travelers. An
important part of the Company's leisure marketing strategy is to develop and
maintain contractual arrangements with associations that provide member benefits
to their constituents. In addition to developing arrangements with traditional
organizations, the Company has created innovative programs such as the Affinity
Link Program that cross references bankcard numbers with Avis Worldwide
identification numbers and provides discounts to the cardholders for
participating bankcard programs. The Company also uses coupons in dine-out books
and provides discounts to members of shopping and travel clubs whose members
generated approximately $63 million of leisure business revenue in 1999.
Preferred supplier agreements with select travel agencies and contracts with
tour operators have also succeeded in generating leisure business for the
Company.

    Travel agents can make Avis System reservations through all four major U.S.
based global distribution systems and several international based systems. Users
of the U.S. based global distribution systems can obtain access through these
systems to the Company's rental locations, vehicle availability and applicable

                                       15
<PAGE>
rate structures. An automated link between these systems and the Wizard System
gives them the ability to reserve and confirm rentals directly through these
systems. The Company also maintains strong links to the travel industry. The
Company has arrangements with frequent traveler programs of airlines such as
Delta, American, Continental, United and TWA, and of hotels including the Hilton
Corporation, Hyatt Corporation, Best Western, and Starwood Hotels and Resorts.
These arrangements provide various incentives to all program participants and
cooperative marketing opportunities for Avis and the partner. The Company also
has an arrangement with Cendant whereby lodging customers who are making
reservations by telephone will be transferred to the Company if they desire to
rent a vehicle.

AVIS ONLINE

    Avis has a strong brand presence on the Internet through its Avis Online web
site, WWW.AVIS.COM. A steadily increasing number of Avis vehicle rental
customers obtain rate, location and fleet information and then reserve their
Avis rentals directly on the Avis Online web site. In addition, customers
electing to use other internet services such as Expedia, Travelocity, Preview
Travel and America Online for their travel plans also have access to Avis
reservations. During 1999 reservations through internet sources increased to
3.7% of total reservations from 1.4% in the prior year.

    In addition to being able to determine rates and place reservations, Avis
Online users can find information about the company, about other Avis programs
and services, special offers, point to point driving directions and maps as well
as airport maps.

INTERNATIONAL VEHICLE RENTAL

    The Company utilizes a multi-faceted approach to sales and marketing
throughout its global network. In its principal international rental operations,
the Company employs teams of trained and qualified account executives to
negotiate contracts with major corporate accounts and leisure and travel
industry partners. In addition, the Company utilizes centralized telemarketing
and direct mail initiatives to continuously broaden its customer base. Sales
efforts are designed to secure customer commitment and support customer
requirements for both domestic and international car rental needs.

    International sales and marketing activities promote the Company's
reputation for delivering a high quality of service, contract rates, competitive
pricing and customer benefits from special services such as Preferred Service,
Roving Rapid Return and other benefits of the Wizard System.

    The Company's international operations maintain close relationships with the
travel industry including participation in several airline frequent flyer
programs, such as those operated by Air Canada, Ansett Airlines (Australia), and
Varig Brazilian Airlines, as well as participation in Avis Europe programs with
British Airways, Lufthansa and other carriers.

VMS SALES AND MARKETING

    VMS has over 560 professionals dedicated exclusively to its sales, marketing
and customer relations efforts. Management believes that this team of
experienced professionals, together with VMS' complementary information
technology have helped create both strong long-term customer relationships as
well as opportunities for new account penetration.

    Increased technological capabilities and expectations have dramatically
changed the ways that vehicle management companies can interact with both
prospective and existing customers. Management believes that VMS' technology
gives its sales, marketing and customer relations professionals a competitive
advantage in providing quality products and services to both prospective and
existing accounts. VMS' technology enables its sales, marketing and customer
relations professionals to: (1) sell an integrated set of products and services
that are billed and analyzed from the same consolidated information database,
(2) respond quickly and efficiently to customers' information requests through
use of the SPIN data warehouse, (3) dedicate additional time to new product and
account development, as customers learn to access and manipulate information on
their own through PHH InterActive on the Internet, and (4) structure competitive
bid pricing and other customer initiatives to manage risk-adjusted
profitability, through use of a proprietary activity-based costing model.

                                       16
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COMPETITION

    (i)  VEHICLE RENTAL: The vehicle rental industry is characterized by intense
price and service competition. In any given location, the Company may encounter
competition from national, regional and local companies, many of which,
particularly those owned by the major automobile manufacturers, have greater
financial resources than the Company. The Company's principal competitors for
commercial accounts in the United States are The Hertz Corporation ("Hertz") and
National Car Rental System, Inc. ("National"). Its principal competitors for
unaffiliated business and leisure travelers in the United States are Budget Rent
A Car Corporation, Hertz and National, and, particularly with regard to leisure
travelers, Alamo and Dollar. In addition, the Company competes with a variety of
smaller vehicle rental companies throughout the country.

    Competition in the U.S. vehicle rental business is based primarily upon
price, reliability, ease of rental and return and other elements of customer
service. In addition, competition is influenced strongly by advertising and
marketing. The Company believes it is capable of competing for virtually all
aspects of the vehicle rental business, except the insurance replacement vehicle
business (in which the Company has agreed not to engage in certain markets until
June 13, 2000 pursuant to an agreement relating to the sale of its replacement
vehicle rental business). In part because of the Wizard System, the Company has
been particularly successful in competing for commercial accounts. There have
been many occasions during the history of the vehicle rental industry in which
all of the major vehicle rental companies have been adversely affected by severe
industry-wide rental rate cutting, and the Company has, on such occasions,
lowered its rates in response to such rate cutting. However, during the past two
years, industry-wide rates have increased, reflecting, in part, both increased
costs of owning and maintaining vehicles and the need to generate returns on
invested capital.

    (ii)  VEHICLE LEASING AND FUEL BASED PRODUCTS:  PHH North America primarily
competes for vehicle leasing customers throughout North America with GE Capital
Fleet Services, Automotive Rentals Inc., U.S. Fleet Leasing, Wheels Inc., and
Lease Plan USA. Like PHH North America, each of these competitors packages
certain related services (vehicle acquisition, vehicle remarketing, title
registration, etc.) with each lease. The top five participants focus on larger
corporate customers and management estimates that they account for almost 40% of
all U.S. managed vehicles. A large group of additional competitors also competes
in the vehicle leasing market but typically services the smaller, regional fleet
market segments.

    With regard to fee based services, PHH North America competes with different
companies with respect to various fee based services. For example, Consolidated
Service Corporation and Salex Holding Corporation participate in the vehicle
maintenance card sector and Collision Experts International competes in accident
management. In addition, WEX is the top ranked niche provider of proprietary
fuel cards to North American corporations, followed by ComCheck and Voyager
Fleet Systems (PHH North America would rank fourth in this sector based upon
number of issued cards). Many leasing-focused competitors provide fee-based
fleet management products and services through third-party arrangements with
selected niche suppliers. For example, many of PHH North America's competitors
provide customers with fuel cards through WEX or other suppliers. In addition,
certain vehicle fleets use lessors such as GE Capital Fleet Services for vehicle
financing while utilizing PHH North America and others for value-added services
such as accident management.

    PHH EUROPE.  With regard to fuel management, PHH Europe's main competitors
are fuel companies. PHH Europe manages over 1.3 million of the United Kingdom's
approximately 1.6 million fuel cards outstanding. PHH Europe has the only
multi-franchised fuel card available in the market in the United Kingdom.

    With regard to other fleet management services, including leasing, PHH
Europe primarily competes throughout Europe and the United Kingdom, with GE
Capital Fleet Services, Lease Plan International, Lex Service, Arriva, Dial and
Swan International. While management believes that these competitors focus

                                       17
<PAGE>
more on providing closed-end leases, each is capable of providing a full range
of vehicle management services to customers. Various other competitors also
compete in the vehicle leasing market, focusing on smaller, regional markets or
specializing in providing particular services, like maintenance management.

    Competition is intense for the accounts of large corporations that already
have vehicle leasing or management partners. As a result, vehicle management
firms that rely solely on traditional vehicle financing as a means of winning
and/or maintaining accounts are facing intense competition for their vehicles
under management. Competitors are consequently expected to focus on the
development of more value-added vehicle management products and services as a
means of driving customer marketing and retention.

    WEX.  WEX competes primarily with other vehicle-based fuel cards (Voyager
and Fuelman, etc.) and driver-based cards (Visa and MasterCard bank cards,
American Express, etc.). WEX also competes in serving small fleets with
vehicle-based cards issued by oil companies.

INSURANCE

    The Company generally assumes the risk of liability to third parties arising
from vehicle rental services in the United States, Canada, Puerto Rico and the
U.S. Virgin Islands, for up to $1 million per occurrence, through a combination
of certificates of self-insurance, insurance coverage provided by its
wholly-owned domestic subsidiary, Pathfinder Insurance Company ("Pathfinder"),
and insurance coverage secured from an unaffiliated domestic insurance carrier.
The Company maintains additional insurance with unaffiliated carriers in excess
of such level up to $202 million per occurrence.

    Currently, the Company provides primary automobile insurance for a majority
of its rental fleet through Pathfinder or through self-insurance. In addition,
the Company provides claims management services from its headquarters in New
York to all of its locations in the United States, Canada, Puerto Rico and the
U.S. Virgin Islands.

    The Company insures the risk of liability to third parties in Argentina,
Australia and New Zealand through a combination of unaffiliated carriers and
Global Excess & Reinsurance, Ltd., a wholly-owned subsidiary established under
the laws of Bermuda ("Global Excess"). These carriers provide coverage
supplemental to minimum local requirements.

    To further control its insurance costs, the Company reinsures some of its
risks through its wholly-owned subsidiary, Constellation Reinsurance Company
Limited ("Constellation"), an insurance company established under the laws of
Barbados.

    Under its standard rental contract, the Company provides its renters primary
automobile liability coverage in many states up to the minimum financial
responsibility limits required by applicable law. In most states, the renters'
insurance is primary and in the states of California and Texas Avis does not
provide automobile liability coverage for the renter. Higher limits are provided
to some United States national corporate accounts and the Company makes
available to renters, for an additional daily charge, participation in a group
policy of "Additional Liability Insurance" underwritten by Continental Casualty
(CNA Group), which increases renters' liability coverage up to $1.0 million. The
Company also offers renters, for additional daily charges, "Personal Accident
Insurance," which pays medical expenses and accidental death benefits for
accidents during the rental period, and "Personal Effects Protection," which
insures against loss or damage to the renters' personal belongings during the
rental period. Coverages are underwritten by Gulf Insurance Company.

INSURANCE INDEMNIFICATION

    Lease agreements generally require the lessee to maintain automobile bodily
injury and property damage liability insurance which names, where appropriate,
certain affiliated companies as additional insureds and loss payees. Each of the
lease agreements further requires the obligor to maintain collision

                                       18
<PAGE>
and comprehensive insurance covering loss and damage to the leased vehicles in
an amount not less than the actual cash value of such leased vehicles, with a
small deductible. The obligor is required to furnish VMS with a certificate of
insurance or other evidence (upon request) of the required insurance coverage.
In North America, the lease agreements provide that obligors may self-insure for
collision and comprehensive insurance coverage with VMS's consent.

    Each lease agreement also contains an indemnification of VMS and, where
appropriate, certain affiliated companies by the obligor against all claims and
liabilities of any kind or nature and all costs and expenses (including
attorneys' fees) incurred in connection with, relating to or arising out of the
possession, use or operation of each of the leased vehicles during the period
when the obligor is in possession of the leased vehicle.

    In addition to the foregoing, VMS maintains excess coverage public liability
insurance with unaffiliated carriers for personal injury, death and property
damage claims resulting from the use of the leased vehicles in excess of
$1million per occurrence up to not less than $50 million per occurrence.

REGULATORY MATTERS

    The Company is subject to federal, state and local laws and regulations
including those relating to taxing and licensing of vehicles, franchising,
consumer credit, environmental protection, retail vehicle sales and labor
matters. The principal environmental regulatory requirements applicable to the
Company's operations relate to the ownership or use of tanks for the storage of
petroleum products, such as gasoline, diesel fuel and waste oils; the treatment
or discharge of waste waters; and the generation, storage, transportation and
off-site treatment or disposal of solid or liquid wastes. The Company operates
266 locations at which petroleum products are stored in underground or
aboveground tanks. The Company has instituted an environmental compliance
program designed to ensure that these tanks are in compliance with applicable
technical and operational requirements, including the replacement and upgrade of
underground tanks to comply with the December 1998 EPA upgrade mandate and
periodic testing and leak monitoring of underground storage tanks. The Company
believes that the locations where it currently operates are in compliance, in
all material respects, with such regulatory requirements.

    The Company may also be subject to requirements related to the remediation
of, or the liability for remediation of, substances that have been released to
the environment at properties owned or operated by the Company or at properties
to which the Company sends substances for treatment or disposal. Such
remediation requirements may be imposed without regard to fault and liability
for environmental remediation can be substantial.

    The Company may be eligible for reimbursement or payment of remediation
costs associated with future releases from its regulated underground storage
tanks. Certain of the states in which the Company maintains underground storage
tanks have established funds to assist in the payment of remediation costs for
releases from certain registered underground tanks. Subject to certain
deductibles, the availability of funds, compliance status of the tanks and the
nature of the release, these tank funds may be available to the Company for use
in remediating future releases from its tank systems.

    A traditional revenue source for the vehicle rental industry has been the
sale of loss damage waivers, by which rental companies agree to relieve a
customer from financial responsibility arising from vehicle damage incurred
during the rental period. Approximately 3.4% of the Company's revenue during
1999 was generated by the sale of loss damage waivers. The U.S. House of
Representatives has from time to time considered legislation that would regulate
the conditions under which loss damage waivers may be sold by vehicle rental
companies. Approximately 40 states have considered legislation affecting the
loss damage waivers. To date, 24 states have enacted legislation which requires
disclosure to each customer at the time of rental that damage to the rented
vehicle may be covered by the customer's personal automobile insurance and that
loss damage waivers may not be necessary. In addition, in the late 1980's, New
York enacted legislation which eliminated the Company's right to offer loss
damage waivers for sale and limited

                                       19
<PAGE>
potential customer liability to $100. Moreover, California and Nevada have
capped rates that may be charged for loss damage waivers to $9.00 and $10.00 per
day, respectively.

    The Company is also subject to regulation under the insurance statutes,
including insurance holding company statutes, of the jurisdictions in which its
insurance company subsidiaries are domiciled. These regulations vary from state
to state, but generally require insurance holding companies and insurers that
are subsidiaries of insurance holding companies to register and file certain
reports including information concerning their capital structure, ownership,
financial condition and general business operations with the state regulatory
authority, and require prior regulatory agency approval of changes in control of
an insurer and intercorporate transfers of assets within the holding company
structure.

    The payment of dividends to the Company by its insurance company
subsidiaries, Pathfinder, Global Excess and Constellation, is restricted by
government regulations in Colorado, Bermuda and Barbados affecting insurance
companies domiciled in those jurisdictions.

EMPLOYEES

    At December 31, 1999, the Company employed approximately 23,000 employees
worldwide.

    Vehicle rental operations has approximately 20,350 employees worldwide, of
whom approximately 19,000 serve in various capacities at rental locations and
the balance are engaged in executive, financial, sales and marketing, and
administrative capacities. Approximately 34% of the Company's employees in the
vehicle rental segment are represented by various unions under contracts
expiring at various dates. No local union represents more than 3.7% of the
Company's employees. The Company believes its relationships with its employees
are good.

    VMS had a total of approximately 3,059 employees, of which 1,274 were
employees of PHH North America (including 187 in Canada), 1,256 were employees
of PHH Europe and 529 were employees of WEX. Management believes that VMS'
relations with its employees is good. None of VMS' employees are unionized.

ITEM 2. PROPERTIES

    The Company's principal offices are in Garden City, New York where the
Company leases approximately 220,000 square feet under a sublease agreement with
WizCom which, by exercising renewal options, can be extended through the year
2015. The Avis reservation system is operated by Cendant from leased space in
Tulsa and Drumright, Oklahoma where the Company subleases approximately 26,000
square feet from Cendant pursuant to a sublease agreement for certain marketing
activities. The Company maintains terminal network facilities, which it uses in
connection with the Wizard System in Garden City and Tulsa. The Company also
leases approximately 58,000 square feet in a building owned by Cendant in
Virginia Beach, Virginia that serves as a satellite administrative facility.

    The Company leases or has vehicle rental concessions relating to space at
529 locations in the United States and 179 locations outside the United States
utilized in connection with its vehicle rental operation. Of those locations,
211 in the United States and 71 outside the United States are at airports.
Typically, an airport receives a percentage of vehicle rental revenues, with a
guaranteed minimum. Because there is a limit to the number of vehicle rental
locations in an airport, vehicle rental companies frequently bid for the
available locations, usually on the basis of the size of the guaranteed
minimums. The Company and other vehicle lease firms also lease parking space at
or near airports and at their other vehicle rental locations.

    The Company leases almost all of its vehicle rental facilities. The airport
facilities are located on airport property owned by airport authorities or
located near the airport in locations convenient for bus transport of customers
to and from the airport. The Company's airport locations serve as the
administrative headquarters for the Company's non-airport locations nearest to
those airport locations and, as a general rule, each airport location includes
vehicle storage areas, a vehicle maintenance facility, a car wash,

                                       20
<PAGE>
a refueling station and rental and return facilities. The Company's non-airport
facilities generally consist of a limited parking facility and a rental and
return counter and are generally subject to long-term leases with renewal
options. Certain of these leases also have purchase options at the end of their
terms.

    VMS leases office space in ten locations in the United States and Canada,
with approximately 281,000 square feet in the aggregate. In addition, PHH
Europe, including the United Kingdom, Germany and Ireland lease seven locations
with total square footage of 185,000 square feet. WEX leases approximately
96,000 square feet of office space in three domestic locations.

    VMS operates its chief executive office from Garden City, New York. VMS
maintains a regional/ processing office in Hunt Valley, Maryland.

ITEM 3. LEGAL PROCEEDINGS

    From time to time, the Company is subject to routine litigation incidental
to its business. The Company maintains insurance policies that cover most of the
actions brought against the Company. The Company is not currently involved in
any legal proceeding, which it believes would have a material adverse effect
upon its financial condition or results of operations.

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

    No matters were submitted to a vote of the stockholders of the Company
during the fourth quarter of the fiscal year ended December 31, 1999.

                                    PART II

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

                               MARKET INFORMATION

    The Company's Common Stock is listed on the NYSE under the symbol "AVI". The
following table sets forth for the years ended December 31, 1999 and 1998, the
high and low sales price per share of the Common Stock on the NYSE Composite
Tape:

<TABLE>
<CAPTION>
                                                                HIGH       LOW
                                                              --------   --------
<S>                                                           <C>        <C>
1999
QUARTERS ENDED:
March 31, 1999..............................................   $29.75     $21.31
June 30, 1999...............................................    37.88      23.81
September 30, 1999..........................................    32.00      19.50
December 31, 1999...........................................    25.69      17.00

1998
QUARTERS ENDED:
March 31, 1998..............................................   $38.25     $27.00
June 30, 1998...............................................    33.13      20.00
September 30, 1998..........................................    28.25      15.25
December 31, 1998...........................................    24.50      11.38
</TABLE>

ITEM 5B. HOLDERS OF COMMON EQUITY

    As of March 22, 2000, there were approximately 6,359 holders of common
equity (including estimated beneficial holders). No common stock dividends were
paid in 1999 or 1998.

                                       21
<PAGE>
ITEM 6.

                            SELECTED FINANCIAL DATA
    (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA AND AVERAGE REVENUE PER RENTAL
                                  TRANSACTION)

    The selected financial data for the years ended December 31, 1999, 1998,
1997 and the periods ended December 31, 1996, October 16, 1996 and the year
ended December 31, 1995 are derived from the audited Consolidated Financial
Statements of the Company.
<TABLE>
<CAPTION>

<S>                                  <C>           <C>           <C>           <C>           <C>                 <C>
                                                                                                                  PREDECESSOR
                                                                                                                 COMPANIES (A)
                                                                                             OCTOBER 17, 1996    -------------
                                                   YEARS ENDED                  COMBINED       (DATE OF          JANUARY 1,
                                     ---------------------------------------   YEAR ENDED    ACQUISITION)           1996
                                      DECEMBER      DECEMBER      DECEMBER      DECEMBER          TO                 TO
                                         31,          31,           31,           31,        DECEMBER 31,        OCTOBER 16,
                                      1999 (E)        1998          1997        1996 (B)         1996               1996
                                     -----------   -----------   -----------   -----------   -----------------   -------------
STATEMENTS OF OPERATIONS DATA:
Revenue:
  Vehicle rental...................  $2,500,746    $2,297,582    $2,046,154    $1,867,517       $  362,844        $1,504,673
  Vehicle leasing..................     692,935
  Other fee based..................     139,046
                                     -----------   ----------    ----------    ----------       ----------        ----------
                                      3,332,727     2,297,582     2,046,154     1,867,517          362,844         1,504,673
                                     -----------   ----------    ----------    ----------       ----------        ----------
Costs and expenses (a).............   3,166,810     2,185,354     1,995,831     1,795,457          360,583         1,434,874
                                     -----------   ----------    ----------    ----------       ----------        ----------
Income before provision for income
  taxes............................     165,917       112,228        50,323        72,060            2,261            69,799
Provision for income taxes.........      73,332        48,707        22,850        32,238            1,040            31,198
                                     -----------   ----------    ----------    ----------       ----------        ----------
Net income.........................      92,585        63,521        27,473        39,822            1,221            38,601
Preferred stock dividends..........       9,110
                                     -----------   ----------    ----------    ----------       ----------        ----------
Earnings applicable to common
  stockholders.....................  $   83,475    $   63,521    $   27,473    $   39,822       $    1,221        $   38,601
                                     ===========   ==========    ==========    ==========       ==========        ==========
Earnings per share (c)
  Basic............................  $     2.66    $     1.86    $      .89                     $      .04        $     1.25
  Diluted..........................  $     2.61    $     1.82    $      .88                     $      .04        $     1.25
STATEMENTS OF FINANCIAL POSITION
  DATA:
Vehicles, net rental...............  $3,367,362    $3,164,816    $3,018,856    $2,243,492       $2,243,492        $2,404,275
Vehicles, net leasing..............  $3,134,009
Total assets.......................  $11,078,258   $4,497,062    $4,274,657    $3,131,232       $3,131,232        $3,186,503
Debt and minority interest (d)
  (e)..............................  $8,569,110    $3,014,712    $2,826,422    $2,542,974       $2,542,974        $2,645,095
Common stockholders' equity........  $  661,684    $  622,614    $  453,722    $   76,415       $   76,415        $  740,113
SELECTED OPERATING DATA:
VEHICLE RENTAL:
  Number of rental locations at
    period-end.....................         723           660           612           546              546               550
  Peak number of vehicles during
    period.........................     248,016       231,086       212,104       196,077          177,839           196,077
  Number of rental transactions
    during period (in thousands)...      16,491        15,296        13,667        12,806            2,534            10,272
VEHICLE LEASING AND OTHER FEE
  BASED:
  Number of vehicle leasing
    units..........................     360,368
  Number of accident management
    units..........................     397,025
  Number of vehicle fuel cards.....   4,045,836
  Number of vehicle maintenance
    cards..........................     573,104

<CAPTION>

<S>                                  <C>
                                     PREDECESSOR
                                      COMPANIES
                                         (A)
                                     -----------
                                     YEAR ENDED
                                      DECEMBER
                                        31,
                                        1995
                                     -----------
STATEMENTS OF OPERATIONS DATA:
Revenue:
  Vehicle rental...................  $1,615,951
  Vehicle leasing..................
  Other fee based..................
                                     ----------
                                      1,615,951
                                     ----------
Costs and expenses (a).............   1,555,251
                                     ----------
Income before provision for income
  taxes............................      60,700
Provision for income taxes.........      34,635
                                     ----------
Net income.........................      26,065
Preferred stock dividends..........
                                     ----------
Earnings applicable to common
  stockholders.....................  $   26,065
                                     ==========
Earnings per share (c)
  Basic............................  $      .84
  Diluted..........................  $      .84
STATEMENTS OF FINANCIAL POSITION
  DATA:
Vehicles, net rental...............  $2,167,167
Vehicles, net leasing..............
Total assets.......................  $2,824,798
Debt and minority interest (d)
  (e)..............................  $2,289,747
Common stockholders' equity........  $  688,260
SELECTED OPERATING DATA:
VEHICLE RENTAL:
  Number of rental locations at
    period-end.....................         541
  Peak number of vehicles during
    period.........................     167,511
  Number of rental transactions
    during period (in thousands)...      11,544
VEHICLE LEASING AND OTHER FEE
  BASED:
  Number of vehicle leasing
    units..........................
  Number of accident management
    units..........................
  Number of vehicle fuel cards.....
  Number of vehicle maintenance
    cards..........................
</TABLE>

------------------------------

(a) See Note 1 to the audited Consolidated Financial Statements. Costs and
    expenses includes a royalty fee payable to Cendant for the years ended
    December 31, 1999, 1998, 1997 and charges from Cendant for the period
    October 17, 1996 (Date of Acquisition) to December 31, 1996. See Note 5 of
    the Notes to the Consolidated Financial Statements.

(b) Presented on a combined twelve-month basis and includes the results of the
    Company for the period October 17, 1996 (Date of Acquisition) to December
    31, 1996 and the results of the Predecessor Companies for the period January
    1, 1996 to October 16, 1996.

(c) Basic earnings per share for the years ended December 31, 1999, 1998 and
    1997 is computed based upon 31,330,536 shares, 34,172,249 shares and
    30,925,000 shares outstanding, respectively. Diluted earnings per share for
    the years ended December 31, 1999, 1998 and 1997 are calculated based on
    31,985,569 shares, 34,952,557 shares and 31,181,134 shares of common stock,
    which includes the dilutive effect of the assumed exercise of outstanding
    stock options. Basic and diluted earnings per share are computed on
    30,925,000 shares of common stock, the number of common shares outstanding
    for the periods ended from December 31, 1996, October 16, 1996 and the year
    ended December 31, 1995.

(d) Includes vehicle financing notes-due to affiliates at December 31, 1996,
    October 16, 1996 and December 31, 1995 of $247,500, $1,289,500, and
    $1,180,000, respectively.

(e) Includes the results of operations of VMS subsequent to the date of
    acquisition on June 30, 1999.

                                       22
<PAGE>
ITEM 7.

                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL OVERVIEW

    On October 17, 1996, Cendant Corporation ("Cendant") acquired Avis, Inc.
(the "Franchisor") and its subsidiaries, which included the operations presently
conducted by Avis Group Holdings, Inc. (the "Acquisition"). The Acquisition was
accounted for as a purchase. (See Note 1 of the Notes to the Consolidated
Financial Statements). After the acquisition of Avis, Inc., Cendant retained the
Avis trade names and trademarks, and became the franchisor of the Avis System
("Avis System") while Avis Rent A Car System, Inc. ("ARACS"), a wholly-owned
subsidiary of Avis Group Holdings, Inc., became a franchisee of the Avis System
in the markets in which it operates.

    On August 20, 1997, ARACS purchased the First Gray Line Corporation ("First
Gray Line"). First Gray Line was the then second largest Avis System franchisee
in North America, after the Company, with locations in Southern California,
Nevada and Arizona.

    On September 24, 1997, the Company issued and sold 22,425,000 shares of its
common stock in an initial public offering ("IPO") and received net proceeds of
approximately $359 million. The net proceeds were used to repay amounts
outstanding under a credit facility established to complete the First Gray Line
acquisition, pay certain acquisition expenses incurred to complete the First
Gray Line acquisition and to prepay outstanding indebtedness. The Franchisor has
entered into a Master License Agreement with ARACS granting it the right to
operate as a franchisee under the Avis System. As an Avis System franchisee,
ARACS is required to make payments consisting of a base royalty of 3.0% of
ARACS' revenue payable monthly and a supplemental royalty of 1.0% of revenue
payable quarterly in arrears, which will increase periodically to a maximum of
1.5% in 2003. The supplemental royalty or a portion thereof may be deferred if
ARACS does not attain certain financial targets.

    On March 23, 1998, the Company sold 5,000,000 shares of its common stock
through a public offering and received net proceeds of approximately $161
million. The Company used the proceeds of the common stock issuance to acquire
the assets of the car rental business of Hayes Leasing Company, Inc., mentioned
below, and for working capital and general corporate purposes, including the
repayment of certain indebtedness.

    On May 1, 1998, the Company acquired the assets of the car rental business
of Hayes Leasing Company, Inc., ("Hayes Leasing") including the Avis System
franchises for the cities of Austin, Fort Worth and San Antonio, and the
counties of Dallas and Tarrant, Texas for approximately $86 million in cash plus
the refinancing of fleet-related indebtedness, which totaled approximately $136
million for a total purchase price of approximately $222 million. In addition,
during the twelve month period ended December 31, 1998, the Company purchased
the assets of several other Avis System franchisees, for approximately $15
million in cash. (See Note 2 of the Notes to the Consolidated Financial
Statements.)

    On June 30, 1999, the Company completed the transaction contemplated by the
agreement and plan of merger and reorganization dated as of May 22, 1999 (the
"Merger"), with PHH Corporation, a Maryland corporation and wholly-owned
subsidiary of Cendant, PHH Holdings Corporation ("PHH Holdings"), a Texas
corporation and wholly-owned subsidiary of PHH Corporation, and Avis Fleet
Leasing and Management Corporation, a Texas corporation and a wholly-owned
subsidiary of the Company (the "Acquisition Subsidiary"). Pursuant to the merger
agreement, the Acquisition Subsidiary and PHH Holdings merged on June 30, 1999
and the Acquisition Subsidiary acquired the fleet leasing and management and
fuel card business of PHH Corporation ("VMS") for $1.8 billion and refinanced
VMS indebtedness of approximately $3.5 billion (the "VMS Acquisition"). The
acquisition financing included borrowings by the Company of $1.0 billion of term
loans, the issuance by the Company of $500 million of

                                       23
<PAGE>
senior subordinated notes, and the issuance by the acquisition subsidiary of
$362.0 million of preferred stock (see Notes 2, 10 and 14 of the Notes to the
Consolidated Financial Statements).

    Management believes that a more meaningful comparison of the results of
operations for the periods presented below is obtained by presenting the results
on a pro-forma basis to give effect to the VMS Acquisition, as if it had
occurred on January 1, 1998.

    The Company conducts vehicle rental operations through wholly-owned
subsidiaries in the United States, Canada, Puerto Rico, the U.S. Virgin Islands,
Argentina, Australia and New Zealand. Vehicle revenue is derived principally
from time and mileage charges for vehicle rentals and, to a lesser extent, the
sale of loss damage waivers, liability insurance and other products and
services. VMS conducts operations principally in the United States, Canada, the
United Kingdom and Germany. VMS' vehicle management services include leases and
services clients require to lease a vehicle, such as vehicle acquisition, title
and registration, vehicle remarketing and fleet management consultation,
(including fleet, policy and vehicle recommendations).

    VMS' principal fee-based products are fuel card services, maintenance card
services and accident management services.

    The expenses of the Company's vehicle rental and vehicle leasing business
segments includes the following:

(i) Vehicle rental expenses consist primarily of:

    - Direct operating expenses (primarily wages and related benefits,
      concessions and commissions paid to airport authorities, vehicle insurance
      premiums and other costs relating to the operation of the rental fleet);

    - Depreciation and lease charges relating to the rental fleet (including net
      gains or losses upon disposition of vehicles, when applicable).

    - Selling, general and administrative expenses (including payments to
      Cendant under the Master License Agreement and the Computer Services
      Agreement), reservation costs and other advertising and marketing costs,
      and commissions paid to airlines and travel agencies and

    - Interest expense, including those relating to the financing of its rental
      fleet.

(ii) VMS' vehicle leasing and other fee based services expenses consist
primarily of:

    - Depreciation and lease charges relating to the fleet (including net gains
      or losses upon the disposition of vehicles, when applicable);

    - Selling, general and administrative expenses includes wages and related
      benefits, information processing and information services costs and

    - Interest expense relating primarily to VMS' leased fleet.

    The Company's vehicle rental segment's profitability is primarily a function
of the volume and pricing of its rental transactions and the utilization of its
rental fleet. Significant changes in the Company's net cost of vehicles or in
interest rates can also have a material effect on the Company's profitability,
depending on its ability to adjust its rental rates. In addition, because the
Company is required to pay royalties based on its rental revenue, not its
profits, royalty payments could increase during a period of declining profits.
The Company's royalty fee obligations and its significant expenditures for
vehicles and facilities impose a significant need for liquidity.

    The vehicle leasing and fee based segment's profitabiltiy and cash flows are
primarily a function of the volume of fee-based transactions, leased vehicle
volume and pricing.

                                       24
<PAGE>
    EBITDA is presented since it is a widely accepted indicator of funds
available to service debt, although it is not a measure of liquidity or
financial performance under generally accepted accounting principles ("GAAP").
The Company believes that EBITDA, while providing useful information, should not
be considered in isolation or as an alternative to net income or cash flows as
determined under GAAP.

    The corporate column in the following tables represent expenses associated
with the VMS acquisition which are primarily interest expense, amortization of
cost in excess of net assets acquired and amortization of deferred financing
costs.

RESULTS OF OPERATIONS

    The following table sets forth, for the periods indicated, certain items in
the Company's consolidated statements of operations (dollars in thousands):
<TABLE>
<CAPTION>
                                                             PRO FORMA
                                                     YEARS ENDED DECEMBER 31,
                                  ---------------------------------------------------------------
                                                         1999                             1998
                                  --------------------------------------------------   ----------
                                                 VEHICLE
                                                 LEASING
                                                   AND
                                                  OTHER
                                   VEHICLE      FEE BASED     CORPORATE                 VEHICLE
                                    RENTAL     SERVICES (A)      (B)        TOTAL        RENTAL
                                  ----------   ------------   ---------   ----------   ----------
<S>                               <C>          <C>            <C>         <C>          <C>
Revenue:
  Vehicle Rental................  $2,500,746                              $2,500,746   $2,297,582
  Vehicle Leasing...............                $1,380,866                 1,380,866
  Other fee based...............                   263,058                   263,058
                                  ----------    ----------                ----------   ----------
  Total Revenue:................   2,500,746     1,643,924                 4,144,670    2,297,582
                                  ----------    ----------                ----------   ----------
Costs and expenses:
  Direct operating..............     957,270                                 957,270      927,930
  Vehicle depreciation and lease
    charges, net................     666,744     1,022,599                 1,689,343      593,064
  Selling, general and
    administrative..............     464,505       246,073                   710,578      436,275
  Interest, net.................     210,579       200,103    $   1,000      411,682      192,080
                                  ----------    ----------    ---------   ----------   ----------
                                   2,299,098     1,468,775        1,000    3,768,873    2,149,349
                                  ----------    ----------    ---------   ----------   ----------
EBITDA..........................     201,648       175,149       (1,000)     375,797      148,233
Interest--acquisition debt......                                140,719      140,719
Amortization of cost in excess
  of net assets acquired........      12,644         7,383       27,382       47,409       11,854
Non-vehicle depreciation and
  amortization..................      26,545        18,794          928       46,267       24,151
                                  ----------    ----------    ---------   ----------   ----------
Income before provision for
  income taxes..................  $  162,459    $  148,972    $(170,029)     141,402   $  112,228
                                  ==========    ==========    =========                ==========
Provision for income taxes......                                              68,231
                                                                          ----------
Net income......................                                          $   73,171
                                                                          ==========

<CAPTION>
                                               PRO FORMA
                                        YEARS ENDED DECEMBER 31,
                                  ------------------------------------
                                                  1998
                                  ------------------------------------
                                    VEHICLE
                                    LEASING
                                      AND
                                     OTHER
                                   FEE BASED    CORPORATE
                                  SERVICES(A)      (B)        TOTAL
                                  -----------   ---------   ----------
<S>                               <C>           <C>         <C>
Revenue:
  Vehicle Rental................                            $2,297,582
  Vehicle Leasing...............  $1,375,187                 1,375,187
  Other fee based...............     234,270                   234,270
                                  ----------                ----------
  Total Revenue:................   1,609,457                 3,907,039
                                  ----------                ----------
Costs and expenses:
  Direct operating..............                               927,930
  Vehicle depreciation and lease
    charges, net................   1,019,904                 1,612,968
  Selling, general and
    administrative..............     231,442                   667,717
  Interest, net.................     204,174    $   2,000      398,254
                                  ----------    ---------   ----------
                                   1,455,520        2,000    3,606,869
                                  ----------    ---------   ----------
EBITDA..........................     153,937       (2,000)     300,170
Interest--acquisition debt......                  143,574      143,574
Amortization of cost in excess
  of net assets acquired........       7,835       26,716       46,405
Non-vehicle depreciation and
  amortization..................      19,188        1,256       44,595
                                  ----------    ---------   ----------
Income before provision for
  income taxes..................  $  126,914    $(173,546)      65,596
                                  ==========    =========
Provision for income taxes......                                38,680
                                                            ----------
Net income......................                            $   26,916
                                                            ==========
</TABLE>

------------------------------

(a) Includes the effects of the VMS Acquisition as if it occurred on January 1
    of each period presented.

(b) Represents expenses associated with the VMS acquisition, which are primarily
    interest expense, amortization of cost in excess of net assets acquired and
    amortization of deferred financing costs.

                                       25
<PAGE>
PRO FORMA YEAR ENDED DECEMBER 31, 1999 COMPARED TO PRO FORMA YEAR ENDED DECEMBER
  31, 1998

VEHICLE RENTAL

REVENUE

    Revenue increased 8.8%, from $2.3 billion to $2.5 billion, compared to the
same period in 1998. The increase in revenue is due primarily to overall market
demand (6.3%) and the acquisitions of the stock of Motorent, Inc. on June 30,
1999, the car rental assets of Hayes Leasing on May 1, 1998 and Rent-A-Car
Company, Inc. on March 19, 1999 (2.5% combined). The revenue increase reflected
a 7.8% increase in the number of rental transactions and a 1.0% increase in
revenue per rental transaction.

COSTS AND EXPENSES

    Total costs and expenses increased 7.0%, from $2,185.4 million to $2,338.3
million, compared to the same period in 1998. Direct operating expenses
increased 3.2%, from $927.9 million to $957.3 million, compared to the same
period in 1998. As a percentage of revenue, direct operating expenses declined
to 38.3%, from 40.4% for the corresponding period in 1998. Direct operating
expense included a one-time $7.5 million credit (0.3% of revenue), resulting
from the curtailment of the Company's Defined Benefit Plan. Operating
efficiencies were derived primarily from lower vehicle insurance costs (1.3% of
revenue), and lower airport commissions (1.0% of revenue), and were partially
offset by higher compensation costs (0.5% of revenue).

    Vehicle depreciation and lease charges increased 12.4%, from $593.1 million
to $666.7 million, compared to the same period in 1998. As a percentage of
revenue, vehicle depreciation and lease charges were 26.7% of revenue in 1999,
as compared to 25.8% of revenue for the corresponding period in 1998. The change
reflected a 6.8% increase in the average rental fleet combined with a higher
monthly cost per vehicle.

    Selling, general and administrative expenses increased 6.5%, from $436.3
million in 1998 to $464.5 million in 1999. The increase was due to higher
reservation costs ($9.7 million), higher royalty fees ($9.2 million), and higher
general and administrative expenses ($7.4 million).

    Interest expense increased 9.6%, from $192.1 million to $210.6 million,
compared to the same period in 1998, due to higher borrowings required to
finance the growth of the rental fleet, partially offset by lower average
interest rates.

INCOME BEFORE PROVISION FOR INCOME TAXES

    Income before provision for income taxes increased 44.8%, from $112.2
million in 1998 to $162.5 million in 1999. The increase reflects higher revenue
and decreased costs and expenses as a percentage of revenue.

VEHICLE LEASING AND OTHER FEE BASED SERVICES

REVENUE

    VMS' revenues increased 2.1% from $1.61 billion in 1998 to $1.64 billion in
1999 due to the continued strong growth of fee-based products. Vehicles under
management increased 8.1% from 779,000 units in 1998 to 841,000 units in 1999;
while fuel maintenance cards outstanding grew 29.0% from 3.6 million to 4.6
million, with continued strong growth in the United Kingdom and at Wright
Express ("WEX").

    Asset based revenues increased 0.4% from $1.375 billion in 1998 to $1.381
billion in 1999. The largest portion of the increase is due primarily to the
United Kingdom, which increased $15.9 million driven by a 24.1% increase in
leased units. PHH North America's asset based revenues decreased slightly due to
lower billings on its floating rate lease portfolio, which was impacted by lower
interest rates.

                                       26
<PAGE>
    Fee-based revenues increased 12.3% from $234.3 million in 1998 to $263.1
million in 1999. Volume increases led to a 9.2% increase in vehicle maintenance
assistance revenue, 19.3% increase in accident and risk management revenue, and
a 10.3% increase in fuel card product line. WEX's fuel cards increased 21.7%
while the PHH proprietary fuel card increased 9.6%.

COSTS AND EXPENSES

    Total expenses increased 0.8% from $1,482.5 million in 1998 to $1,495.0
million in 1999.

    Selling general and administrative expenses increased 6.4% from $231.4
million in 1998 to $246.1 million in 1999. This increase is due to higher
volumes across all major product lines. The increase was centered in the fee
based product areas to support the 12.3 % revenue growth.

    Total interest cost decreased 2.0% from $204.2 million in 1998 to $200.1
million in 1999. The decrease is mainly attributed to lower borrowing costs due
to a decline in short-term rates in the U.S. for 1999 versus 1998, which was
partly offset by higher debt levels in the United Kingdom.

INCOME BEFORE PROVISION FOR INCOME TAXES

    Income before provision for income taxes increased 17.4% from $126.9 million
in 1998 to $149.0 million in 1999. Solid fee based revenue growth in all three
segments and continued focus on cost management were the primary factors in the
growth.

CORPORATE

    Total corporate expenses decreased from $173.5 million in 1998 to $170.0
million in 1999, principally due to lower 1998 interest rates on acquisition
debt.

INCOME TAXES

    The provision for income taxes for 1999 increased 76.4% from $38.7 million
to $68.2 million, over 1998. The effective tax rate for 1999 was 48.3% as
compared to 59.0% for 1998. The increase in the tax provision and the decrease
in the effective tax rate were primarily due to higher income before provision
for income taxes. The effective tax rate reflects differences between the
foreign income tax rates and the U.S. federal statutory income tax rate, taxes
on the repatriation of foreign earnings, non-deductible cost in excess of net
assets acquired and foreign withholding taxes on dividends paid to the Company.

NET INCOME

    Net Income for 1999 increased from $26.9 million to $73.2 million, over
1998. The increase reflected higher revenue, decreased total costs and expenses
as a percentage of revenue and a lower effective income tax rate in 1999.

                                       27
<PAGE>
RESULTS OF OPERATIONS

    The following table sets forth, for the periods indicated, certain items in
the Company's consolidated statements of operations (dollars in thousands):

<TABLE>
<CAPTION>
                                                              YEARS ENDED DECEMBER 31,
                                                              -------------------------
                                                                 1998          1997
                                                              -----------   -----------
                                                              HISTORICAL     PRO-FORMA
                                                                VEHICLE       VEHICLE
                                                                RENTAL       RENTAL(A)
                                                              -----------   -----------
<S>                                                           <C>           <C>
Revenue--Vehicle Rental.....................................  $2,297,582    $2,175,897
Costs and expenses:
  Direct operating, net.....................................     927,930       907,774
  Vehicle depreciation and lease charges, net...............     593,064       559,433
  Selling, general and Administrative.......................     436,275       422,053
  Interest, net.............................................     192,080       188,945
                                                              ----------    ----------
                                                               2,149,349     2,078,205
                                                              ----------    ----------
EBITDA......................................................     148,233        97,692
Amortization of cost in excess of net assets acquired.......      11,854         9,743
Non-vehicle depreciation and amortization...................      24,151        16,162
                                                              ----------    ----------
Income before provision for income taxes....................     112,228        71,787
Provision for income taxes..................................      48,707        32,355
                                                              ----------    ----------
Net income..................................................  $   63,521    $   39,432
                                                              ==========    ==========
</TABLE>

------------------------

(a) Includes the effects of the following as if they had occurred on January 1
    of each period presented: (i) the acquisition of the Company by Cendant and
    the establishment of a franchisor/franchisee relationship, (ii) the
    acquisition of First Gray Line and (iii) the repayment of debt with the net
    proceeds (after the acquisition of First Gray Line) from the IPO.

HISTORICAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO PRO FORMA YEAR ENDED
  DECEMBER 31, 1997

VEHICLE RENTAL

REVENUE

    Rental vehicle revenue for 1998 increased 5.6% from $2.18 billion to $2.30
billion, over 1997. The increase in revenue is due primarily to the acquisition
of the car rental assets of Hayes Leasing (2.7%) and overall market demand
(2.9%). The revenue increase reflected a 5.3% increase in the number of rental
transactions and a 0.3% increase in revenue per rental transaction.

COSTS AND EXPENSES

    Rental vehicle total costs and expenses for 1998 increased 3.9%, from
$2,104.1 million to $2,185.4 million, over 1997. Avis' direct operating expenses
increased 2.2%, from $907.8 million to $927.9 million, over 1997. As a
percentage of revenue, direct operating expenses for 1998 declined to 40.4%,
from 41.7% for 1997. Avis' operating efficiencies were derived primarily from
lower vehicle insurance costs (0.3% of revenue), lower airport commissions (1.5%
of revenue), and lower computer services costs (0.4% of revenue). These
efficiencies were partially offset by higher vehicle damage costs (0.2% of
revenue) and higher compensation costs (0.5% of revenue).

    Vehicle depreciation and lease charges for 1998 increased 6.0%, from $559.4
million to $593.1 million, over 1997. As a percentage of revenue, vehicle
depreciation and lease charges were 25.8% of revenue in 1998, as compared to
25.7% of revenue in 1997. The change reflected a 3.4% increase in the average
rental

                                       28
<PAGE>
fleet combined with a higher monthly cost per vehicle. In addition, the net
proceeds received by Avis in excess of book value for the disposition of used
vehicles was $2.3 million lower (0.1% of revenue) in 1998 compared to 1997. This
was primarily due to favorable market conditions for the sale of certain model
vehicles during 1997.

    Selling, general and administrative expenses for 1998 increased 3.4%, from
$422.1 million to $436.3 million, over 1997. The increase was due to $6.6
million higher reservation costs, $5.2 million higher marketing expenses, and
$4.9 million higher royalty fees.

    Rental vehicle interest expense for 1998 increased 1.7% from $188.9 million
to $192.1 million, over 1997, due to higher borrowings required to finance the
growth of the rental fleet.

INCOME BEFORE PROVISION FOR INCOME TAXES

    Income before provision for income tax increased 56% from $71.8 million in
1997 to $112.2 million in 1998, primarily due to increased revenue discussed
above and decreased costs and expenses as a percent of revenue.

INCOME TAXES

    The provision for income taxes for 1998 increased 50.5% from $32.4 million
to $48.7 million, over 1997. The effective income tax rate was 43.4%, down from
45.1% in 1997. The effective tax rate reflects differences between foreign
income tax rates and the U.S. federal statutory income tax rate, taxes on the
repatriation of foreign earnings, and foreign withholding taxes on dividends
paid to the Company.

NET INCOME

    Net income for 1998 increased 61.1% from $39.4 million to $63.5 million over
1997. The increase reflected higher revenue, decreased costs and expenses as a
percentage of revenue and a lower effective income tax rate in 1998.

LIQUIDITY AND CAPITAL RESOURCES

    The Company's operations are expected to be funded by cash provided by
operating activities and by financing arrangements maintained by the Company in
the markets in which it operates. The Company's primary use of funds will be for
the acquisition of new vehicles and the repayment of acquisition indebtedness.
For the years ended December 31, 1999 and 1998, pro forma for the VMS
Acquisition, the Company's expenditures for new vehicles would have been
approximately $7.23 billion and $6.82 billion, respectively. Pro forma proceeds
from the disposition of used vehicles would have been approximately $5.29
billion and $4.92 billion for the years ended December 31, 1999 and 1998,
respectively. For the year ended December 31, 2000, management expects the
Company's expenditures for new vehicles (net of proceeds from the disposition of
used vehicles) to be higher than in 1999.

    Since the late 1980's, the Company has acquired vehicles related to its
vehicle rental operations primarily pursuant to manufacturer Repurchase
Programs. These Repurchase Programs limit residual risk with respect to vehicles
purchased under the programs. This enables management to better estimate
depreciation expense in advance. VMS has historically not participated in
Repurchase Programs and management does not expect to do so in the future.
Generally, customers with open-end leases, which make up approximately 85% of
VMS' lease portfolio, bear the residual risk with respect to their vehicles,
whereas with respect to closed-end leases, which made up approximately 15% of
VMS' lease portfolio, VMS bears such residual risk. The vehicle rental and
vehicle leasing segments have established methods for disposition of used
vehicles that are not covered by Repurchase Programs.

    Historically, the Company's financing requirements for rental vehicles have
typically reached an annual peak during the second and third calendar quarters,
as fleet levels build in response to increased

                                       29
<PAGE>
rental demand during that period. The typical low point for cash requirements
occurs during the end of the fourth quarter and the beginning of the first
quarter, coinciding with lower levels of vehicle and rental demand. Management
expects that this pattern will continue with the addition of VMS, whose cash
requirements have historically been relatively consistent over the course of a
given year.

    Management expects that cash flows from operations and funds from available
credit facilities will be sufficient to meet the Company's anticipated cash
requirements for operating purposes for the next twelve months. The vehicle
rental segments' trade receivables also provide liquidity with approximately 13
days of daily sales outstanding.

THE VEHICLE RENTAL ABS FACILITY

    The vehicle rental operations of ARACS are funded through a domestic
integrated financing program that as of December 31, 1999 provides for up to
$3.75 billion in financing for vehicles covered by Repurchase Programs, with up
to 25% of such Facility available for vehicles not covered by Repurchase
Programs (the "Vehicle Rental ABS Facility"). The vehicle rental ABS Facility
provides for the issuance of up to $1.5 billion of asset backed variable funding
notes (the "Variable Funding Notes") and $2.25 billion of asset-backed medium
term notes (the "Medium Term Notes"). The Variable Funding Notes and the Medium
Term Notes are indirectly secured by, among other things, a first priority
security interest in Avis' fleet.

    The Variable Funding Notes support the issuance by a special purpose company
of commercial paper notes that are rated A-1 by Standard & Poor's Ratings
Services ("S&P") and P-1 by Moody's Investors Service, Inc. ("Moody's"). The
Medium Term Notes are guaranteed under a surety bond issued by MBIA and as a
result are rated AAA by S&P and Aaa by Moody's. At December 31, 1999, the
Company had approximately $3.276 billion of debt outstanding under the Vehicle
Rental ABS Facility and approximately $474 million of additional credit
available for vehicle purchases under this facility.

THE VEHICLE LEASING ABS FACILITIES

    VMS-U.S. currently has a $3.0 billion lease financing program (the "Vehicle
Leasing ABS Facility") supported by the leases and vehicles owned by VMS-U.S and
the United Kingdom. The Vehicle Leasing ABS facility consists of two classes of
floating rate asset-backed notes; Class A-1 notes, which total $550 million and
Class A-2, which total $450 million. Both classes of notes have an interest
rate, which is reset monthly at LIBOR plus 32 basis points for the Class A-1
notes and 35 basis points for the Class A-2 notes. The Class A-1 notes have an
average expected life of 2 years and commence amortizing in March 2001 and have
a final stated maturity of October 2006. The Class A-2 notes have an average
expected life of 3 years and commence amortizing when the Class A-2 are repaid
in full. The Class A-2 notes have a final stated maturity of October 2011. Both
classes of notes are rated AAA by S&P and Aaa by Moody's. In addition to the
floating rate asset-backed notes, the Company may issue up to $1,750 million
Variable Funding Investor Notes to a group of multi- seller commercial paper
conduits. At December 31, 1999, the Company has also issued two series of Senior
Preferred Membership Interest (see Note 11of the Notes to the Consolidated
Financial Statements), which total $99.3 million at a rate of 6.97%.

    VMS-U.K. currently has a $856 million (L531 million) asset-backed facility
(the "U.K. ABS Facility") which is supported by the leases, vehicles and fuel
card receivables of the various VMS-U.K entities. The U.K. ABS Facility is
funded through a group of multi-seller commercial paper conduits. As of December
31, 1999, there was $850 million (L528 million) outstanding under this facility
at a blended rate of 6.03%.

ACQUISITION FINANCING

    Avis Group Holdings, Inc. is party to a credit agreement (the "New Credit
Facility") which provides for up to $1.35 billion of borrowings in the form of
(1) A Revolving Credit Facility in the amount of up to $350.0 million, (2) a
$250.0 million Term A Loan, (3) a $375.0 million Term B Loan and (4) a $375.0

                                       30
<PAGE>
million Term C Loan. Upon consummation of the VMS Acquisition, Avis borrowed as
of June 30, 1999, the full $1.0 billion under the Term A Loan, Term B Loan and
Term C Loan and $73.0 million under the Revolving Credit Facility ($62 million
outstanding at December 31, 1999). The loans under the New Credit Facility bear
interest at variable rates and at a fixed margin, above either The Chase
Manhattan Bank's alternative base rate or the Eurodollar rate. The New Credit
Facility is guaranteed by each U.S subsidiary of Avis Group Holdings, Inc., but
excluding any insurance subsidiaries, banking subsidiaries, and securitization
or other vehicle financing subsidiaries. All borrowings by the Company under the
New Credit Facility are secured by a first-priority perfected lien on
substantially all of the tangible and intangible assets of the Company and each
guarantor under the New Credit Facility excluding assets that secure both the
Vehicle Rental and Vehicle Leasing ABS Facilities, and by a pledge of all the
capital stock of each of Avis Group Holdings, Inc.'s U.S. subsidiaries and 65%
of the capital stock of its first tier non-U.S. subsidiaries.

    As part of the VMS acquisition financing, the Company issued 11% Senior
Subordinated Notes (the "Notes") that will mature in 2009. Avis Group Holdings,
Inc.'s obligation under the Notes are subordinate and junior in right of payment
in all existing and future senior indebtedness of the Company, including all
indebtedness under the New Credit Facility. The obligations of the Company under
the Notes and the Indenture are guaranteed on a senior subordinated basis by
each of the Company's U.S. subsidiaries, other than its banking subsidiaries,
insurance subsidiaries and securitization and other vehicle financing
subsidiaries which have not guaranteed senior indebtedness of the Company.

INTERNATIONAL

    Borrowings for the Company's international operations consist mainly of
loans obtained from local and international banks. All borrowings for
international operations are in the local currencies of the countries in which
those operations are conducted. The Company has a number of guarantees in place
to support the operations of it's subsidiaries. At December 31, 1999, the total
debt for the Company's international operations is approximately $1 billion. The
impact on the Company's liquidity and financial condition due to the exchange
rate fluctuations of the Company's foreign operations is not expected to be
material.

CAPITAL IMPROVEMENTS

    The Company also makes capital investments for property improvements and
equipment. Capital investments for property improvements and equipment were
$48.2 million in 1999 and management estimates such expenditures will
approximate $75.0 million in 2000. Pro forma for the VMS Acquisition, the
Company would have made capital investments for property improvements totaling
$69.7 million for the year ended December 31, 1999, and $102.8 million for the
year ended December 31, 1998.

RESTRICTIONS IMPOSED BY INDEBTEDNESS

    The agreements with the Company's lenders include a number of significant
covenants that, among other things, restrict its ability to dispose of non-fleet
assets, incur additional indebtedness, create liens, pay dividends, prepay
subordinated indebtedness, make capital improvements, enter into certain
investments or acquisitions, repurchase or redeem capital stock, sell or
otherwise dispose of assets, engage in mergers or consolidations or engage in
certain transactions with affiliates, and otherwise restrict corporate
activities. Certain of these agreements also require the Company to maintain
specified financial ratios. A breach of any of these covenants or the inability
of the Company to maintain the required financial ratios could result in a
default in respect of the related indebtedness. In the event of a default, the
lenders could declare, among other options, the indebtedness, together with
accrued interest and other fees, to be immediately due and payable, failing
which the lenders could proceed against the collateral securing such
indebtedness. As of December 31, 1999, the Company was in compliance with all
such covenants and financial ratios related to these agreements.

                                       31
<PAGE>
INFLATION

    The increased acquisition cost of vehicles is the primary inflationary
factor affecting the Company's operations. Many of the Company's other operating
expenses are inflation sensitive, with increases in inflation generally
resulting in increased costs of operations. The effect of inflation-driven cost
increases on the Company's overall operating costs is not expected to be greater
for the Company than for its competitors.

SEASONALITY

    The Company's car rental business is seasonal, with decreased travel in
winter months and heightened activity in spring and summer. To accommodate
increased demand, the Company increases its available fleet during the second
and third quarters. Since VMS' business is generally not seasonal, these
patterns of seasonality are expected to continue. Certain of the Company's
operating expenses are fixed and cannot be reduced during periods of decreased
rental demand. In certain geographic markets, the impact of seasonality has been
reduced by emphasizing leisure or business travel in the off-peak season.

RECENT ACCOUNTING STANDARDS

    A recent pronouncement of the Financial Accounting Standards Board which are
not required to be adopted at this date, is Statement of Financial Accounting
Standards ("SFAS") No. 133--"ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES", ("SFAS 133") which is effective for the Company's consolidated
financial statements for the year ending December 31, 2001. SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position at fair value. The Company
has not completed its assessment of the effect on the Company's consolidated
financial statements that will result from the adoption of SFAS No. 133.

YEAR 2000 READINESS IMPLEMENTATION

    The Company has completed the Year 2000 Remediation plan on its mission
critical systems on a timely basis. The Company is not aware of any adverse
effects of Year 2000 issues with respect to the Company's vehicle rental and
vehicle leasing and other fee based operations. The Company has no indication
that: a significant vendor may be unable to sell to the Company; a significant
customer or client may be unable to purchase from the Company; or a significant
service provider may be unable to provide services to the Company, in each case
because of Year 2000 compliance problems.

    Total costs of hardware and software remediation are expected to be $26.0
million including $2.9 million related to VMS. Costs of hardware and software
remediation were approximately $11.7 million in 1999, $8.4 million in 1998 and
$3.0 million in 1997. In addition, Year 2000 implementation costs are estimated
to be approximately $2.9 million in 2000. These estimates include the costs of
certain equipment and software for which planned replacement was accelerated due
to Year 2000 requirements. In addition, they reflected the cost of redeploying
certain internal resources to address the Year 2000 requirements.

FORWARD LOOKING INFORMATION

    Certain matters discussed in this report that are not historical facts are
forward-looking statements that are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements involve risks and uncertainties including the impact of competitive
products and pricing, changing market conditions, and other risks which were
detailed from time to time in the Company's publicly-filed documents. Actual
results may differ materially from those projected. These forward-looking
statements represent the Company's judgement as of the date of this report.

                                       32
<PAGE>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

INTEREST RATE RISK

    The tables below provide information about our market sensitive financial
instruments and constitute "forward-looking statements". All items described are
non-trading.

    Our major market risk exposure is changing interest rates, primarily in the
United States. We use interest rate derivatives to adjust interest rate
exposures when appropriate, based upon market conditions. These derivatives
consist of interest rate swaps, caps and floors and swaption which we enter into
with a group of financial institutions with high credit ratings, thereby
minimizing the risk of credit loss.

    The Company has entered into interest rate swap and cap agreements to reduce
the impact of changes in interest rates on certain outstanding existing
domestic, Canadian and European debt obligations. The Company's swap and cap
agreements have the effect of changing the interest rate on certain of the
Company's debt from a variable to a fixed rate of interest. The variable
interest rates for certain of these interest rate swap agreements are either
reset quarterly or daily based upon the average 30-day commercial paper rate for
the quarter. Interest is cash settled on a net basis for each agreement
quarterly. There are four U.S. interest rate swap agreements that will terminate
between October 2001 and May 2005, and seventeen Canadian swap agreements which
will expire between May 2000 and August 2003, and there are three German swap
agreements that will expire between June and December 2001. Under the U.S. Swap
Agreement terminating in May 2005, the counterparty has the right to terminate
the agreement in June 2001. Under the Canadian swap agreements terminating in
August 2003 the counter-party has the right to terminate one of the agreements
in August 2000 and one agreement in 2001.

    The notional amounts used to calculated the contractual payments to be
exchanged under those swap agreements which require contractual exchange as of
December 31, 1999 consist of $750 million, $141 million and $27 million for the
U.S., Canadian and European swap agreements, respectively. The weighted average
variable payment and receipt rates are based on implied forward rates in the
yield curve at December 31, 1999. The weighted average expected payment rates
are 5.2%, 5.3%, 5.6%, 5.6 % and 5.6% for the years ended December 31, 2000,
2001, 2002, 2003 and 2004, respectively. The weighted average expected receipt
rates are 6.2%, 6.7%, 7.0 %, 7.0% and 7.1% for the years ended December 31,
2000, 2001, 2002, 2003 and 2004, respectively. The fair value of the interest
rate swaps, caps and floors, and swaption agreement at December 31, 1999 is
approximately $15 million. The fair value of interest rate swaps, caps and
floors and swaption is determined from dealer quotations and represents the
discounted cash flows through maturity or expiration using current rates and is
effectively the amount we would pay or receive if we terminate the agreements.

    Fair value estimates are made at a specific point in time, based on relevant
market information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgment. The fair value of variable rate debt approximates the carrying value
since interest rates are variable and, thus, approximate current market rates.
The fair value of interest rate swaps and caps is determined from dealer
quotations and represents the discounted future cash flows through maturity or
expiration using current rates and is effectively the amount we would pay or
receive to terminate the agreements.

                                       33
<PAGE>
    The following tables present expected maturities of the Company's long-term
debt and related fair values and annualized weighted average interest rates:

<TABLE>
<CAPTION>
                                                            EXPECTED MATURITY DATE AS OF DECEMBER 31, 1999
                                                                            (IN THOUSANDS)
                                      -------------------------------------------------------------------------------------------
                                        2000       2001       2002       2003       2004     THEREAFTER     TOTAL      FAIR VALUE
                                      --------   --------   --------   --------   --------   ----------   ----------   ----------
<S>                                   <C>        <C>        <C>        <C>        <C>        <C>          <C>          <C>
LONG-TERM DEBT:
FIXED RATE
  Vehicle rental--asset backed
    Notes...........................  $800,000              $850,000              $200,000    $400,000    $2,250,000   $2,204,850
  Acquisition--Senior Subordinated
    Notes...........................                                                           500,000       500,000      517,500
  Other.............................    11,104   $  9,445      6,774   $  3,604      1,591       3,784        36,302       36,302
Annualized weighted average interest
  rate..............................     6.23%      6.72%      6.40%      6.86%      6.15%       8.84%         7.12%
VARIABLE RATE
  Vehicle leasing--domestic ABS.....              351,350    291,190    196,040     96,040      65,380     1,000,000    1,000,000
  Acquisition--Term loans...........    17,000     27,000     42,000     52,000     62,000     800,000     1,000,000    1,000,000
  Other.............................                                                            62,000        62,000       62,000
Annualized weighted average interest
  rate..............................     9.01%      6.96%      7.08%      7.28%      7.66%       9.35%         8.16%
</TABLE>

<TABLE>
<CAPTION>
                                                            EXPECTED MATURITY DATE AS OF DECEMBER 31, 1998
                                                                            (IN THOUSANDS)
                                      -------------------------------------------------------------------------------------------
                                        1999       2000       2001       2002       2003     THEREAFTER     TOTAL      FAIR VALUE
                                      --------   --------   --------   --------   --------   ----------   ----------   ----------
<S>                                   <C>        <C>        <C>        <C>        <C>        <C>          <C>          <C>
LONG-TERM DEBT:
FIXED RATE
  Medium Term Notes.................             $800,000              $850,000               $600,000    $2,250,000   $2,294,541
  Other domestic debt...............   $1,085         209    $ 227          256                                1,777        1,777
Annualized weighted average interest
  rate..............................     8.0%        6.2%     9.3%         6.4%                   6.1%
VARIABLE RATE
  Floating rate notes...............                9,677                                                      9,677        9,677
  Average interest rate.............                 6.0%
</TABLE>

    In 1998, the Company had entered into four interest rate swap agreements to
reduce the impact of changes in interest rates on certain outstanding current
domestic and Canadian debt obligations. The Company's swap agreements have the
effect of changing the interest rate on certain of the Company's current debt
from a variable to a fixed rate of interest. The variable interest rates for
certain of these interest rate swap agreements are either reset quarterly or
daily based upon the average 30-day commercial paper rate for the quarter.
Interest is cash settled on a net basis for each agreement quarterly. The U.S.
interest rate swap agreement will terminate in October 2001 and the three
Canadian swap agreements in August 2003, the counterparty has the right to
terminate one of the agreements in August 2000 and one agreement in August 2001.

    At December 31, 1998, the notional amounts used to calculate the contractual
payments to be exchanged under these swap agreements consist of $250 million and
$38.6 million for the U.S and Canada swap agreements, respectively. The weighted
average variable payment and receipt rates are based on implied forward rates in
the yield curve at December 31, 1998. The weighted average expected payment
rates are 4.8%, 4.8%, 4.8%, 5.6% and 5.6% for the years ended December 31, 1999,
2000, 2001, 2002 and 2003, respectively. The weighted average expected receipt
rates are 4.9%, 5.0%, 5.1%, 5.2% and 5.4% for the years ended December 31, 1999,
2000, 2001, 2002 and 2003, respectively. The fair value of the interest Rate
Swap agreements at December 31, 1998 is approximately $885,000

COMMODITY RISK

    Depending on market fundamentals of the price of gasoline and other
conditions, the Company's subsidiary, Wright Express may purchase put options to
reduce or eliminate the risk of gasoline price declines. Put options purchased
by Wright Express effectively establish a minimum sales transaction fee for the
volume of gasoline purchased on Wright Express programs. An increase in value of
the options is highly correlated to a decrease in the average price of gasoline
purchased by Wright Express's cardholders.

                                       34
<PAGE>
Put options permit Wright Express to participate in price increases above the
option price. The cost of an option is amortized in the month the option
expires. Gains from the sale or exercise of options are recognized when the
underlying option is sold. At December 31, 1999, the total contract amount of
such options was 31.1 million gallons of gasoline and the unamortized cost of
options was $313 thousand and is included in other assets in the accompanying
Consolidated Statement of Financial Position.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

    See Financial Statements Index commencing on page F-1 hereof.

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

    None.

                                    PART III

    The information required by Items 10, 11, 12 and 13 of Part III of Form 10-K
will be set forth in the Proxy Statement of the Company relating to the 2000
Annual Meeting of Stockholders, which information is incorporated herein by
reference.

                                    PART IV

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

ITEM 14 (A) (1) FINANCIAL STATEMENTS

    See Financial Statements Index commencing on page F-1 herein.

ITEM 14 (A) (2) INDEX TO FINANCIAL STATEMENT SCHEDULES

    See Financial Statement Schedule II--Valuation and Qualifying Accounts on
Page S-1.

    All schedules, except those set forth above, have been omitted since the
information required has been included in the Consolidated Financial Statements
or Notes thereto or has been omitted as not applicable or not required.

ITEM 14 (A) (3). EXHIBITS

    See Exhibits Index commencing on page E-1 herein.

ITEM 14 (B) REPORTS ON FORM 8-K

    None in the fourth quarter of 1999.

                                       35
<PAGE>
                                   SIGNATURES

    Pursuant to the requirements of the 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, in the City of New
York, State of New York, on March 29, 2000.

<TABLE>
<S>                                                    <C>  <C>
                                                       AVIS GROUP HOLDINGS, INC.
                                                       (Registrant)

                                                       By:             /s/ KEVIN M. SHEEHAN
                                                            -----------------------------------------
                                                                         Kevin M. Sheehan
                                                                      Name: Kevin M. Sheehan
                                                             Title: President--Corporate and Business
                                                               Affairs and Chief Financial Officer
</TABLE>

    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 capacities and on the dates indicated.

<TABLE>
<CAPTION>
                      SIGNATURE                                    TITLE                    DATE
                      ---------                                    -----                    ----
<C>                                                    <S>                             <C>
                                                       Chairman of the Board, Chief
                  /s/ A. BARRY RAND                      Executive Officer and
     -------------------------------------------         Director (Principal           March 29, 2000
                    A. Barry Rand                        Executive Officer)
                                                       President-Corporate and
                /s/ KEVIN M. SHEEHAN                     Business Affairs, Chief
     -------------------------------------------         Financial Officer and         March 29, 2000
                  Kevin M. Sheehan                       Director (Principal
                                                         Financial Officer)
               /s/ TIMOTHY M. SHANLEY                  Vice President and Controller
     -------------------------------------------         (Principal Accounting         March 29, 2000
                 Timothy M. Shanley                      Officer)
                /s/ W. ALUN CATHCART                   Director
     -------------------------------------------                                       March 29, 2000
                  W. Alun Cathcart
             /s/ LEONARD S. COLEMAN, JR.               Director
     -------------------------------------------                                       March 29, 2000
               Leonard S. Coleman, Jr.
               /s/ ALFONSE M. D'AMATO                  Director
     -------------------------------------------                                       March 29, 2000
                 Alfonse M. D'amato
                 /s/ MARTIN EDELMAN                    Director
     -------------------------------------------                                       March 29, 2000
                   Martin Edelman
                /s/ DEBORAH L. HARMON                  Director
     -------------------------------------------                                       March 29, 2000
                  Deborah L. Harmon
                /s/ STEPHEN P. HOLMES                  Director
     -------------------------------------------                                       March 29, 2000
                  Stephen P. Holmes
               /s/ MICHAEL J. KENNEDY                  Director
     -------------------------------------------                                       March 29, 2000
                 Michael J. Kennedy
                /s/ MICHAEL P. MONACO                  Director
     -------------------------------------------                                       March 29, 2000
                  Michael P. Monaco
                /s/ F. ROBERT SALERNO                  President and Chief Operating
     -------------------------------------------         Officer--Rental Car Group,    March 29, 2000
                  F. Robert Salerno                      and Director
</TABLE>

                                       36
<PAGE>
                                                            EXHIBIT NO. 14(A)(2)

           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

                          FINANCIAL STATEMENT SCHEDULE

                 SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                ADDITIONS
                                                         -----------------------
                                            BALANCE AT   CHARGED TO     OTHER                   BALANCE AT
                                            BEGINNING    COSTS AND    ADDITIONS,                  END OF
DESCRIPTION                                 OF PERIOD     EXPENSES      NET(A)     DEDUCTIONS     PERIOD
-----------                                 ----------   ----------   ----------   ----------   ----------
<S>                                         <C>          <C>          <C>          <C>          <C>
Year ended December 31, 1999:
Allowance for doubtful accounts--accounts
  receivable..............................   $  3,350      $ 6,137                   $ 1,818     $  7,669
Accumulated amortization--goodwill........   $ 19,740      $30,182                               $ 49,922
Public liability and property damage and
  other insurance liabilities.............   $261,209      $72,853                   $74,306     $259,756

Year ended December 31, 1998:
Allowance for doubtful accounts--accounts
  receivable..............................   $  2,286      $ 2,961                   $ 1,897     $  3,350
Accumulated amortization--goodwill........   $  7,886      $11,854                               $ 19,740
Public liability and property damage and
  other insurance liabilities.............   $248,029      $93,038                   $79,858     $261,209

Year ended December 31, 1997:
Allowance for doubtful accounts--accounts
  receivable..............................   $    227      $ 3,208                   $ 1,149     $  2,286
Accumulated amortization--goodwill........   $  1,026      $ 6,860                               $  7,886
Public liability and property damage and
  other insurance liabilities.............   $213,785      $96,663      $8,670       $71,089     $248,029
</TABLE>

------------------------

a)  Includes additions of $8,838 relating to the acquisition of First Gray Line
    on August 20, 1997.

                                      S-1
<PAGE>
ITEM NO. 14 (A) (3)

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT                                         DESCRIPTION
-------                                         -----------
<S>                     <C>
1.0                     UNDERWRITING AGREEMENTS

1.01                    Purchase Agreement, dated as of June 25, 1999, among Avis
                        Rent A Car, Inc. (the "Company"), the Subsidiary Guarantors
                        (as defined therein) and Chase Securities Inc. and Lehman
                        Brothers Inc. (the "Initial Purchasers"). (7)

2.0                     PLAN OF ACQUISITION

2.01                    Agreement and Plan of Merger and Reorganization by and among
                        PHH Corporation, PHH Holdings Corporation, the Company and
                        Avis Fleet Leasing and Management Corporation, dated as of
                        May 22, 1999. (7)

3.                      CERTIFICATE OF INCORPORATION AND BY-LAWS.

3.01                    Certificate of Incorporation of Avis Rent A Car, Inc. (3)

3.01(a)                 Certificate of Ownership and Merger; Merging Avis Group
                        Holdings, Inc. into Avis Rent A Car, Inc. (1)

3.02(a)                 Certificate of Incorporation of Avis Rent A Car System,
                        Inc. (7)

3.02(b)                 Restated Certificate of Incorporation of Avis Rent A Car
                        System, Inc. (7)

3.02(c)                 Corrected Restated Certificate of Incorporation of Avis Rent
                        A Car System, Inc. (7)

3.02(d)                 Certificate of Ownership and Merger merging The First Gray
                        Line Corporation into Avis Rent A Car System, Inc. (7)

3.03(a)                 Certificate of Incorporation of Avis International,
                        Ltd. (7)

3.03(b)                 Certificate of Change of Location of Registered Office and
                        Registered Agent of Avis International, Ltd. (7)

3.03(c)                 Certificate of Change of Registered Agent and Registered
                        Office of Avis International, Ltd. (7)

3.04(a)                 Certificate of Incorporation of Avis Management Services,
                        Ltd. (7)

3.04(b)                 Certificate of Change of Location of Registered Office and
                        Registered Agent of Avis Management Services, Ltd. (7)

3.04(c)                 Certificate of Change of Registered Agent and Registered
                        Office of Avis Management Services, Ltd. (7)

3.05                    Certificate of Incorporation of Avis Caribbean,
                        Limited. (7)

3.06                    Certificate of Incorporation of Avis Asia and Pacific,
                        Limited. (7)

3.07(a)                 Certificate of Incorporation of Avis Enterprises, Inc. (7)

3.07(b)                 Certificate of Amendment of Certificate of Incorporation of
                        Avis Enterprises, Inc. (7)

3.07(c)                 Certificate of Amendment of Certificate of Incorporation of
                        Avis Enterprises, Inc. (7)

3.08                    Certificate of Incorporation of Avis Service, Inc. (7)
</TABLE>

                                      E-1
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                                         DESCRIPTION
-------                                         -----------
<S>                     <C>
3.09                    Certificate of Incorporation of Avis Lube, Inc.(7)

3.10                    Certificate of Incorporation of Avis Leasing
                        Corporation. (7)

3.11(a)                 Certificate of Incorporation of Rent-A-Car Company,
                        Incorporated. (7)

3.11(b)                 Articles of Reduction of Rent-A-Car Company,
                        Incorporated. (7)

3.11(c)                 Articles of Amendment to Articles of Incorporation of
                        Rent-A-Car Company, Incorporated. (7)

3.11(d)                 Articles of Amendment to Articles of Incorporation of
                        Rent-A-Car Company, Incorporated. (7)

3.11(e)                 Articles of Amendment to the Articles of Incorporation of
                        Rent-A-Car Company, Incorporated. (7)

3.11(f)                 Articles of Amendment of Rent-A-Car Company,
                        Incorporated. (7)

3.12(a)                 Certificate of Incorporation of Reserve Claims Management
                        Co. (7)

3.12(b)                 Certificate of Change of Registered Agent and Registered
                        Office of Reserve Claims Management Co. f/k/a Avis Leasing
                        International, Ltd. (7)

3.12(c)                 Restated Certificate of Incorporation of Avis Leasing
                        International, Ltd. (7)

3.13(a)                 Certificate of Incorporation of Avis Fleet Leasing and
                        Management Corporation. (7)

3.13(b)                 Articles of Correction of Avis Fleet Leasing and Management
                        Corporation. (7)

3.13(c)                 Certificate of Designation of Powers, Preferences and
                        Special Rights of Series A Cumulative Participating
                        Redeemable Convertible Preferred Stock and Qualifications,
                        Limitations and Restrictions Thereof of Avis Fleet Leasing
                        and Management Corporation. (6)

3.13(d)                 Certificate of Designation of Powers, Preferences and
                        Special Rights of Series B Cumulative PIK Preferred Stock
                        and Qualifications, Limitations and Restrictions Thereof of
                        Avis Fleet Leasing and Management Corporation. (5)

3.13(e)                 Certificate of Designation of Powers, Preferences and
                        Special Rights of Series C Cumulative Redeemable Preferred
                        Stock and Qualifications, Limitations and Restrictions
                        Thereof of Avis Fleet Leasing and Management
                        Corporation. (5)

3.14(a)                 Certificate of Incorporation of Dealers Holding, Inc. (7)

3.14(b)                 Notice of Change of Resident Agent of Dealers Holding,
                        Inc. (7)

3.14(c)                 Notice of Change of Resident Agent of Dealers Holding,
                        Inc. (7)

3.14(d)                 Change of Address of Resident Agent of Dealers Holding,
                        Inc. (7)

3.14(e)                 Certified Copy of Resolution of Board of Directors for
                        Designation or Change of Resident Agent and/or Principal
                        Office of Dealers Holdings, Inc. (7)

3.15(a)                 Articles of Incorporation of Williamsburg Motors, Inc. (7)

3.15(b)                 Notice of Change of Resident Agent of Williamsburg Motors,
                        Inc. (7)

3.15(c)                 Change of Resident Agent of Williamsburg Motors, Inc. (7)

3.15(d)                 Change of Address of Resident Agent of Williamsburg Motors,
                        Inc. (7)
</TABLE>

                                      E-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                                         DESCRIPTION
-------                                         -----------
<S>                     <C>
3.15(e)                 Certified Copy of Resolution of Board of Directors for
                        Designation or Change of Resident Agent and/or Principal
                        Office. (7)

3.15(f)                 Articles of Amendment of Articles of Incorporation of
                        Williamsburg Motors, Inc. (7)

3.16(a)                 Articles of Incorporation of Edenton Motors, Inc. (7)

3.16(b)                 Notice of Change of Resident Agent of Edenton Motors,
                        Inc. (7)

3.16(c)                 Articles of Amendment of Edenton Motors, Inc. (7)

3.16(d)                 Articles of Amendment of Edenton Motors, Inc. (7)

3.16(e)                 Change of Resident Agent of Edenton Motors, Inc. (7)

3.16(f)                 Change of Address of Resident Agent of Edenton Motors,
                        Inc. (7)

3.16(g)                 Certified Copy of Resolution of Board of Directors for
                        Designation or Change of Resident Agent and/or Principal
                        Office of Edenton Motors, Inc. (7)

3.17                    Certificate of Incorporation of PHH Canadian Holdings,
                        Inc. (7)

3.18(a)                 Articles of Incorporation of PHH Deutschland, Inc. (7)

3.18(b)                 Articles of Amendment of PHH Deutschland, Inc. (7)

3.18(c)                 Articles of Amendment of PHH Deutschland, Inc. (7)

3.18(d)                 Articles of Amendment of PHH Deutschland, Inc. (7)

3.18(e)                 Change of Resident Agent of PHH Deutschland, Inc. (7)

3.18(f)                 Articles of Amendment of PHH Deutschland, Inc. (7)

3.18(g)                 Articles of Amendment of PHH Deutschland, Inc. (7)

3.18(h)                 Certified Copy of Resolution of Board of Directors for
                        Designation or Change of Resident Agent and/or Principal
                        Office of PHH Deutschland, Inc. (7)

3.18(i)                 Change of Address of Resident Agent of PHH Deutschland,
                        Inc. (7)

3.19(a)                 Certificate of Incorporation of FAH Company, Inc. (7)

3.19(b)                 Certificate of Amendment to Certificate of Incorporation of
                        FAH Company, Inc. (7)

3.19(c)                 Certificate of Amendment to Certificate of Incorporation of
                        FAH Company, Inc. (7)

3.19(d)                 Certificate of Amendment to Certificate of Incorporation of
                        FAH Company, Inc. (7)

3.20                    Limited Liability Company Agreement of PHH Vehicle
                        Management Services LLC. (7)

3.21                    Limited Liability Company Agreement of Wright Express
                        LLC. (7)

3.22                    Operating Agreement of PHH/Paymentech LLC. (7)

3.50                    By-Laws of Avis Rent A Car, Inc. (3)

3.51                    By-Laws of Avis Rent A Car System, Inc. (7)

3.52                    By-Laws of Avis International, Ltd. (7)

3.53                    By-Laws of Avis Management Services, Ltd. (7)

3.54                    By-Laws of Avis Caribbean, Limited. (7)
</TABLE>

                                      E-3
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                                         DESCRIPTION
-------                                         -----------
<S>                     <C>
3.55                    By-Laws of Avis Asia and Pacific, Limited. (7)

3.56                    By-Laws of Avis Enterprises, Inc. (7)

3.57                    By-Laws of Avis Service, Inc. (7)

3.58                    By-Laws of Avis Lube, Inc. (7)

3.59                    By-Laws of Avis Leasing Corporation. (7)

3.60                    By-Laws of Rent-A-Car Company, Incorporated. (7)

3.61                    By-Laws of Reserve Claims Management Co. (7)

3.62                    By-Laws of Avis Fleet Leasing and Management
                        Corporation. (7)

3.63                    By-Laws of Dealers Holdings, Inc. (7)

3.64                    By-Laws of Williamsburg Motors, Inc (7).

3.65                    By-Laws of Edenton Motors, Inc. (7)

3.66                    By-Laws of PHH Canadian Holdings, Inc. (7)

3.67                    By-Laws of PHH Deutschland, Inc. (7)

3.68                    By-Laws of FAH Company, Inc. (7)

4.0                     INSTRUMENT DEFINING THE RIGHTS OF SECURITY HOLDERS,
                        INCLUDING INDENTURES.

4.02                    Form of Certificate of Common Stock (2)

4.03                    Series 1997-1 Supplement, dated as of July 30, 1997 between
                        AESOP Funding II L.L.C. and the Avis ABS Trustee, to the
                        Amended and Restated Base Indenture, dated as of July 30,
                        1997, between AESOP Funding II and the Avis ABS
                        Trustee. (2)

4.04                    Series 1997-1 Supplement, dated as of July 30, 1997 between
                        AESOP Funding II L.L.C. and the Avis ABS Trustee, to the
                        Amended and Restated Base Indenture, dated as of July 30,
                        1997, between AESOP Funding II and the Avis ABS
                        Trustee. (2)

4.05                    Loan Agreement, dated as of July 30, 1997, between AESOP
                        Leasing L.P., as borrower, and AESOP Funding II L.L.C. as
                        lender. (2)

4.06                    Loan Agreement, dated as of July 30, 1997, among AESOP
                        Leasing L.P., as borrower, PV Holding Corp., as a permitted
                        nominee of the borrower, Quartz Fleet Management, Inc., as a
                        permitted nominee of the borrower, and AESOP Funding I
                        L.L.C., as lender. (2)

4.07                    Loan Agreement, dated as of July 30, 1997, between AESOP
                        Leasing Corp II, as borrower, AESOP Leasing Corp., as
                        permitted nominee of the borrower, and AESOP Funding II
                        L.L.C., as lender. (2)

4.08                    Master Motor Vehicle Finance Lease Agreement, dated as of
                        July 30, 1997, by and among AESOP Leasing L.P., as lessor,
                        Avis Rent A Car System, Inc., as lessee, individually and as
                        the administrator and Avis Rent A Car, Inc., as
                        guarantor. (2)

4.09                    Master Motor Vehicle Operating Lease Agreement, dated as of
                        July 30, 1997, by and among AESOP Leasing L.P., as lessor,
                        Avis Rent A Car System, Inc., individually and as the
                        administrator, certain Eligible Rental Car Companies, as
                        lessees, and Avis Rent A Car, Inc., as guarantor. (2)
</TABLE>

                                      E-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                                         DESCRIPTION
-------                                         -----------
<S>                     <C>
4.10                    Master Motor Vehicle Operating Lease Agreement, dated as of
                        July 30, 1997, by and among AESOP Leasing Corp. II, as
                        lessor, Avis Rent A Car System, Inc., individually and as
                        the administrator, certain Eligible Rental Car Companies, as
                        lessees, and Avis Rent A Car, Inc., as guarantor. (2)

4.11                    Credit Agreement, dated as of July 30, 1997, among Avis
                        Rent A Car, Inc., Avis Rent A Car System, Inc., The Chase
                        Manhattan Bank, as administrative agent, Lehman Commercial
                        Paper, Inc., as syndication agent and the other lenders
                        party thereto (the "Credit Agreement"). (2)

4.12                    Guarantee, dated as of July 30, 1997, in favor of The Chase
                        Manhattan Bank, as administrative agent for the lenders from
                        time to time parties to the Credit Agreement. (2)

4.13                    Security Agreement, dated as of July 30, 1997, in favor of
                        The Chase Manhattan Bank, as administrative agent for the
                        lenders from time to time parties to the Credit
                        Agreement. (2)

4.14                    Pledge Agreement, dated as of July 30, 1997, in favor of The
                        Chase Manhattan Bank, as administrative agent for the
                        lenders from time to time parties to the Credit
                        Agreement. (2)

4.15                    Supplemental Indenture No. 1, dated as of July 31, 1998, to
                        the Amended and Restated Base Indenture, dated as of July
                        30, 1997, between AESOP Funding I L.L.C. as issuer and the
                        Avis ABS Trustee. (4)

4.16                    Amendment No. 1, dated as of July 31, 1998, to Loan
                        Agreement, dated as of July 30, 1997, between AESOP Leasing
                        L.P., as borrower, and AESOP Funding I L.L.C., as
                        lender. (4)

4.17                    Amendment No. 1, dated as of July 31, 1998, to Loan
                        Agreement, dated as of July 30, 1997, among AESOP Leasing
                        L.P., as borrower, PV Holding Corp., as a permitted nominee
                        of the borrower, Quartz Fleet Management, Inc., as a
                        permitted nominee of the borrower, and AESOP Funding II
                        L.L.C., as lender. (4)

4.18                    Amendment No. 1, dated as of July 31, 1998, to Master Motor
                        Vehicle Finance Lease Agreement, dated as of July 30, 1997,
                        among AESOP Leasing L.P., as lessor, Avis Rent A Car
                        Systems, Inc., as Lessee individually and as Administrator,
                        and Avis Rent A Car, Inc., as guarantor. (4)

4.19                    Amended and Restated Loan Agreement, dated as of September
                        15, 1998, among AESOP Leasing L.P., as borrower, PV Holding
                        Corp., as a permitted nominee of the borrower, Quartz Fleet
                        Management, Inc., as a permitted nominee of the borrower,
                        and AESOP Funding II L.L.C. (4)

4.20                    Amended and Restated Master Motor Vehicle Operating Lease
                        Agreement, dated as of September 15, 1998, among AESOP
                        Leasing L.P., as lessor, Avis Rent Car System, Inc.,
                        individually and as Administrator, certain Eligible Rental
                        Car Companies, as lessees, and Avis Rent A Car, Inc., as
                        guarantor. (4)

4.21                    Supplemental Indenture No. 2, dated as of September 15,
                        1998, to Amended and Restated Base Indenture, dated as of
                        July 30, 1997, between AESOP Funding I L.L.C., as issuer and
                        the Avis ABS Trustee. (4)

4.22                    Series 1998-1 Supplement, dated as of February 26, 1998
                        between AESOP Funding II L.L.C., as issuer, and the Avis ABS
                        Trustee, as trustee and Series 1998-1 agent, to the Amended
                        and Restated Base Indenture, dated as of July 30, 1997,
                        between AESOP Funding II L.L.C., as issuer, and the Avis ABS
                        Trustee. (4)
</TABLE>

                                      E-5
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                                         DESCRIPTION
-------                                         -----------
<S>                     <C>
4.30                    Indenture, dated as of June 30, 1999, among the Company, the
                        Subsidiary Guarantors and the Bank of New York (the "Notes
                        Trustee"). (7)

4.31                    Exchange and Registration Rights Agreement, dated as of June
                        30, 1999, among the Company, the Subsidiary Guarantors, the
                        Initial Purchasers and the Notes Trustee. (7)

4.32                    Credit Agreement, dated as of June 30, 1999, among the
                        Company, as borrower, the financial institutions party
                        thereto, the Chase Manhattan Bank (the "Administrative
                        Agent"), and Lehman Commercial Paper Inc. (7)

4.33                    Guarantee and Collateral Agreement, dated as of June 30,
                        1999, among the Company, the Subsidiary Guarantors and the
                        Administrative Agent. (7)

4.40                    Origination Trust Agreement, dated as of June 30, 1999 (the
                        "Origination Trust Agreement"), among Raven Funding LLC (the
                        "SPV"), PHH Vehicle Management Services LLC ("VMS LLC") and
                        Wilmington Trust Company (the "VMS ABS Trustee"). (7)

4.41                    Sold SUBI Supplement 1999-1A to the Origination Trust
                        Agreement, dated as of June 30, 1999 (the "1999-1A SUBI
                        Supplement"), among the SPV, VMS LLC and the VMS ABS
                        Trustee. (7)

4.42                    Sold SUBI Supplement 1999-1B to the Origination Trust
                        Agreement, dated as of June 30, 1999 (the "1999-1B SUBI
                        Supplement"), among the SPV, VMS LLC and the VMS ABS
                        Trustee. (7)

4.43                    Servicing Agreement, dated as of June 30, 1999 (the
                        "Servicing Agreement"), between D.L. Peterson Trust (the
                        "Origination Trust") and VM LLC. (7)

4.44                    Sold SUBI Supplement 1999-1 to the Servicing Agreement,
                        dated as of June 30, 1999 (the "Sold SUBI Servicing
                        Supplement"), among the Origination Trust, the VMS ABS
                        Trustee and VMS LLC.

4.45                    Asset Sale Agreement, dated as of June 30, 1999, between VMS
                        LLC and the SPV. (7)

4.46                    Receivables Purchase Agreement, dated as of June 30, 1999,
                        by and between VMS LLC and the SPV. (7)

4.47                    Contribution Agreement, dated as of June 30, 1999 between
                        the SPV and the VMS ABS Trustee as trustee for the
                        Organization Trust and by VMS LLC for the Origination
                        Trust. (7)

4.48                    Transfer Agreement, dated as of June 30, 1999, between the
                        SPV and Greyhound Funding LLC ("Greyhound"), together with
                        the Origination Trust, VM LLC and the SPV. (7)

4.49                    Base Indenture, dated as of June 30, 1999, between Greyhound
                        and The Chase Manhattan Bank (the "VMS ABS Indenture
                        Trustee"). (7)

4.50                    Series 1999-1 Supplement, dated as of June 30, 1999, among
                        Greyhound, VMS LLC, Park Avenue Receivables Corporation and
                        the VMS ABS Indenture Trustee. (7)

4.51                    Custodian Agreement dated as of June 30, 1999, among the
                        Origination Trust, Wilmington Trust Company as Trustee, VMS
                        LLC, as Servicer and All First Financial Center, as
                        Custodian. (7)

4.52                    Lockbox Services Agreement, dated as of June 30, 1999 among
                        the Origination Trust, VMS LLC, in its capacity as servicer
                        of the Trust, and Bank of America National Trust and Savings
                        Association. (7)
</TABLE>

                                      E-6
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                                         DESCRIPTION
-------                                         -----------
<S>                     <C>
4.53                    Preferred Membership Interest Purchase Agreement, dated as
                        of June 0, 1999, among Greyhound Funding LLC, Park Avenue
                        Receivables Corporation, The Chase Manhattan Bank,
                        individually as the APA Bank and as Funding Agent, PHH
                        Vehicle Management Services LLC, as Administrator. (7)

4.54                    Administration Agreement, dated as of June 30, 1999, among
                        Greyhound Funding LLC, Raven Funding LLC, The Chase
                        Manhattan Bank, as Indenture Trustee, PHH Vehicle Management
                        Services LLC, as Administrator. (7)

10.                     MATERIAL CONTRACTS.

10.01                   Form of Registration Rights Agreement (2)

10.02                   Separation Agreement, dated as of July 30, 1997, between
                        Cendant Car Rental, Inc. and Avis Rent A Car, Inc. (2)

10.03                   Master License Agreement, dated as of July 30, 1997, among
                        Cendant Car Rental, Inc., Avis Rent A Car System, Inc. and
                        Wizard Co., Inc. (2)

10.04                   Computer Services Agreement, dated as of July 30, 1997,
                        between Avis Rent A Car System, Inc. and WizCom
                        International, Ltd. (2)

10.05                   Reservation Services Agreement, dated as of July 30, 1997,
                        between Cendant Incorporated and Avis Rent A Car System,
                        Inc. (2)

10.06                   Form of Tax Disaffiliation Agreement among Cendant
                        Incorporated, Cendant Car Rental, Inc. and Avis
                        Rent A Car, Inc. (2)

10.07                   Form of Lease Agreement by and between WizCom International,
                        Ltd., as lessor, and Avis Rent A Car System, Inc., as lessee
                        (Virginia Beach, Virginia). (2)

10.08                   Form of Sublease Agreement by and between WizCom
                        International, Ltd., as sublessor, and Avis Rent A Car
                        System, Inc., as sublessee (Tulsa, Oklahoma). (2)

10.09                   Form of Sublease Agreement by and between WizCom
                        International, Ltd., as sublessor, and Avis Rent A Car
                        System, Inc., as sublessee (Garden City, New York). (2)

10.10                   Wizard Note Assignment, Assumption and Release Agreement,
                        dated as of July 30, 1997, by and between Wizard Co., Inc.,
                        Avis Rent A Car System, Inc. and Reserve Claims Management
                        Co. (2)

10.11                   Termination Services Agreement, dated as of July 30, 1997,
                        among Harris Trust and Savings Bank, AESOP Funding II
                        L.L.C., Avis Rent A Car System, Inc., and WizCom
                        International, Ltd. (2)

10.13                   Call Transfer Agreement, dated March 4, 1997, between HFS
                        Incorporated and Avis Rent A Car System, Inc. (2)

10.15                   Retention Agreement, dated as of January 1, 1999, between
                        Avis Rent A Car System, Inc. and F. Robert Salerno. (4)

10.16                   Retention Agreement, dated as of January 1, 1999, between
                        Avis Rent A Car System, Inc. and Kevin M. Sheehan. (4)

10.17                   Avis Rent A Car, Inc. 1997 Stock Option Plan. (2)

10.18                   Avis Rent A Car System, Inc. Nonqualified Deferred
                        Compensation Plan. (4)
</TABLE>

                                      E-7
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                                         DESCRIPTION
-------                                         -----------
<S>                     <C>
10.20                   Information Technology Services Agreement, dated as of June
                        29, 1999, between PHH Vehicle Management Services, LLC and
                        Cendant Corporation. (7)

10.21                   Corporate Services Transition Agreement, dated as of June
                        30, 1999 between Cendant Operations, Inc. and Avis Fleet
                        Leasing and Management Corporation. (7)

10.22                   Corporate Services Transition Agreement, dated as of June
                        30, 1999 between PHH Corporation and Avis Fleet Leasing and
                        Management Corporation. (7)

10.23                   VMS Acquisition Registration Rights Agreement, dated as of
                        June 30, 1999, among Avis Rent A Car, Inc., Avis Fleet
                        Leasing and Management Corporation, PHH Corporation and PHH
                        Holdings Corporation. (7)

10.24                   Non-Competition Agreement, dated as of June 30, 1999, among
                        Avis Rent A Car, Inc., Avis Fleet Leasing and Management
                        Corporation, PHH Corporation and PHH Holdings
                        Corporation. (7)

10.25                   Stockholders' Agreement, dated as of June 30, 1999, among
                        Avis Rent A Car, Inc., Avis Fleet Leasing and Management
                        Corporation, and PHH Corporation. (7)

10.26                   Trademark License Agreement, dated as of June 30, 1999,
                        between Avis Fleet Leasing and Management Corporation and
                        PHH Holdings Corporation. (7)

10.27                   Transitional License Agreement, dated as of June 30, 1999,
                        between Cendant Corporation and Avis Fleet Leasing and
                        Management Corporation. (7)

10.28                   Undertaking, dated as of June 30, 1999 by Avis Fleet Leasing
                        and Management Corporation. (7)

10.29                   Instrument of Assumption, dated as of June 30, 1999 by Avis
                        Fleet Leasing and Management Corporation. (7)

12.                     COMPUTATION OF RATIOS

12.1                    Computation of Ratio of Earnings to Fixed Charges and
                        Combined Fixed Charges. (7)

21.                     Subsidiaries of the Registrants. (2)

23.                     Consents

23.01                   Consent of Deloitte & Touche LLP, Independent Auditors of
                        the Company to be incorporated by reference to Registrant's
                        Registration Statement Nos. 333-59693, 333-59659, and
                        333-63269 on Form S-8 from the 1998 Annual Report filed
                        herewith. (1)

23.02                   Consent of Deloitte & Touche LLP relating to Avis Financial
                        Statements. (7)

23.03                   Consent of Deloitte & Touche LLP relating to VMS Financial
                        Statements. (7)

23.04                   Consent of White & Case LLP (included in opinion). (7)

24.1                    Powers of Attorney. (7)

27                      FINANCIAL DATA SCHEDULE

27.1                    Financial Data Schedule--December 31, 1997. (3)

27.2                    Financial Data Schedule--December 31, 1998. (4)

27.3                    Financial Data Schedule--December 31, 1999. (1)
</TABLE>

                                      E-8
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT                                         DESCRIPTION
-------                                         -----------
<S>                     <C>
99.1                    Combined Financial Statements as of December 31, 1998 and
                        1997 and for the Years Ended December 31, 1998, 1997 and
                        1996 and Unaudited Condensed Combined Financial Statements
                        as of March 31, 1999 and for the Three Months Ended March
                        31, 1999 and 1998 of PHH Vehicle Management Services. (5)

99.2                    Unaudited Pro Forma Consolidated Financial Data. (5)

99.3                    Press Release of the Company, dated June 30, 1999. (5)
</TABLE>

------------------------

(1) Filed herewith.

(2) Incorporated by reference to the Registrant's Registration Statement on Form
    S-1, 333-28609.

(3) Incorporated by reference to the Registrant's Registration Statement on Form
    S-1, 333-46737.

(4) Incorporated by reference to the Registrant's Form 10-K for the fiscal year
    ended December 31, 1998.

(5) Incorporated by reference to the Registrant's Current Report on Form 8-K
    dated July 15, 1999.

(6) Incorporated by reference to Amendment No. 1 to the Registrant's Current
    Report on Form 8-K/A dated July 15, 1999.

(7) Incorporated by reference to the Registrant's Registration Statement on Form
    S-4, 333-86269.

                                      E-9
<PAGE>
                                                                  ITEM 14(A) (2)

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                 PAGE NO.
                                                              --------------
<S>                                                           <C>
AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)
Consolidated Financial Statements:
  Independent Auditors' Report..............................             F-2
  Consolidated Statements of Operations for the years ended
    December 31, 1999, 1998 and 1997........................             F-3
  Consolidated Statements of Financial Position at
    December 31, 1999 and 1998..............................             F-4
  Consolidated Statements of Common Stockholders' Equity for
    the years ended December 31, 1999, 1998 and 1997........             F-5
  Consolidated Statements of Cash Flows for the years ended
    December 31, 1999, 1998 and 1997........................             F-6
  Notes to the Consolidated Financial Statements............         F7--F50
</TABLE>

                                      F-1
<PAGE>
                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Avis Group Holdings, Inc.
New York, New York

    We have audited the accompanying consolidated statements of financial
position of Avis Group Holdings, Inc. (formerly Avis Rent A Car, Inc.) and
subsidiaries (the "Company") as of December 31, 1999 and 1998, and the related
consolidated statements of operations, common stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 1999. Our
audits also included the financial statement schedule listed in the Index at
Item 14. These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on the consolidated financial statements and financial
statement 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, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of December 31,
1999 and 1998, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1999 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.

/s/ Deloitte & Touche LLP

New York, New York
January 26, 2000
(March 27, 2000 as to Note 1)

                                      F-2
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                           ------------------------------------
                                                              1999         1998         1997
                                                           ----------   ----------   ----------
<S>                                                        <C>          <C>          <C>
Revenue:
  Vehicle rental.........................................  $2,500,746   $2,297,582   $2,046,154
  Vehicle leasing........................................     692,935
  Other fee based........................................     139,046
                                                           ----------   ----------   ----------
                                                            3,332,727    2,297,582    2,046,154
                                                           ----------   ----------   ----------
Costs and expenses:
  Direct operating, net..................................     957,270      927,930      853,767
  Vehicle depreciation and lease charges, net............   1,174,509      593,064      525,143
  Selling, general and administrative....................     582,056      436,275      413,291
  Interest, net..........................................     382,303      192,080      180,608
  Minority interest......................................       5,890
  Non-vehicle depreciation and amortization..............      34,600       24,151       16,162
  Amortization of cost in excess of net assets
    acquired.............................................      30,182       11,854        6,860
                                                           ----------   ----------   ----------
                                                            3,166,810    2,185,354    1,995,831
                                                           ----------   ----------   ----------
  Income before provision for income taxes...............     165,917      112,228       50,323
  Provision for income taxes.............................      73,332       48,707       22,850
                                                           ----------   ----------   ----------
  Net income.............................................      92,585       63,521       27,473
  Preferred stock dividends..............................       9,110
                                                           ----------   ----------   ----------
  Earnings applicable to common stockholders.............  $   83,475   $   63,521   $   27,473
                                                           ==========   ==========   ==========
  Earnings per share:
  Basic..................................................  $     2.66   $     1.86   $      .89
                                                           ==========   ==========   ==========
  Diluted................................................  $     2.61   $     1.82   $      .88
                                                           ==========   ==========   ==========
</TABLE>

              See notes to the consolidated financial statements.

                                      F-3
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

                 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                              DECEMBER 31,   DECEMBER 31,
                                                                  1999           1998
                                                              ------------   ------------
<S>                                                           <C>            <C>
ASSETS
Cash and cash equivalents...................................  $    71,697     $   29,751
Cash held on deposit with financial institution.............       93,530
Restricted cash.............................................      253,080        133,284
Accounts receivable, net....................................    1,115,740        360,574
Finance lease receivables...................................      871,034
Prepaid expenses............................................       64,316         42,083
Vehicles, net--rental.......................................    3,367,362      3,164,816
Vehicles, net--leasing......................................    3,134,009
Property and equipment, net.................................      197,827        145,045
Other assets................................................      115,273         40,590
Deferred income tax assets..................................                     117,659
Cost in excess of net assets acquired, net..................    1,794,390        463,260
                                                              -----------     ----------
Total assets................................................  $11,078,258     $4,497,062
                                                              ===========     ==========
LIABILITIES, PREFERRED STOCK AND COMMON STOCKHOLDERS' EQUITY
Accounts payable............................................  $   588,377     $  198,481
Accrued liabilities.........................................      369,453        326,204
Due to affiliates, net......................................       59,396         22,293
Current income tax liabilities..............................       18,226         23,045
Deferred income tax liabilities, net........................      181,256         28,504
Public liability, property damage and other insurance
  liabilities, net..........................................      259,756        261,209
Debt........................................................    8,469,805      3,014,712
Minority interest (preferred membership interest)...........       99,305
                                                              -----------     ----------
Total liabilities...........................................   10,045,574      3,874,448
                                                              -----------     ----------
Commitments and contingencies

Preferred stock:
Series A Preferred stock ($.01 par value, 7,200,000 shares
  authorized, issued and outstanding; $50 liquidation
  preference)...............................................      360,000
Series B Preferred stock accrued ($.01 par value, 5,880,217
  shares authorized; $50 liquidation preference)............        9,000
Series C Preferred stock ($.01 par value, 40,000 shares
  authorized, issued and outstanding; $50 liquidation
  preference)...............................................        2,000
                                                              -----------
  Total preferred stock.....................................      371,000
                                                              -----------
Common stockholders' equity:
Class A Common stock ($.01 par value, 100,000,000 shares
  authorized; 35,925,000 issued at December 31, 1999 and
  1998).....................................................          359            359
Additional paid-in capital..................................      593,106        591,651
Retained earnings...........................................      175,690         92,215
Accumulated other comprehensive loss........................       (3,639)       (10,651)
Treasury stock (4,793,288 and 2,672,700 shares at December
  31, 1999 and 1998, respectively, at cost)                      (103,832)       (50,960)
                                                              -----------     ----------
  Total common stockholders' equity.........................      661,684        622,614
                                                              -----------     ----------
Total liabilities, preferred stock and common stockholders'
  equity....................................................  $11,078,258     $4,497,062
                                                              ===========     ==========
</TABLE>

              See notes to the consolidated financial statements.

                                      F-4
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

             CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY

                      (IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                             ACCUMULATED
                                                                    ADDITIONAL                  OTHER
                                         COMPREHENSIVE    COMMON     PAID-IN     RETAINED   COMPREHENSIVE    TREASURY
                                            INCOME        STOCK      CAPITAL     EARNINGS   INCOME/(LOSS)     STOCK       TOTAL
                                         -------------   --------   ----------   --------   -------------   ----------   --------
<S>                                      <C>             <C>        <C>          <C>        <C>             <C>          <C>
Balance January 1, 1997................                    $ 85      $ 74,915    $  1,221     $    194                   $ 76,415
Net income.............................     $27,473                                27,473                                  27,473
Sale of Class A Common stock ($.01 par
  value) through an initial public
  offering of 22,425,000 shares of
  common stock on September 24, 1997...                     224       355,592                                             355,816
Foreign currency translation
  adjustment...........................      (5,761)                                            (5,761)                    (5,761)
Additional minimum pension charge......        (221)                                              (221)                      (221)
                                            -------        ----      --------    --------     --------      ----------   --------
Comprehensive income...................     $21,491
                                            =======
Balance, December 31, 1997.............                     309       430,507      28,694       (5,788)                   453,722
Net income.............................     $63,521                                63,521                                  63,521
Sale of Class A Common stock ($.01 par
  value) through a public offering of
  5,000,000 shares of common stock on
  March 23, 1998.......................                      50       161,144                                             161,194
Purchases of treasury stock, 2,672,700
  shares, at cost......................                                                                     $  (50,960)   (50,960)
Foreign currency translation
  adjustment...........................      (3,374)                                            (3,374)                    (3,374)
Additional minimum pension charge......      (1,489)                                            (1,489)                    (1,489)
                                            -------        ----      --------    --------     --------      ----------   --------
Comprehensive income...................     $58,658
                                            =======
Balance, December 31, 1998.............                     359       591,651      92,215      (10,651)        (50,960)   622,614
Net income.............................     $92,585                                92,585                                  92,585
Preferred stock dividends..............                                            (9,110)                                 (9,110)
Purchases of treasury stock 2,327,300
shares, at cost........................                                                                        (57,237)   (57,237)
Issuance of treasury stock due to
  exercise
of stock options and other, net........                                 1,455                                    4,365      5,820
Foreign currency translation
  adjustment...........................       6,199                                              6,199                      6,199
Additional minimum pension benefit.....         813                                                813                        813
                                            -------
Comprehensive income...................     $99,597
                                            =======        ----      --------    --------     --------      ----------   --------
Balance, December 31, 1999.............                    $359      $593,106    $175,690     $ (3,639)     $ (103,832)  $661,684
                                                           ====      ========    ========     ========      ==========   ========
</TABLE>

              See notes to the consolidated financial statements.

                                      F-5
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                     YEARS ENDED DECEMBER 31,
                                                              ---------------------------------------
                                                                 1999          1998          1997
                                                              -----------   -----------   -----------
<S>                                                           <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income..................................................  $    92,585   $    63,521   $    27,473
Adjustments to reconcile net income to net cash provided by
operating activities:
  Vehicle depreciation......................................    1,146,926       581,022       466,799
  Depreciation and amortization of property and equipment...       19,558        12,890        11,791
  Amortization of other non-revenue producing assets........       45,224        23,115        11,231
  Deferred income tax provision.............................       57,027        38,457         9,161
  Provision for doubtful accounts receivable................        6,137         2,961         3,208
  Provision for public liability, property damage and other
    insurance liabilities, net..............................       (1,819)       13,687        25,574
  Changes in operating assets and liabilities:
    Restricted cash.........................................      (62,588)      (26,300)      (76,596)
    Accounts receivable.....................................      (89,568)      (14,045)      (15,201)
    Prepaid expenses........................................       (6,336)        6,848         3,914
    Other assets............................................       21,654        (5,625)       (8,769)
    Accounts payable........................................       54,299       (23,148)      (12,597)
    Accrued liabilities.....................................        7,795        (2,475)      (84,150)
    Due to (from) affiliates................................     (192,951)      (18,320)       53,761
                                                              -----------   -----------   -----------
  NET CASH PROVIDED BY OPERATING ACTIVITIES.................    1,097,943       652,588       415,599
                                                              -----------   -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES
  Payments for vehicle additions............................   (5,605,494)   (4,303,048)   (4,240,809)
  Vehicle deletions.........................................    4,205,221     3,610,721     3,382,177
  Increase in finance lease receivables.....................      (22,663)
  Payments for additions to property and equipment..........      (48,240)      (42,933)      (24,733)
  Retirements of property and equipment.....................       (6,419)        5,603         3,971
  Payments for purchase of rental car franchise licensees,
    net of cash acquired....................................      (45,192)     (237,182)     (199,381)
  Payment for purchase of PHH Holdings, net of cash
    acquired................................................   (1,325,781)
  Proceeds from the sale and leaseback of office building...       32,156
                                                              -----------   -----------   -----------
  NET CASH USED IN INVESTING ACTIVITIES.....................   (2,816,412)     (966,839)   (1,078,775)
                                                              -----------   -----------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from public offerings, net.........................                    161,194       359,316
Purchases of treasury stock, net............................      (53,868)      (50,960)
Changes in debt:
  Proceeds..................................................    6,120,545     1,217,289     3,381,173
  Repayments................................................   (4,307,537)   (1,023,432)   (3,031,885)
                                                              -----------   -----------   -----------
  Net increase in debt......................................    1,813,008       193,857       349,288
Payments for debt issuance costs............................       (6,543)       (4,654)      (29,302)
Increase in minority interest (preferred membership
  interest).................................................       99,305
                                                              -----------   -----------   -----------
  NET CASH PROVIDED BY FINANCING ACTIVITIES.................    1,851,902       299,437       679,302
                                                              -----------   -----------   -----------
Effect of exchange rate changes on cash.....................        2,043          (334)         (945)
                                                              -----------   -----------   -----------
Net increase (decrease) in cash and cash equivalents and
  cash held on deposit with financial institutions..........      135,476       (15,148)       15,181
Cash and cash equivalents and cash held on deposit with
  financial institutions at beginning of year...............       29,751        44,899        29,718
                                                              -----------   -----------   -----------
CASH AND CASH EQUIVALENTS AND CASH HELD ON DEPOSIT WITH
  FINANCIAL INSTITUTIONS AT END OF YEAR.....................  $   165,227   $    29,751   $    44,899
                                                              ===========   ===========   ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for:
  Interest..................................................  $   370,247   $   209,977   $   189,086
                                                              ===========   ===========   ===========
  Income taxes..............................................  $    28,877   $    13,338   $     8,899
                                                              ===========   ===========   ===========
Business acquired:
  Fair value of assets acquired, net of cash acquired.......  $ 6,004,777   $   244,501   $   519,650
  Liabilities assumed.......................................    4,271,804         7,319       320,269
                                                              -----------   -----------   -----------
  Net assets acquired.......................................    1,732,973       237,182       199,381
  Less issuance of Series A and Series C Preferred Stock....      362,000
                                                              -----------   -----------   -----------
NET CASH PAID FOR ACQUISITIONS..............................  $ 1,370,973   $   237,182   $   199,381
                                                              ===========   ===========   ===========
</TABLE>

              See notes to the consolidated financial statements.

                                      F-6
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

THE COMPANY

    Effective March 27, 2000, Avis Rent A Car, Inc. changed its name to Avis
Group Holdings, Inc. The accompanying consolidated financial statements include
Avis Group Holdings, Inc. (formerly Avis Rent A Car, Inc.) and subsidiaries,
which was incorporated on October 17, 1996. The Company and its former parent,
Avis Inc., were acquired by Cendant ("Cendant") on October 17, 1996 (the "Date
of Acquisition") for approximately $806.5 million (the "Acquisition"). The
purchase price was comprised of approximately $367.2 million in cash, $100.9
million of indebtedness and $338.4 million of common stock. Avis Group Holdings,
Inc. (formerly Avis Rent A Car, Inc.) and subsidiaries are referred to
throughout the notes to the consolidated financial statements as the "Company".
On January 1, 1997, Avis, Inc., the Company's former ultimate parent, a
wholly-owned subsidiary of Cendant, contributed the net assets of its corporate
operations and all of its common stock ownership in Avis International, Ltd. and
subsidiaries, Avis Enterprises, Inc. and subsidiaries, Pathfinder Insurance
Company and Global Excess & Reinsurance, Ltd. to the Company. Pursuant to a plan
developed by Cendant prior to the Date of Acquisition, Cendant caused the
Company to undertake an initial public offering ("IPO"). On September 24, 1997,
the Company issued and sold 22,425,000 shares of its common stock through such
IPO and received net proceeds of $359.3 million. On March 23, 1998, the Company
sold 5,000,000 shares of its common stock through a public offering (the
"Offering") and received net proceeds of approximately $161.2 million. In
addition, in the Offering on March 23, 1998, Cendant reduced its ownership of
the Company by selling 1,000,000 shares of the Company's common stock and
retained the net proceeds. As a result of the IPO, the Offering on March 23,
1998, the net repurchase of 2,120,588 shares and 2,672,700 shares of treasury
stock by the Company during 1999 and 1998, respectively, and the issuance of
Series A and C preferred stock in connection with the VMS acquisition (see Notes
2, 14 and 15), Cendant's common stockholder's equity interest in the Company at
January 1, 2000 is approximately 18 % excluding potential conversion of
Preferred Stock (see Notes 14, 16 and 24). The Company has used the net proceeds
from these offerings to (i) acquire certain Avis System franchises (see Note 2)
and (ii) for working capital and general corporate purposes, including the
repayment of certain indebtedness. A Cendant subsidiary owns and operates the
reservation system as well as the telecommunications and computer processing
systems which service the rental car operations for reservations, rental
agreement processing, accounting and vehicle control. Cendant is reimbursed for
such services at cost (see Note 5). In addition, a Cendant subsidiary charges
the Company a royalty fee for the use of the Avis trade name (see Note 5).

    On March 19, 1999, and June 30, 1999, the Company purchased the common stock
and franchise rights of Rent-A-Car Company, Incorporated, of Richmond Virginia
("Rent-A-Car, Inc.") and Motorent, Inc. of Nashville Tennessee ("Motorent") for
approximately $10.1 million and $49.3 million, respectively. These acquisitions
were financed through internally generated funds.

    On June 30, 1999, the Company completed the transaction contemplated by the
Agreement and Plan of Merger and Reorganization dated as of May 22, 1999 (the
"Merger Agreement"), with PHH Corporation, a Maryland corporation and
wholly-owned subsidiary of Cendant, PHH Holdings Corporation ("PHH Holdings"), a
Texas corporation and wholly-owned subsidiary of PHH Corporation, and Avis Fleet
Leasing and Management Corporation, a Texas corporation and a wholly-owned
subsidiary of the Company (the "Acquisition Subsidiary"). Pursuant to the Merger
Agreement, the Acquisition Subsidiary and PHH Holdings merged on June 30, 1999
and the Acquisition Subsidiary acquired the fleet leasing and management and
fuel card business of PHH corporation ("VMS") for approximately $1.8 billion and
refinanced VMS indebtedness of approximately $3.5 billion (the "VMS
Acquisition"). The acquisition financing included borrowings by the Company of
$1.0 billion of term loans, the issuance by the Company

                                      F-7
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
of $500 million of senior subordinated notes, and the issuance by the
Acquisition Subsidiary of $362.0 million of preferred stock (see Notes 10, 14
and 15).

PRINCIPLES OF CONSOLIDATION

    All material intercompany accounts and transactions have been eliminated.

ACCOUNTING ESTIMATES

    Generally accepted accounting principles require the use of estimates, which
are subject to change, in the preparation of financial statements. Significant
accounting estimates used include estimates for recoverability of the cost in
excess of net assets acquired, the determination of public liability, property
damage and other insurance liabilities, and the realization of deferred income
tax assets. However, actual results may differ.

REVENUE RECOGNITION

VEHICLE RENTAL REVENUE:

    Revenue is recognized over the period the vehicle is rented.

VEHICLE LEASING REVENUE:

    The Company primarily leases vehicles under three standard arrangements:
open-end operating leases, closed-end operating leases or open-end finance
leases (direct financing leases). These leases are accounted for in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 13, "Accounting
for leases". Each lease is either classified as an open end or closed end
operating lease or open end finance lease and are included in Vehicles,
net-leasing and Finance lease receivables, respectively, on the accompanying
Consolidated Statements of Financial Position. Vehicle lease terms generally
range from 12 to 50 months. Amounts charged to the leases for interest on the
unrecovered investment are credited to income on a level yield method, which
approximates the contractual terms.

OTHER FEE BASED REVENUE:

    Revenues from fleet management services other than leasing are recognized
over the period in which services are provided and the related expenses are
incurred.

CASH AND CASH EQUIVALENTS

    The Company considers unrestricted deposits and short-term investments with
an original maturity date of three months or less to be cash equivalents.

CASH HELD ON DEPOSIT WITH FINANCIAL INSTITUTION

    Cash held on deposit with financial institution represents lease payments
collected from the Company's vehicle leasing customers by one of the Company's
lenders in connection with the Company's VMS Domestic Asset Based Financing
Structure (see Vehicle Leasing and Other Fee Based Debt in Note 10). Cash
collected during the month by the lender, net of vehicle purchases, is settled
with the Company in the early part of the following month.

                                      F-8
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RESTRICTED CASH

    Restricted cash includes cash and short-term investments that are not
readily available for normal Company disbursements. Certain amounts have been
set aside as required under the Company's debt covenants and to satisfy
insurance related and other commitments of the Company.

FINANCE LEASE RECEIVABLES

    Finance Lease Receivables are leases accounted for in accordance with SFAS
No. 13, "ACCOUNTING FOR LEASES", which are classified as a direct financing
lease, as defined.

    The Company records the cost of the leased vehicle as an "investment in
finance leases". Vehicles are depreciated using the straight-line method over
the expected lease term. Amounts charged to the lessees for interest on the
unrecovered investment are credited to income on a level yield method, which
approximates the contractual terms.

VEHICLES, NET

    Rental vehicles are stated at cost, net of accumulated depreciation,
incentives and allowances. In accordance with industry practice, when vehicles
are sold, gains or losses are reflected as an adjustment to depreciation.
Vehicles are generally depreciated at rates ranging from 10% to 25% per annum.
Manufacturers provide the Company with incentives and allowances (such as
rebates and volume discounts) which are amortized to income over the holding
periods of the vehicles.

    Leasing vehicles include vehicles which are leased to customers under either
open-end or closed-end operating leases:

    Open-end Operating Leases--Under these leases, the minimum lease term is 12
    months with a month to month renewal thereafter. In addition, resale of the
    vehicles upon termination of the lease is generally for the account of the
    lessee except for a minimum residual value, which the Company has
    guaranteed. The Company guarantees 16% of the original cost of the unit for
    the first 24 months of the lease, and then 16% of the fair market value of
    the unit at inception of the month to month renewals thereafter.

    Closed-end Operating Leases--Under these leases, the minimum lease term is
    for 12 months or longer. However, 24 and 36 month lease terms are the most
    prevalent. These leases are cancelable under certain conditions. Resale of
    the vehicles upon termination is for the account of the Company.

    Open-end finance leases provide that the resale of the vehicles upon
    termination of the lease, are for the account of the lessee.

PROPERTY AND EQUIPMENT, NET

    Property and equipment is stated at cost, net of accumulated depreciation
and amortization. Depreciation is calculated using the straight-line method over
the estimated useful life of the assets. Estimated useful lives range from five
to ten years for furniture, fixtures and equipment, to thirty years for
buildings. Leasehold improvements are amortized over the shorter of twenty years
or the remaining life of the lease. Maintenance and repairs are expensed;
renewals and improvements are capitalized. When depreciable

                                      F-9
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
assets are retired or sold, the cost and related accumulated depreciation are
removed from the accounts with any resulting gain or loss reflected in the
Consolidated Statements of Operations.

COST IN EXCESS OF NET ASSETS ACQUIRED, NET

    Cost in excess of net assets acquired is amortized over a 40 year period and
is shown net of accumulated amortization of $49.9 million and $19.7 million at
December 31, 1999 and 1998, respectively.

IMPAIRMENT ACCOUNTING

    The Company reviews the recoverability of its long-lived assets, including
cost in excess of net assets acquired, when events or changes in circumstances
occur that indicate that the carrying value of the assets may not be
recoverable. The measurement of possible impairment is based on the Company's
ability to recover the carrying value of the asset from the expected future
pre-tax undiscounted cash flows generated. The measurement of impairment
requires management to use estimates of expected future cash flows. If an
impairment loss existed, the amount of the loss would be recorded under the
caption costs and expenses in the Consolidated Statements of Operations. It is
reasonably possible that future events or circumstances could cause these
estimates to change.

PUBLIC LIABILITY, PROPERTY DAMAGE AND OTHER INSURANCE LIABILITIES, NET

    Insurance liabilities on the accompanying consolidated statements of
financial position include additional liability insurance, personal effects
protection insurance, public liability and property damage ("PLPD") and personal
accident insurance claims for which the Company is self-insured. The Company is
self-insured up to $1 million per claim under its automobile liability insurance
program for PLPD and additional liability insurance. Costs in excess of $1
million per claim are insured under various contracts with commercial insurance
carriers. The liability for claims up to $1 million is estimated based on the
Company's historical loss and loss adjustment expense experience, which is
adjusted for current trends.

    The insurance liabilities include a provision for both claims reported to
the Company as well as claims incurred but not yet reported to the Company. This
method is an actuarially accepted loss reserve method. Adjustments to this
estimate and differences between estimates and the amounts subsequently paid are
reflected in the Consolidated Statements of Operations as they occur.

FOREIGN CURRENCY TRANSLATION

    The assets and liabilities of foreign companies are translated at year-end
exchange rates. Results of operations are translated at the average rates of
exchange in effect during the year. The resultant translation adjustment is
included as a component of accumulated other comprehensive loss within
consolidated common stockholders' equity.

INCOME TAXES

    Effective September 30, 1997, the Company files a U.S. consolidated federal
income tax return. The Company has adopted the calendar year as its fiscal year.
The Company files separate income tax returns in states where a consolidated
return is not permitted. The Company was included in the consolidated federal
income tax return of Cendant through September 29, 1997. Pursuant to the
regulations under the Internal Revenue Code, the Company's pro rata share of the
consolidated federal income tax liability of

                                      F-10
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cendant was allocated to the Company on a separate return basis. In accordance
with Statement of Financial Accounting Standards No. 109, "ACCOUNTING FOR INCOME
TAXES" ("SFAS 109"), deferred income tax assets and liabilities are measured
based upon the difference between the financial accounting and tax basis of
assets and liabilities.

PENSIONS

    Costs of the defined benefit plans are actuarially determined under the
projected unit credit cost method and include amounts for current service and
interest on projected benefit obligations and plan assets. The Company's policy
is to fund at least the minimum contribution amount required by the Employee
Retirement Income Security Act of 1974.

ADVERTISING

    Advertising costs are expensed as incurred. Advertising costs were $86.7
million, $77.7 million and $65.6 million for the years ended December 31, 1999,
1998 and 1997, respectively.

DERIVATIVE FINANCIAL INSTRUMENTS

    Derivative financial instruments are used to manage exposure to market risks
associated with fluctuations in interest rates. Analyses are performed on an
on-going basis to determine that a high correlation exists between the
characteristics of derivative instruments and the assets or transactions being
hedged. As a matter of policy, derivative activities are not engaged for trading
or speculative purposes. Exposure to credit-related losses exist in the event of
non-performance by counterparties to certain derivative financial instruments.
At December 31, 1999, the Company's identified derivative financial instruments
(see Recent Accounting Pronouncements below) include interest rate swap
agreements, interest rate cap and floor agreements, gasoline options and options
imbedded in certain instruments (see Notes 10, 12 and 14).

    Interest on the Company's interest rate swap agreements, and interest rate
cap and floor agreements are cash settled on a net basis for each agreement
quarterly. The Company's swaption agreement is marked to market with adjustments
to the swaption's fair value recorded in earnings. Gains or losses from the sale
or exercise of gasoline options are recognized when the underlying option is
sold.

ENVIRONMENTAL COSTS

    The Company's operations include the storage and dispensing of gasoline. The
Company accrues losses associated with the remediation of accidental fuel
discharges when such losses are probable and reasonably estimable. Accruals for
estimated losses from environmental remediation obligations generally are
recognized no later than completion of the remedial feasibility study. Such
accruals are adjusted as further information develops or circumstances change.
Costs of future expenditures for environmental remediation obligations are not
discounted to their present value.

RECLASSIFICATIONS

    Certain prior year amounts have been reclassified to conform with the
presentation of the current year's consolidated financial statements.

                                      F-11
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECENT ACCOUNTING PRONOUNCEMENTS

    A recent pronouncement of the Financial Accounting Standards Board which is
not required to be adopted at this date, is SFAS No. 133, "ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES" ("SFAS 133"), which is effective
for the Company's consolidated financial statements for the year ending December
31, 2001. SFAS 133 establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that any entity recognize all
derivatives as either assets or liabilities in the statement of financial
position at fair value. Avis Rent A Car has not completed its assessment of the
effect on the Company's consolidated financial statements that will result from
the adoption of SFAS 133.

NOTE 2--ACQUISITIONS

    On March 19, 1999, and June 30, 1999, the Company purchased the common stock
and franchise rights of Rent-A-Car Company, Incorporated, of Richmond, Virginia
("Rent-A-Car, Inc.") and Motorent, Inc. of Nashville Tennessee ("Motorent") for
approximately $10.1 million and $49.3 million, respectively. These acquisitions
were financed through internally generated funds.

    On June 30, 1999, the Company completed the transaction contemplated by the
Merger Agreement with PHH Corporation, PHH Holdings Corporation and the
Acquisition Subsidiary. Pursuant to the Merger Agreement, the Acquisition
Subsidiary and PHH Holdings merged on June 30, 1999 and the Acquisition
Subsidiary acquired the fleet leasing and fuel card businesses of VMS for
approximately $1.8 billion and refinanced VMS indebtedness of approximately $3.5
billion. The acquisition financing included borrowings by the Company of $1.0
billion of term loans, the issuance by the Company of $500 million of senior
subordinated notes, and the issuance by the acquisition subsidiary of $362.0
million of preferred stock (see Notes 10,14 and 15).

    In connection with the VMS Acquisition, the Company received a perpetual,
royalty-free license to use the VMS trademarks, including the "PHH" name and
logo. PHH Corporation and PHH Holdings entered into a 5-year non-compete
agreement with Avis Group Holdings, Inc. and the Acquisition Subsidiary. The
Acquisition Subsidiary also received a limited license to use the Cendant name
in Europe and the United States for a period of up to one year. In addition, the
parties have entered into agreements under which Cendant agreed to provide the
Company with computer services and with transitional services with respect to
various administrative services, including payroll and benefits, which had
previously been provided to VMS by Cendant. In addition, the Acquisition
subsidiary has entered into an agreement under which it will provide Cendant
with certain transitional administrative services which had previously been
provided by VMS.

    The preliminary purchase cost allocation for the Company's acquisitions of
Rent-A-Car Inc., Motorent and VMS, are subject to adjustment, when additional
information concerning asset and liability valuations are obtained. The final
asset and liability fair values will differ from those set forth in the
accompanying statement of financial position at December 31, 1999. However, the
changes are not expected to have a material effect on the financial position of
the Company.

                                      F-12
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--ACQUISITIONS (CONTINUED)
    The following is the preliminary purchase cost allocation of the
acquisitions described above (in thousands):

<TABLE>
<S>                                                           <C>
Purchase cost...............................................  $1,917,949
                                                              ----------
Fair value of:
  Assets acquired...........................................   4,810,307
  Liabilities assumed.......................................  (4,271,804)
                                                              ----------
Net assets..................................................     538,503
                                                              ----------
Cost in excess of net assets acquired.......................  $1,379,446
                                                              ==========
</TABLE>

    The following unaudited pro forma information presents the results of
operations of the Company as if the acquisition of VMS for approximately $1.9
billion (including the issuance of Series A and Series C Preferred Stock) and
the refinancing of VMS indebtedness and related adjustments had taken place on
January 1, 1998 (in thousands, except per share data):

<TABLE>
<CAPTION>
                                                       YEARS ENDED DECEMBER 31,
                                                       -------------------------
                                                          1999          1998
                                                       -----------   -----------
<S>                                                    <C>           <C>
Revenue..............................................  $4,144,670    $3,907,039
                                                       ==========    ==========
Income before provision for income taxes.............  $  141,402    $   65,596
                                                       ==========    ==========
Net income...........................................  $   73,171    $   26,916
Preferred stock dividends............................      18,220        18,220
                                                       ----------    ----------
Earnings applicable to common stockholders...........  $   54,951    $    8,696
                                                       ==========    ==========
Earnings per share:
Basic................................................  $     1.75    $      .25
                                                       ==========    ==========
Diluted..............................................  $     1.72    $      .25
                                                       ==========    ==========
</TABLE>

    On May 1, 1998, the Company acquired the assets of the car rental business
of Hayes Leasing Company, Inc., including the Avis System franchises for the
cities of Austin, Fort Worth and San Antonio, and the counties of Dallas and
Tarrant, Texas for approximately $86 million in cash plus the refinancing of
fleet-related indebtedness, which totaled approximately $136 million for a total
purchase price of approximately $222 million. In addition, during the year ended
December 31, 1998, the Company purchased the assets of several other Avis System
franchises for approximately $15 million in cash. If these Acquisitions had
occurred on January 1, 1999 or 1998, they would not have had a material impact
on the Company's results of operations. The excess purchase price over the net
assets acquired for these acquisitions was approximately $90 million.

                                      F-13
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--ACQUISITIONS (CONTINUED)
    The following is the purchase cost allocation for the acquisition of the car
rental assets of Hayes Leasing Company, Inc. and other Avis System franchises
during the year ended December 31, 1998 mentioned above (in thousands):

<TABLE>
<S>                                                           <C>
Purchase cost...............................................  $237,182
                                                              --------
Fair value of:
  Assets acquired...........................................   153,828
  Liabilities assumed.......................................    (7,319)
                                                              --------
Net assets..................................................   146,509
                                                              --------
Cost in excess of net assets acquired.......................  $ 90,673
                                                              ========
</TABLE>

    In 1997, the Company purchased First Gray Line and the franchise rights of
another Avis System franchisee. These acquisitions had an aggregate purchase
cost of approximately $199 million. The excess purchase cost over net assets
acquired was approximately $168 million.

    The following is the purchase cost allocation for these 1997 acquisitions
mentioned above (in thousands):

<TABLE>
<S>                                                           <C>
Purchase cost...............................................  $199,381
                                                              --------
Fair value of:
  Assets acquired...........................................   351,517
  Liabilities assumed.......................................   320,269
                                                              --------
Net assets..................................................    31,248
                                                              --------
Cost in excess of net assets acquired.......................  $168,133
                                                              ========
</TABLE>

    The acquisition of the franchise rights of the additional Avis System
franchisee, if it had occurred on January 1, 1997, would not have had a material
impact on the results of operations of the Company.

    The following unaudited pro-forma information presents the results of
operations of the Company, which assumes that the following transactions had
occurred on January 1, 1997 (i) the acquisition of the Company by Cendant and
the establishment of a franchisor/franchisee relationship, (ii) the acquisition
of First Gray Line and (iii) the repayment of debt with the net proceeds (after
the purchase of First Gray Line) from the IPO (in thousands, except earnings per
share amounts):

<TABLE>
<CAPTION>
                                                                 1997
                                                              ----------
<S>                                                           <C>
Revenue.....................................................  $2,175,897
                                                              ==========

Net income..................................................  $   39,432
                                                              ==========

Basic earnings per share....................................  $     1.28
                                                              ==========

Diluted earnings per share..................................  $     1.26
                                                              ==========
</TABLE>

                                      F-14
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--ACQUISITIONS (CONTINUED)
    The above mentioned acquisitions have been accounted for by the purchase
method. The financial statements include the operating results of acquisitions
subsequent to their dates of acquisition.

NOTE 3--RESTRICTED CASH

    At December 31, 1999 and 1998, restricted cash includes an escrow amount of
$90,000,000 as required under the Company's debt agreements, to provide
additional credit enhancement on the Company's Medium Term Notes and Domestic
Asset Backed Securities-Variable Fund Notes (see Note 10). Also included in
restricted cash at December 31, 1999 is $116,244,000 related to the VMS Domestic
and Foreign ABS Facilities and certain amounts which are set aside to satisfy
claims under the Company's self-insurance programs and other obligations of the
Company.

NOTE 4--ACCOUNTS RECEIVABLE, NET

    Accounts receivable, net at December 31, 1999 and 1998 consist of the
following (in thousands):

<TABLE>
<CAPTION>
                                                           1999        1998
                                                        ----------   --------
<S>                                                     <C>          <C>
Vehicle leasing and other fee based...................  $  699,006
Due from General Motors...............................     196,497   $161,377
Vehicle rentals.......................................     109,084    104,032
Vehicle related.......................................      51,282     65,586
Value added and provincial taxes......................      28,427
Damage claims.........................................      13,715     14,710
Other.................................................      25,398     18,219
                                                        ----------   --------
                                                         1,123,409    363,924
Less allowance for doubtful accounts..................      (7,669)    (3,350)
                                                        ----------   --------
                                                        $1,115,740   $360,574
                                                        ==========   ========
</TABLE>

    Vehicle related amounts include receivables for vehicles sold under
guaranteed repurchase contracts ("Repurchase Programs") and amounts due for
incentives and allowances. Incentives and allowances are based on all of the
following: the volume of vehicles to be purchased for a model year, the
manufacturers' willingness to encourage the Company to retain vehicles rather
than return the vehicles back to the manufacturer and the purchase of particular
models not subject to repurchase under "buyback" arrangements. Incentives and
allowances are amortized to income over the average holding period of the
vehicles (see Notes 7 and 24).

                                      F-15
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 5--DUE TO AFFILIATES, NET

    Due to affiliates, net at December 31, 1999 and 1998 consist of amounts due
Cendant or its consolidated subsidiaries of $59.4 million and $22.3 million,
respectively, for services. Non-interest bearing advances represent intercompany
transactions relating primarily to royalty fees, reservation processing and data
processing.

    Expense items of the Company include the following items from Cendant and
affiliates of Cendant for the years ended December 31, 1999, 1998 and 1997 (in
thousands):

<TABLE>
<CAPTION>
                                                  1999       1998       1997
                                                --------   --------   --------
<S>                                             <C>        <C>        <C>
Royalty fee...................................  $100,031   $ 91,904   $ 81,846
Reservations..................................    58,063     49,872     43,240
Data processing and other.....................    43,700     35,844     41,896
Rent..........................................     4,639      4,648      4,927
                                                --------   --------   --------
                                                $206,433   $182,268   $171,909
                                                ========   ========   ========
</TABLE>

    These charges seek to reimburse the affiliated company for the actual costs
incurred. They are determined in accordance with various intercompany agreements
and include certain allocations which are based upon such factors as square
footage, employee salaries, computer usage time, etc. Effective January 1, 1997,
Cendant charged the Company a royalty fee of 4.0% of revenue for the use of the
Avis trade name. The royalty fee of 4.0% consists of a base royalty of 3.0% of
the vehicle rental segment's gross revenue and a supplemental royalty of 1.0% of
the vehicle rental segment's gross revenue payable quarterly in arrears, which
will increase periodically to a maximum of 1.5% in 2003. The supplemental
royalty or a portion thereof may be deferred if the Company does not meet
certain financial targets.

    In addition, for the years ended December 31, 1999 and 1998, the Company was
charged by Cendant approximately $4.1 million and $3.8 million for certain
software developed for internal use, which has been capitalized on the
accompanying Consolidated Statements of Financial Position. Under the Computer
Services Agreement with Cendant, dated July 30, 1997, software developed for the
Company's internal use is charged to the Company at Cendant's cost.

NOTE 6--FINANCE LEASE RECEIVABLES

    Under these leases, the minimum lease term is 12 months with a month to
month renewal thereafter. In addition, resale of the vehicles upon termination
of the lease is for either the account of the lessor (PHH Europe) or the lessee
(both PHH North America and PHH Europe). The net investment in leases and leased
vehicles at December 31, 1999 consisted of the following (in thousands):

<TABLE>
<CAPTION>

<S>                                                           <C>
Future minimum lease payments receivable....................  $561,157
Estimated unguaranteed residual value.......................   392,191
Less unearned income........................................   (82,314)
                                                              --------
                                                              $871,034
                                                              ========
</TABLE>

                                      F-16
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6--FINANCE LEASE RECEIVABLES (CONTINUED)
    At December 31, 1999, future minimum lease payments on the Company's direct
financing leases are as follows (in thousands):

<TABLE>
<CAPTION>

<S>                                                           <C>
2000........................................................    $243,645
2001........................................................     175,791
2002........................................................      94,459
2003........................................................      33,088
2004........................................................       7,841
Thereafter..................................................       6,333
                                                                --------
                                                                $561,157
                                                                ========
</TABLE>

NOTE 7--VEHICLES, NET

    Vehicles at December 31, 1999 and 1998 consist of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                    1999
                                                           -----------------------      1998
                                                            VEHICLE      VEHICLE      VEHICLE
                                                             RENTAL      LEASING       RENTAL
                                                           ----------   ----------   ----------
<S>                                                        <C>          <C>          <C>
Rental vehicles..........................................  $3,683,864                $3,443,385
Vehicles under open-end operating leases.................               $3,337,191
Vehicles under closed-end operating leases...............                  230,693
Buses and support vehicles...............................      81,150                    67,786
Vehicles held for sale...................................      19,757       40,400       21,871
                                                           ----------   ----------   ----------
                                                            3,784,771    3,608,284    3,533,042
Less accumulated depreciation............................    (417,409)    (474,275)    (368,226)
                                                           ----------   ----------   ----------
                                                           $3,367,362   $3,134,009   $3,164,816
                                                           ==========   ==========   ==========
</TABLE>

    Depreciation expense recorded for rental vehicles was $644.6 million, $576.2
million and $460.6 million for the years ended December 31, 1999, 1998, and
1997, respectively. Depreciation expense recorded for leasing vehicles for the
period June 30, 1999 (date of acquisition) through December 31, 1999 was $507.7
million. Rental vehicle depreciation expense for rental vehicles is stated net
of amortization of certain incentives and allowances from various vehicle
manufacturers of approximately $120 million, $119 million and $121 million for
the years ended December 31, 1999, 1998 and 1997, respectively. Rental vehicle
depreciation expense also reflects a net gain (loss) on the disposal of vehicles
of $(5.4) million, $(6.8) million and $7.0 million for the years ended December
31, 1999, 1998, and 1997, respectively.

                                      F-17
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 7--VEHICLES, NET (CONTINUED)
    At December 31, 1999, future minimum lease payments to be received on the
Company's open-end and closed-end operating leases are as follows (in
thousands):

<TABLE>
<S>                                                           <C>
YEARS
2000........................................................  $1,122,002
2001........................................................     921,121
2002........................................................     619,250
2003........................................................     290,897
2004........................................................      96,987
Thereafter..................................................      92,673
                                                              ----------
Total.......................................................  $3,142,930
                                                              ==========
</TABLE>

    Other fleet leasing vehicles with net carrying amounts of $233.6 million at
December 31, 1999, are included in special purpose entities which are not owned
by the Company. These entities do not require consolidation as they are not
controlled by the Company and all risks and rewards rest with the owners.
Additionally, managed vehicles totaling approximately $110.9 million at December
31, 1999, are owned by special purpose entities, which are owned by the Company.
However, such assets and related liabilities have been netted in the
Consolidated Statements of Financial Position since there is a two-party
agreement with determinable accounts, a legal right to offset exists and the
Company exercises its right of offset in settlement with client corporations
received from vehicle manufacturers are partially recognized at the time of
acquisition of the leased vehicle, a portion is deferred and recognized on a
straight line basis over the lease term of the vehicle, and a portion is
deferred and recognized at the time the vehicle is disposed of.

VEHICLE SALE--LEASEBACK TRANSACTIONS

    During 1999, the Company entered into a sale-leaseback transaction with an
independent third party ("Counterparty") in Canada. In addition, the Company is
party to similar arrangements with the Counterparty resulting from transactions
incurred prior to 1999. Under this arrangement, the Company sells its net
investment in operating leases and leased vehicles to the Counterparty. Then, it
repurchases the leased vehicles (the Counterparty retains the lease rights).
Subsequently, the Company leases the vehicles under a direct financing lease to
the Counterparty. The Counterparty prepays all lease payments except for an
agreed-upon residual amount. These residual amounts are typically 3% to 4.5% of
the total lease exposure from these transactions. The total amount of net
investment in operating leases and leased vehicles sold under this agreement was
$48.1 million. At December 31, 1999, the total outstanding prepaid rent and
residual amounts outstanding under such agreements was $286.7 million and $16.1
million respectively. The total revenues recognized under these agreements was
$60.6 million for 1999.

                                      F-18
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8--PROPERTY AND EQUIPMENT, NET

    Property and equipment, net at December 31, 1999 and 1998 consist of the
following (in thousands):

<TABLE>
<CAPTION>
                                                            1999       1998
                                                          --------   --------
<S>                                                       <C>        <C>
Land....................................................  $ 28,270   $ 23,726
Buildings...............................................     8,191      8,655
Leasehold improvements..................................   119,702     87,830
Furniture, fixtures and equipment.......................    52,823     16,869
Construction-in-progress................................    32,975     32,236
                                                          --------   --------
                                                           241,961    169,316
Less accumulated depreciation and amortization..........   (44,134)   (24,271)
                                                          --------   --------
                                                          $197,827   $145,045
                                                          ========   ========
</TABLE>

    In December 1999, VMS in the U.K. entered into a sale and lease back for an
office building. The selling price of the office building was approximately
$32.2 million. The period of the lease is 16 years. The gain on the sale of the
office building of $16.4 million has been reflected in the Consolidated
Statement of Financial Position at December 31, 1999, as a reduction of cost in
excess of net assets acquired, net.

NOTE 9--ACCRUED LIABILITIES

    Accrued liabilities at December 31, 1999 and 1998 consist of the following
(in thousands):

<TABLE>
<CAPTION>
                                                            1999       1998
                                                          --------   --------
<S>                                                       <C>        <C>
Payroll and related costs...............................  $106,209   $103,043
Taxes, other than income taxes..........................    15,664      9,349
Rents and property related..............................    36,270     22,241
Interest................................................    28,866      6,140
Sales and marketing.....................................    54,749     43,704
Vehicle related.........................................    29,355     27,102
Other...................................................    98,340    114,625
                                                          --------   --------
                                                          $369,453   $326,204
                                                          ========   ========
</TABLE>

                                      F-19
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--FINANCING AND DEBT

    Debt outstanding at December 31, 1999 and 1998 consist of the following (in
thousands):

<TABLE>
<CAPTION>
                                                                 1999         1998
                                                              ----------   ----------
<S>                                                           <C>          <C>
VEHICLE RENTAL
Commercial Paper Notes......................................  $1,026,261   $  678,377
Short-term notes-foreign....................................     111,259       74,881
Series 1997-1A asset backed Medium Term Notes due May
  through October 2000 at 6.22%.............................     800,000      800,000
Series 1997-1B asset backed Medium Term Notes due May
  through October 2002 at 6.40%.............................     850,000      850,000
Series 1998-1 asset backed Medium Term Notes due December
  2004 through May 2005 at 6.14%............................     600,000      600,000
Revolving credit facility due June 2005.....................      62,000
Other.......................................................       5,902       11,454
                                                              ----------   ----------
  TOTAL VEHICLE RENTAL DEBT.................................   3,455,422    3,014,712
                                                              ----------   ----------
VEHICLE LEASING AND OTHER FEE BASED
Commercial Paper Notes......................................   1,521,498
Canadian short term borrowings..............................      44,563
Series 1999-2 floating rate asset-backed notes, Class A-1...     550,000
Series 1999-2 floating rate asset-backed notes, Class A-2...     450,000
Foreign Asset Backed Securities--UK Advances................     850,443
Self-fund notes.............................................      30,397
Wright Express Certificates of Deposit......................      67,482
                                                              ----------
  TOTAL VEHICLE LEASING AND OTHER FEE BASED DEBT............   3,514,383
                                                              ----------
ACQUISITION FINANCING
Term A Loan Notes due June 2005.............................     250,000
Term B Loan Notes due June 2006.............................     375,000
Term C Loan Notes due June 2007.............................     375,000
Senior Subordinated Notes due May 2009 at 11.00%............     500,000
                                                              ----------
  TOTAL ACQUISITION FINANCING...............................   1,500,000
                                                              ----------   ----------
  TOTAL DEBT................................................  $8,469,805   $3,014,712
                                                              ==========   ==========
</TABLE>

VEHICLE RENTAL DEBT

    On July 31, 1997, the Company, through its wholly-owned subsidiary Avis Rent
A Car System, Inc. ("ARACS"), entered into a domestic integrated fleet financing
program that provided for financing for vehicles covered by Repurchase Programs,
(the "Avis ABS Facility"). As of December 31, 1999, the availability of the
domestic integrated fleet under this program is $3.75 billion. The domestic
integrated fleet financing program provides for the issuance of up to $1.5
billion of asset-backed variable funding notes (the "Commercial Paper Notes")
and $2.25 billion of asset backed medium term notes (the "Medium Term Notes").
The Commercial Paper Notes and the Medium Term Notes are backed by a first
priority security interest in the domestic rental fleet. Additional credit
enhancement was provided for the Medium Term Notes by establishing an escrow
account of $90 million, which is included in "Restricted

                                      F-20
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--FINANCING AND DEBT (CONTINUED)
Cash" (see Note 3) on the accompanying Consolidated Statements of Financial
Position at December 31, 1999 and 1998, respectively. The weighted average
interest rates on the Commercial Paper Notes were 5.3% and 5.5% for the years
ended December 31, 1999 and 1998. Average borrowings in the Commercial Paper
Notes during the years ended December 31, 1999 and 1998 was $1,079.3 million and
$809.7 million, respectively.

    On June 30, 1999, the Company entered into a $1.35 billion secured credit
facility (the "Credit Facility") which is guaranteed by certain of it's
subsidiaries. This facility replaced a similar facility that ARAC had entered
into on July 31, 1997. The Credit Facility consists of (i) $1 billion of Term
Loans (see Acquisition Financing below), (ii) a revolving credit facility of up
to $350 million which is available on a revolving basis until June 30, 2005 in
order to finance the working capital needs of the Company in the ordinary course
of business (with up to $75 million of such amount available for the issuance of
standby letters of credit to support workers' compensation and other insurance
and bonding requirements of ARACS, the Company and its subsidiaries in the
ordinary course of business, and a 364 day standby letter of credit facility of
up to $225 million available to fund (a) any shortfall in certain payments owing
to AESOP Leasing, a subsidiary of ARACS pursuant to fleet agreements and (b)
maturing Commercial Paper Notes if such Commercial Paper Notes cannot be repaid
through the issuance of additional Commercial Paper Notes or draws under the
liquidity facility supporting the Commercial Paper Notes). At December 31, 1999
and 1998, the Company had issued letters of credit of $29.2 million and $31.9
million under the revolving credit facility and $150 million and $150 million
under the $225 million standby letter of credit facility, respectively. Under
the terms of the Revolving Credit Facility, the Company had outstanding $62
million as of December 31, 1999 at a variable interest rate with terms identical
to the Term A Loan Notes (see Acquisition Financing below).

    The Credit Facility is secured by the tangible and intangible assets of the
Company (including, without limitation, its intellectual property, its rights
under the Master License Agreement and related agreements, real property and all
of the capital stock or equivalent equity ownership interests of the Company and
each of its direct and indirect domestic subsidiaries and 65% of the Company
first-tier foreign subsidiaries), except for those assets which are subject to a
negative pledge or as to which the agents for the Credit Facility shall
determine in their sole discretion that the costs of obtaining such a security
interest are excessive in relation to the value of the security to be afforded
thereby.

    The weighted-average interest rates of the short-term notes-foreign as of
December 31, 1999 and 1998 were 5.8% and 6.0%, respectively.

VEHICLE LEASING AND OTHER FEE BASED DEBT

    In connection with the VMS Acquisition (see Note 2), Avis Group Holdings,
Inc. refinanced the VMS existing fleet debt with the proceeds of $2,735,507
domestic and $720,000 foreign asset-backed securities issued pursuant to an
offering of asset-backed securities (the "Interim VMS ABS Offering"), under
certain fleet financing facilities and together with the Avis ABS Facility. The
domestic securities comprising the Interim VMS ABS Offering are issued by a
bankruptcy remote special purpose entity (the "Domestic ABS Issuer") and placed
initially with a single multi-seller commercial paper conduit, and thereafter
may be syndicated to one or more other bank sponsored conduits (collectively the
"CP Conduits"). The CP Conduits will acquire Domestic Variable Funding Notes
("VFNs"), Domestic Preferred Membership Interests and U.K. Advances using the
proceeds of commercial paper issuances. In addition, from time to

                                      F-21
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--FINANCING AND DEBT (CONTINUED)
time, the Domestic ABS Issuer may issue medium-term notes secured by the
Domestic ABS Assets, using the proceeds of any such offerings to reduce the
amount of Domestic VFNs then outstanding.

    On October 28, 1999, $1 billion of 7 and 12 year Medium Term Notes ("MTN's")
were issued to replace a like amount of Domestic VFN's. This facility consists
of two classes of floating rate asset-backed notes; Class A-1 notes, which total
$550 million and Class A-2 notes, which total $450 million. Both classes of
notes have an interest rate, which is reset monthly at LIBOR plus 32 basis
points for the Class A-1 notes and LIBOR plus 35 basis points for the Class A-2
notes. The Class A-1 notes have an average expected life of 2 years and commence
amortizing in March 2001 and have a final stated maturity of October 2006. The
Class A-2 notes have an average expected life of 3 years and commence amortizing
when the Class A-1 notes are repaid in full. The Class A-2 notes have a final
stated maturity of October 2011. Both classes of notes are rated AAA by Standard
and Poors and Aaa by Moody's. In addition to the floating rate asset-backed
notes, the Company may issue up to $1.75 billion Variable Funding Investor Notes
to a group of multi seller commercial paper conduits. The Domestic VFN agreement
expires in June 2000 and is renewable annually. The blended interest rate in
effect (including program fees from 32 to 35 basis points) at December 31, 1999
for the domestic asset-backed securities is 6.71%. The Company has also issued
two series of Senior Preferred Membership Interests (see Note 11), which total
$99.3 million at a rate (including program fees of 70 basis points) of 6.97 % at
December 31, 1999.

    VMS-U.K. currently has a $856 million asset-backed facility (the "U.K. ABS
Facility"), which is supported by the leased vehicles and fuel card receivables
of the various VMS-U.K entities. VMS-U.K. is funded through a group of
multi-seller commercial paper conduits. The interest rate is variable and is
based on commercial paper notes plus a weighted average margin of approximately
45 basis points. As of December 31, 1999, there was approximately $850 million
outstanding at a blended rate of 6.66%. This facility expires in December 2000
and is renewable annually.

SELF-FUND NOTES

    Self-fund notes represent loans made by customers to purchase leased
vehicles. Repayment of these notes is matched to payments on the underlying
lease including the disposal of the vehicles at maturity. Interest can be fixed
or floating, depending on the underlying leases. The average interest rate at
December 31, 1999 was 5.1%. The loans are repayable at expiration of the various
lease terms. At December 31, 1999 self-funded notes expire between 2003 and
2013.

WRIGHT EXPRESS CERTIFICATES OF DEPOSIT

    At December 31, 1999, scheduled maturities of certificates of deposit of
$67.5 million are all less than one year. The interest rates range from 5.2% to
6.25%.

ACQUISITION FINANCING

    In connection with the VMS Acquisition (see Notes 1 and 2 ), the Company
entered into $1 billion of term loans, consisting of $250 million ("Term A
Loan"), $375 million ("Term B Loan") and $375 million

                                      F-22
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--FINANCING AND DEBT (CONTINUED)
("Term C Loan"), under the credit facility described previously. These amounts
are outstanding as of December 31, 1999 and accrue interest as follows:

    Term Loans A, B, C and Revolving Loans bear interest at either Chase
Manhattan Bank's ("Chase") alternate base rate ("ABR") or the Eurodollar rate
(at the Company's option) plus the applicable margin. As of December 31, 1999,
the applicable margin and interest rate for each type of loan is as follows:

<TABLE>
<CAPTION>
                                                 WEIGHTED AVERAGE   DECEMBER 31, 1999
                                     ABR LOANS   EURODOLLAR LOANS     INTEREST RATE
                                     ---------   ----------------   -----------------
<S>                                  <C>         <C>                <C>
Revolving Loans....................    1.75%          2.75%               8.20%
Term A Loan........................    1.75%          2.75%               8.41%
Term B Loan........................    2.25%          3.25%               8.92%
Term C Loan........................    2.50%          3.50%               9.16%
</TABLE>

    The agreements with the Company's lenders include a number of significant
covenants that, among other things, restrict its ability to dispose of non-fleet
assets, incur additional indebtedness, create liens, prohibit the payment of
dividends, enter into certain investments or acquisitions, repurchase or redeem
capital stock, engage in mergers or consolidations or engage in certain
transactions with affiliates and otherwise restrict corporate activities.
Certain of these agreements also require the Company to maintain specified
financial ratios. As of December 31, 1999, the Company was in compliance with
all such covenants related to these agreements.

    In addition, the Company issued $500 million of Senior Subordinated Notes
due May 1, 2009 with an interest rate of 11% (the "Senior Subordinated Notes").
The Senior Subordinated Notes are subordinated in the right of payment to all
existing and future senior indebtedness of the Company and are unconditionally
guaranteed on a senior subordinated basis by ARACS and other domestic
subsidiaries of the Company that guarantees the Senior Credit Facility (as
defined). Interest is payable semi-annually commencing November 1, 1999.

    Mandatory maturities of long-term obligations, including current maturities,
for each of the next five years ending December 31, and thereafter, are as
follows (in thousands):

<TABLE>
<S>                                                           <C>
2000........................................................  $ 828,104
2001........................................................    387,795
2002........................................................  1,189,964
2003........................................................    251,644
2004........................................................    359,631
Thereafter..................................................  1,831,164
</TABLE>

OTHER CREDIT FACILITIES

    At December 31, 1999, in addition to the credit facilities previously
described, the Company had credit facilities available to support various
international and other operations. At December 31, 1999, the total available
under these facilities was $625.8 million of which $393.0 million was unused and
available. Amounts unused under these facilities require an annual fee of 0.2%
to 0.4% of the unused portion. In addition, the Company had available letters of
credit/overdraft agreements in place, renewable annually at the Company's option
and the bank's discretion. At December 31, 1999, the Company had $45.1 million

                                      F-23
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--FINANCING AND DEBT (CONTINUED)
available, against which there are outstanding Letters of Credit totaling $27.6
million. The collateral for certain of these agreements consists of a pledge of
certain cash balances, in the amount of $25 million, which are included in
"Restricted Cash" on the accompanying Consolidated Statements of Financial
position.

DERIVATIVE FINANCIAL INSTRUMENTS

    The Company has derivative financial instruments at December 31, 1999 that
are sensitive to fluctuations in interest rates and gasoline prices. The
following derivative instruments agreements have been entered into by the
Company:

    To reduce the risk from interest rate fluctuations under its asset based
debt agreements, the Company has entered into domestic and foreign interest rate
cap and interest rate floor agreements with durations of 10 and 5 years,
respectively. The interest rate cap and interest rate floor agreements have
notional values of $672.8 million and $436.2 million and $591.7 million and
$591.7 million, respectively. The agreements established the domestic and
foreign interest rate ceiling and floor on the asset-backed vehicle financing of
6.13% and 5.0% and 6.3% and 5.5%, respectively.

    The Company was party to twenty five and four interest rate swap agreements
at December 31, 1999 and 1998, respectively, to reduce the impact of changes in
interest rates on certain outstanding debt obligations. These agreements
effectively change the Company's interest rate exposure on $842.2 million and
$288.6 million of its outstanding debt from a weighted average variable interest
rate to an average fixed rate of 5.3% and 4.8% at December 31, 1999 and 1998,
respectively. The variable interest rates for certain of these interest rate
swap agreements are either reset quarterly or monthly based upon various
indices, including 30 day commercial paper, 3 month LIBOR and 3 month Canadian
Bankers Acceptances. Interest is cash settled on a net basis for each agreement
quarterly. The interest rate swap agreements will terminate between May 2000 and
May 2005. Under certain of the swap agreements terminating in August 2003, the
counter-party has the right to terminate one of the agreements in August 2000
and one agreement in August 2001. Under a Swap Agreement terminating in May
2005, the counterparty has the right to terminate the agreement in June 2001.
The differential to be paid or received is recognized ratably as interest rates
change over the life of the agreements as an adjustment to interest expense.

    The net interest differential (credited) charged to interest expense for the
periods ended December 31, 1999, 1998 and 1997 was ($773,000), $53,000, and
$909,000, respectively. The Company is exposed to credit risk in the event of
non-performance by counterparties to its interest rate swap agreements. Credit
risk is limited by entering into such agreements with institutions with high
credit ratings. Therefore, the Company does not anticipate that non-performance
by counterparties will occur. Notwithstanding this, the Company monitors
counterparty credit ratings at least quarterly through reviewing independent
credit agency reports.

    Both current and potential exposure are evaluated, as necessary, by
obtaining replacement cost information from alternative dealers. Potential loss
to the Company from credit risk on these agreements is limited to amounts
receivable, if any.

    Depending on market fundamentals of the price of gasoline and other
conditions, the Company may purchase put options to reduce or eliminate the risk
of gasoline price declines. Put options purchased by the Company effectively
establish a minimum sales transaction fee for the volume of gasoline purchased
on the Company's programs. An increase in the value of the options is highly
correlated to a decrease in the

                                      F-24
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--FINANCING AND DEBT (CONTINUED)
average price of gasoline purchased by the Company's cardholders. Put options
permit the Company to participate in price increases above the option price. The
cost of an option is amortized in the month the options expire. Gains and losses
from the sale or exercise of options are recognized when the underlying option
is sold. At December 31, 1999, the total contract amount of such options was
31.1 million gallons of gasoline and the unamortized cost of these options was
$313 thousand and is included in other assets in the accompanying Consolidated
Statements of Financial position.

NOTE 11--MINORITY INTEREST (PREFERRED MEMBERSHIP INTEREST)

    In connection with the issuance of the Vehicle Leasing ABS Facility (see
Note 10), the Company has issued two Series 1999-2 Senior Preferred Membership
Interests ("PMI's") of which $99.3 million are outstanding at a distribution
rate of 6.97% at December 31, 1999. The PMI's represent an equity interest in
one of the Company's domestic vehicle leasing subsidiaries and accordingly, are
reported as minority interest (preferred membership interest), on the
accompanying Consolidated Statements of Financial Position at December 31, 1999.
The holders of the Preferred Membership Interest are entitled to receive
dividends based upon the funding costs of the multi-seller commercial paper
conduits, plus a program fee of 0.70% per annum. The dividend periods correspond
to the same interest periods as the 1999-2 floating rate asset-backed notes. For
the year ended December 31, 1999, the Company accrued approximately $5.9 million
of distributions, which are reflected in the accompanying Consolidated
Statements of Operations as minority interest.

NOTE 12--FAIR VALUE OF FINANCIAL INSTRUMENTS

    The net interest receivable and the estimated fair value of the Company's
interest rate swaps, caps and floors, swaption agreement and gasoline put
options represent assets of approximately $763 thousand and $15.2 million,
respectively, at December 31, 1999. At December 31, 1998, the net interest
receivable and estimated fair value of the Company's interest rate swap
agreements represent assets of approximately $268 thousand and $885 thousand,
respectively.

    For instruments including cash and cash equivalents, restricted cash,
accounts receivable, and accounts payable, the carrying amount approximates fair
value because of the short maturity of these instruments. The fair value of
floating-rate debt approximates carrying value because these instruments re-
price frequently at current market prices. At December 31, 1999 and 1998, the
fair value of the Medium Term Notes, Asset Backed Securities and Senior
Subordinated Notes is (less than), exceeds the carrying value by approximately
$(27.7) million and $44.5 million, respectively.

    At December 31, 1999 the Company had $371 million of preferred stock which
approximates fair value. The Company believes that it is not practicable to
estimate the current fair value of the amounts due to affiliates, net, because
of the related party nature of the instruments.

                                      F-25
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13--INCOME TAXES

    The provision for income taxes for the years ended December 31, 1999, 1998
and 1997 consist of the following (in thousands):

<TABLE>
<CAPTION>
                                                     1999       1998       1997
                                                   --------   --------   --------
<S>                                                <C>        <C>        <C>
Current:
  Federal........................................             $   800
  State..........................................  $ 2,010        980    $ 1,013
  Foreign........................................   14,295      8,470     12,676
                                                   -------    -------    -------
                                                    16,305     10,250     13,689
                                                   -------    -------    -------
Deferred:
  Federal........................................   42,095     33,200     12,463
  State..........................................    3,596      3,520        410
  Foreign........................................   11,336      1,737     (3,712)
                                                   -------    -------    -------
                                                    57,027     38,457      9,161
                                                   -------    -------    -------
Provision for income taxes.......................  $73,332    $48,707    $22,850
                                                   =======    =======    =======
</TABLE>

    The effective income tax rates for the years ended December 31, 1999, 1998
and 1997 vary from the statutory U.S. federal income tax rate due to the
following (dollar amounts in thousands):

<TABLE>
<CAPTION>
                                                        1999                  1998                  1997
                                                 -------------------   -------------------   -------------------
<S>                                              <C>        <C>        <C>        <C>        <C>        <C>
Statutory U.S. federal income tax provision/tax
  rate.........................................  $58,071      35.0%    $39,280      35.0%    $17,613      35.0%
Tax effect of foreign operations and
  dividends....................................    2,628       1.6       2,677       2.4       1,436       2.9
Amortization of cost in excess of net assets
  acquired and other intangibles...............    8,190       4.9       3,351       3.0       2,369       4.7
State income taxes, net of federal tax
  benefit......................................    3,644       2.2       2,925       2.6         924       1.8
Other non-deductible business expenses.........      799       0.5         474       0.4         508       1.0
                                                 -------      ----     -------      ----     -------      ----
Effective income tax provision/tax rate........  $73,332      44.2%    $48,707      43.4%    $22,850      45.4%
                                                 =======      ====     =======      ====     =======      ====
</TABLE>

                                      F-26
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 13--INCOME TAXES (CONTINUED)
    In accordance with SFAS 109, the net deferred income tax (liabilities)
assets at December 31, 1999 and 1998, include the following (in thousands):

<TABLE>
<CAPTION>
                                                                1999        1998
                                                              ---------   ---------
<S>                                                           <C>         <C>
GROSS DEFERRED INCOME TAX ASSETS:
Accrued liabilities.........................................  $ 241,631   $ 230,575
Net operating loss carryforwards............................    138,392     118,437
Alternative minimum income tax credit carryforwards.........      4,199       3,825
                                                              ---------   ---------
                                                                384,222     352,837
                                                              ---------   ---------
GROSS DEFERRED INCOME TAX LIABILITIES:
Tax depreciation in excess of book depreciation.............   (546,938)   (247,090)
Prepaids and other..........................................    (18,540)    (16,592)
                                                              ---------   ---------
                                                               (565,478)   (263,682)
                                                              ---------   ---------
Net deferred income tax (liabilities) assets................  $(181,256)  $  89,155
                                                              =========   =========
</TABLE>

    In connection with the adoption of SFAS No. 130, "REPORTING COMPREHENSIVE
INCOME" ("SFAS 130"), the Company has included in net deferred income tax
(liabilities) assets and common stockholders' equity, an increase of $4.6
million, $3.1 million, and $3.8 million related to the income tax effects of the
Foreign Currency Translation Adjustment and Minimum Pension Liability for the
years ended December 31, 1999, 1998, and 1997, respectively.

    The Company has alternative minimum tax net operating loss carryforwards of
$211.9 million. The federal net operating loss carryforward is $370.9 million
which expires as follows: 2000, $11.6 million; 2001, $7.1 million; 2004, $93.1
million; 2007, $67.7 million; 2008, $41.1 million; 2009, $18.3 million; 2010,
$1.1 million; 2017, $83.7 million; 2018, $1 million and 2019, $46.2 million.

    Deferred income taxes were not provided on accumulated earnings of foreign
subsidiaries of $99,164,000 at December 31, 1999 because such accumulated
undistributed earnings are considered to be permanently reinvested. If these
amounts were not considered permanently reinvested, additional deferred income
taxes of approximately $45,133,000 would have been provided at December 31,
1999.

NOTE 14--PREFERRED STOCK (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                        SERIES A    SERIES B    SERIES C
                                                        PREFERRED   PREFERRED   PREFERRED
                                                          STOCK       STOCK       STOCK      TOTAL
                                                        ---------   ---------   ---------   --------
<S>                                                     <C>         <C>         <C>         <C>
Issuance of Preferred Stock Series A and Series C on
  June 30, 1999 in connection with the acquisition of
  VMS (see Notes 1&2).................................  $360,000                 $2,000     $362,000
Preferred Stock Dividends accrued.....................               $9,000                    9,000
                                                        --------     ------      ------     --------
Balance December 31, 1999.............................  $360,000     $9,000      $2,000     $371,000
                                                        ========     ======      ======     ========
</TABLE>

                                      F-27
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14--PREFERRED STOCK (IN THOUSANDS) (CONTINUED)
SERIES A PREFERRED STOCK

    In connection with the VMS Acquisition (see Notes 1 and 2), a total of
7,200,000 shares of Series A Preferred Stock of the Acquisition Subsidiary have
been issued and were outstanding at December 31, 1999. Holders of Series A
Preferred Stock are not entitled to preemptive rights. The Series A Preferred
Stock has an aggregate liquidation preference of $360 million or $50 per share
(the "Series A Liquidation Preference"). Each share of Series A Preferred
accrues dividends at a rate per annum of 5% of the Series A Liquidation
Preference, payable in cash semi-annually in arrears. Until June 30, 2004,
dividends may be paid at the discretion of the Acquisition Subsidiary in shares
of Series B Cumulative PIK Preferred Stock (see Series B Preferred Stock below).
In addition, if the Company is unable to obtain the consent of its Shareholders
to amend its charter by June 30, 2000 to issue Class B Common Stock of the
Company and Class A Common Stock of the Company issuable in exchange for the
Class B Common Stock of the Company, the dividend rate on the Series A Preferred
will increase to 12%, with retroactive effect to the date of issuance. The
Series A Preferred is also entitled to special annual dividends at a rate of 2%
of the Series A Liquidation Preference per annum, payable in cash annually on
March 15(th), in the event that the Acquisition Subsidiary achieves targeted
consolidated Earnings Before Income Taxes, Depreciation and Amortization
("EBITDA") levels. Upon liquidation, and after payment of all amounts owed to
all classes of capital stock ranked senior to the Series A Preferred, holders of
shares of Series A Preferred will receive the Series A Liquidation Preference of
such shares plus accrued and unpaid dividends.

    The Series A Preferred may be redeemed by the Acquisition Subsidiary, in
whole or in part, on or after the fifth anniversary of the date of issuance,
June 30, 2004, and must be redeemed in whole upon the eleventh anniversary of
the date of issuance for an amount per share equal to the Series A Liquidation
Preference plus accrued and unpaid dividends. In addition, holders of the Series
A Preferred may cause the Acquisition Subsidiary to redeem their shares for
cash, upon the bankruptcy or insolvency of the Company or a change of control
with respect to the Company or the Acquisition Subsidiary.

    The holders of the Series A Preferred may convert shares of Series A
Preferred into shares of Class B Common Stock of the Company once specified
levels of 12-month consolidated EBITDA of the Acquisition Subsidiary have been
reached and the average closing price of Class A Common Stock of the Company for
a specified period shall have exceeded a performance conversion price. Such
conversion shall be at a rate (the "Performance Conversion Rate") obtained by
dividing the per share Series A Liquidation Preference by $50 (as adjusted for
antidilution protection, the "Performance Conversion Price").

    On or after the fifth anniversary of the closing date of the VMS
Acquisition, June 30, 1999, if the share price of the Class A Common Stock of
the Company has exceeded an amount equal to 110% of the Performance Conversion
Price for 20 trading days within a period of 30 consecutive trading days ending
within five trading days of notice of conversion given by the Acquisition
Subsidiary, then the Acquisition Subsidiary has the right to convert all of the
shares of the Series A Preferred into Class B Common Stock of the Company at the
Performance Conversion Rate. Upon the bankruptcy or insolvency of the
Acquisition Subsidiary or any of its subsidiaries that constitute a Significant
Subsidiary of the Company, as defined in Rule 1-02(w) of Regulation S-X (a
"Significant Subsidiary"), the Series A Preferred automatically converts into
Class B Common Stock of the Company at a rate equal to the quotient obtained by
dividing: (1) the per share Series A Liquidation Preference by (2) the average
trading price per share of Class A Common Stock of the Company for the 30
trading days immediately preceding the date of the holder's conversion notice or
the date on which the bankruptcy case commences, as applicable (the "Series

                                      F-28
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14--PREFERRED STOCK (IN THOUSANDS) (CONTINUED)
A Market Conversion Rate"). The Series A Market Conversion Rate is subject to
adjustment for antidilution protection.

    Additionally, holders of Series A Preferred may convert their Series A
Preferred into Class B Common Stock of the Company at the Series A Market
Conversion Rate if the Acquisition Subsidiary: (1) fails to make a redemption
payment on the Series A Preferred or the Series B Preferred, (2) fails to pay
dividends when due on either the Series A Preferred or the Series B Preferred,
(3) takes actions requiring consents of its holders of the Series A Preferred or
the Series B Preferred without obtaining such consents or (4) issues additional
shares of the Series A Preferred or Series B Preferred, or reissues shares of
either, in violation of their terms.

    Without the affirmative vote or written consent of the holders of a majority
of the outstanding shares of Series A Preferred, the Acquisition Subsidiary
shall not (1) authorize, create or issue any security ranking senior to the
Series A Preferred as to dividends or on liquidation (other than the Series C
Preferred); (2) amend its articles of incorporation or the certificate of
designation for the Series A Preferred in a manner adverse to the holders of the
Series A Preferred; (3) authorize the issuance of additional shares of Series A
Preferred; or (4) reincorporate the Acquisition Subsidiary in a jurisdiction
other than Texas prior to the second anniversary of the date of issuance of the
Series A Preferred. Holders of Series A Preferred are not entitled to voting
rights, except as required by Texas law. In those circumstances where the
holders of Series A Preferred have a right to vote, each holder of a share of
Series A Preferred shall be entitled to one vote per share.

    Shares of Series A Preferred are freely transferable. Shares of Series A
Preferred reacquired in any manner will be retired and may not be reissued as
shares of Series A Preferred.

SERIES B PREFERRED STOCK

    Series B Cumulative PIK Preferred Stock (the "Series B Preferred") will be
issued as dividends to the Series A Preferred holders by the Acquisition
Subsidiary. Holders of the Series B Preferred are not entitled to preemptive
rights. The Series B Preferred has a liquidation preference of $50 per share
(the "Series B Liquidation Preference"). Each share of Series B Preferred
accrues dividends at a rate per annum of 5% of the Series B Liquidation
Preference, payable in cash semi-annually in arrears. In addition, if the
Company is unable to obtain the consent of its shareholders to amend its charter
by June 30, 2000 to issue Class B Common Stock of the Company and Class A Common
Stock of the Company issuable in exchange for the Class B Common Stock of the
Company, the dividend rate on the Series B Preferred will increase to 12%, with
retroactive effect to the date of issuance. Until the fifth anniversary of the
date of issuance of the Series B Preferred, dividends may, at the discretion of
the Acquisition Subsidiary be paid in kind; thereafter, dividends must be paid
in cash. Upon liquidation, and after payment of all amounts owed to all classes
of capital stock ranked senior to the Series B Preferred, holders of shares of
Series B Preferred will receive the Series B Liquidation Preference of such
shares plus accrued and unpaid dividends.

    The Series B Preferred has the same ranking as the Series A Preferred. The
Series B Preferred may be redeemed by the Acquisition Subsidiary, in whole or in
part, on or after the fifth anniversary of the date of issuance, January 30,
2005, and must be redeemed in whole upon the eleventh anniversary of the date of
issuance for an amount per share equal to the Series B Liquidation Preference
plus accrued and unpaid dividends.

                                      F-29
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14--PREFERRED STOCK (IN THOUSANDS) (CONTINUED)
    Additionally, holders of Series B Preferred may convert their Series B
Preferred into Class B Common Stock of the Company at the Series B Market
Conversion Rate (defined below) if the Acquisition Subsidiary: (1) fails to make
a redemption payment on the Series A Preferred or the Series B Preferred, (2)
fails to pay dividends when due on either the Series A Preferred or the Series B
Preferred, (3) takes actions requiring the consents of the holders of the Series
A Preferred or the Series B Preferred without obtaining such consents or (4)
issues additional shares of the Series A Preferred or Series B Preferred, or
reissues shares of either, in violation of their terms. The Series B Preferred
also automatically converts into Class B Common Stock of the Company at the
Series B Market Conversion Rate upon the bankruptcy or insolvency of the
Acquisition Subsidiary or any of its Significant Subsidiaries.

    The Series B Market Conversion Rate ("Series B Market Conversion Rate")
equals the quotient obtained by dividing : (1) the per share Series B
Liquidation Preference by (2) the average trading price per share of the
Company's Common Stock for the 30 trading days immediately preceding the date of
the holder's conversion notice or the date on which the bankruptcy case
commences, as applicable. The Market Conversion Rate is subject to customary
adjustment under certain circumstances.

    Holders of Series B Preferred will have voting rights analogous to those of
the holders of the Series A Preferred. Shares of Series B Preferred are freely
transferable. Shares of Series B Preferred reacquired in any manner will be
retired and may not be reissued as shares of Series B Preferred.

SERIES C PREFERRED STOCK

    A total of 40,000 shares of Series C Preferred of the Acquisition Subsidiary
were outstanding at December 31, 1999, in connection with the VMS Acquisition
(see Notes 1 and 2). Holders of the Series C Preferred are not entitled to
preemptive rights. The Series C Preferred has an aggregate liquidation
preference of $2,000,000 or $50 per share (the "Series C Liquidation
Preference"). Each share of Series C Preferred accrues dividends at 11% per
annum, payable in cash semi-annually in arrears. An escrow account in the amount
of $1,000,000, which is included in "Restricted Cash", has been established to
cover future dividend payments. Upon liquidation, and after payment of amounts,
if any, owed to all classes of capital stock ranked senior to the Series C
Preferred, holders of shares of Series C Preferred will receive the Series C
Liquidation Preference of such shares plus accrued and unpaid dividends. The
Series C Preferred ranks senior to the Series A Preferred, the Series B
Preferred and the Class A Common Stock in right of payment of dividends. The
Series C Preferred may be redeemed by the Acquisition Subsidiary, in whole or in
part, on or after June 30, 2004, the fifth anniversary of the date of issuance,
and must be redeemed in whole upon June 30, 2006, the seventh anniversary of the
date of issuance, in each case for an amount per share equal to the Series C
Liquidation Preference plus accrued and unpaid dividends.

    Holders of Series C Preferred are not entitled to voting rights, except
under certain circumstances. Without the affirmative vote or written consent of
the holders of a majority of the outstanding shares of Series C Preferred, the
Acquisition Subsidiary may not take certain specified actions that would
adversely affect the rights of the holders of the Series C Preferred. Shares of
Series C Preferred reacquired in any manner will be retired and may not be
reissued as shares of Series C Preferred.

PREFERRED STOCK OF THE COMPANY

    In addition, the Company has authorized the issuance of 20 million shares of
Preferred Stock, par value $.01 of which none has been issued at December 31,
1999 and 1998.

                                      F-30
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 15--CLASS B COMMON STOCK

    In the event that the Company obtains the consent of its shareholders to
amend its charter by June 30, 2000 to issue Class B Common Stock, the Company
will authorize and reserve for issuance shares of Class B Common Stock to be
issued upon the conversion of the Series A Preferred or the Series B Preferred
of the Acquisition Subsidiary.

    The Class B Common Stock will rank (1) junior to any class or series of
preferred stock of the Company and (2) PARI PASSU with the Class A Common Stock
in right of payment of dividends and on liquidation. The Class B Common Stock
will be nonvoting.

    At any time that the beneficial ownership by Cendant, together with any
affiliate of Cendant (Cendant and such affiliates, the "Cendant Affiliates"), of
the Class A Common stock is less than 20% of the aggregate number of all of the
outstanding shares of Class A Common Stock, the Cendant Affiliates shall have
the right to convert shares of Class B Common Stock into Class A Common Stock on
a share-for-share basis in an amount such that the ownership by the Cendant
Affiliates of the Class A Common Stock does not exceed 20% of the aggregate
number of all of the outstanding shares of Class A Common Stock after giving
effect to such conversion.

    The Cendant Affiliates shall have the right to convert the Class B Common
Stock into shares of Class A Common Stock on a share-for-share basis upon the
occurrence of (1) the bankruptcy or insolvency of the Company and (2) a
Preferred Stock Change of Control, other than any Preferred Stock Change of
Control that is caused solely by the sale by the Cendant Affiliates of its
shares of Class A Common Stock or Class B Common Stock.

    Upon the transfer, sale or disposition for value to any person other than
the Cendant Affiliates, each share of Class B Common Stock shall be
automatically exchanged for the Class A Common Stock on a share-for-share basis.

    Other than upon conversion of the Series A Preferred or the Series B
Preferred, no additional shares of Class B Common Stock may be issued. Shares of
Class B Common Stock shall be freely transferable. Shares of Class B Common
Stock reacquired in any manner shall be retired and may not be reissued as
shares of Class B Common Stock.

    In connection with the VMS Acquisition, the Company entered into a
registration rights agreement pursuant to which Cendant and certain transferees
of Class B Common Stock and Class A Common Stock converted from the Class B
Common stock held by Cendant (the "Holders") will have the right to require the
Company to register all or part of the Class A Common Stock owned by such
Holders under the Securities Act of 1933 as amended (the "Securities Act") (an
"Acquisition Demand Registration"). However, the Company may postpone giving
effect to an Acquisition Demand Registration for a period of up to 30 days if
the Company believes such registration might have a material adverse effect on
any plan or proposal by the Company with respect to any financing, acquisition,
recapitalization, reorganization or other material transaction or the Company is
in possession of material non-public information that, if publicly disclosed,
could result in a material disruption of a major corporate development or
transaction then pending or in progress or in other material adverse
consequences to the Company. In addition, the Holders have the right to
participate in any registrations by the Company of Class A Common Stock (an
"Acquisition Piggyback Registration"). The Holders will pay all out-of-pocket
expenses incurred in connection with any Acquisition Registration, and the
Company will pay all out-of-pocket expenses incurred in connection with any
Acquisition Demand Piggyback Registration, except for underwriting discounts,
commissions and expenses attributable to the shares of Class A Common Stock sold
by such holders.

                                      F-31
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 16--TREASURY STOCK

    At December 31, 1999 and 1998, treasury stock is comprised of the following:

<TABLE>
<CAPTION>
                                                           1999                         1998
                                                --------------------------   --------------------------
                                                   TREASURY                     TREASURY
                                                  STOCK, NET     TREASURY      STOCK, NET     TREASURY
                                                (IN THOUSANDS)    SHARES     (IN THOUSANDS)    SHARES
                                                --------------   ---------   --------------   ---------
<S>                                             <C>              <C>         <C>              <C>
Balance, beginning of year....................     $ 50,960      2,672,700
Common stock repurchased......................       57,237      2,327,300      $50,960       2,672,700
Treasury stock issued under the Company's
  stock option plan, and other................       (4,365)      (206,712)
                                                   --------      ---------      -------       ---------
                                                   $103,832      4,793,288      $50,960       2,672,700
                                                   ========      =========      =======       =========
</TABLE>

    On September 1, 1998, the Board of Directors authorized the Company to
repurchase up to 1,500,000 shares of the outstanding common stock at market
prices. On September 23, 1998, the Board of Directors authorized the Company to
purchase up to 3,500,000 additional shares of outstanding common stock. Of the
total treasury shares repurchased during the year ended December 31, 1999,
1,614,200 were repurchased from Cendant at an aggregate cost of $40.8 million.
No shares were repurchased from Cendant during 1998. As of December 31, 1999,
the acquisition of these treasury shares reduced Cendant's ownership in the
Company's common stock to approximately 18%. (See Notes 1, 2 and 24.)

NOTE 17--RETIREMENT BENEFITS

    The Company, through its subsidiary ARACS, sponsors non-contributory defined
benefit plans covering certain employees hired prior to December 31, 1983 who
were age 25 or above on January 1, 1985. ARACS also contributes to union
sponsored pension plans.

    Through ARACS, the Company sponsors two Voluntary Investment Savings Plans
under a "qualified cash or deferred arrangement" under Section 401(k) of the
Internal Revenue Code covering its union and non-union employees. For the years
ended December 31, 1999, 1998 and 1997, the Company's cost of these plans was
$3.0 million, $1.6 million and $1.8 million, respectively.

    Included in the non-union Investment Savings Plan, ARACS makes a defined
contribution for full-time employees. The contributions were determined at 2% of
each covered employee's compensation through December 31, 1998 and were
increased to 3% of each covered employee's compensation with effect from January
1, 1999. Employer contributions for the years ended December 31, 1999, 1998 and
1997 amounted to $5.0 million, $2.3 million and $2.1 million, respectively.

    The vehicle rental defined benefit plan for its Salaried and Hourly
Employees as of June 30, 1985, provides benefits based upon years of credited
service, highest average compensation and social security benefits. Annual
retirement benefits, at age 65, are equal to 1 1/2% of the participating
employee's final average compensation (average compensation during the highest
five consecutive years of employment in the ten years prior to retirement) less
1 1/2% of the Social Security benefits for each year of service up to a maximum
of 35 years. In addition, the plan provides for reduced benefits before age 65
and for a joint and survivor annuity option. Effective January 1, 1999, the
Company curtailed its defined benefit Retirement Plan for Employees as of June
30, 1985. The Company recognized a $7,500,000 pre-tax gain as a result of the
curtailment during the first quarter of fiscal year ending December 31, 1999.

                                      F-32
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 17--RETIREMENT BENEFITS (CONTINUED)
    The Company also sponsors several foreign pension plans. The most
significant of these are the United Kingdom and Canadian defined benefit pension
plans.

    The status of the Company's defined benefit plans at December 31, 1999 and
1998, including the plans to its Salaried and Hourly Employees as of June 1985,
the Bargaining Plan, the Non-Qualified Defined Benefit Plan, the Motorent Plan
(terminated on September 30, 1999) the United Kingdom Plan and the Canadian
Defined Benefit Plan are as follows (in thousands):

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
CHANGE IN BENEFIT OBLIGATION
Benefit obligations at beginning of year....................  $125,251   $106,887
  Benefit obligations assumed from acquisitions.............    30,820
  Service cost..............................................     1,588      2,809
  Interest cost.............................................     6,611      6,922
  Plan participants' contributions..........................       562        182
  Amendments................................................   (19,395)       635
  Actuarial (1oss)gain......................................   (11,735)    11,014
  Benefits paid.............................................   (15,819)    (2,798)
  Foreign currency translation loss.........................      (997)      (400)
                                                              --------   --------
Benefit obligations at end of year..........................   116,886    125,251
                                                              --------   --------

CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year..............   101,449     89,816
  Fair value of plan assets acquired from acquisitions......    25,682
  Actual return on plan assets..............................     8,107      9,060
  Plan participants' contributions..........................       562        182
  Employer contributions....................................     7,022      5,908
  Benefits paid.............................................   (15,891)    (2,798)
  Foreign currency translation loss.........................      (614)      (719)
                                                              --------   --------
Fair value of plan assets at end of year....................   126,317    101,449
                                                              --------   --------
  Funded status.............................................     9,431    (23,802)
  Unrecognized net accrual gain (loss)......................    (6,003)    16,307
  Unrecognized prior service cost...........................     1,276      1,703
  Unrecognized transition asset.............................    (2,237)    (2,251)
                                                              --------   --------
Prepaid (accrued) benefit cost..............................  $  2,467   $ (8,043)
                                                              ========   ========
AMOUNTS RECOGNIZED IN THE STATEMENT OF FINANCIAL POSITION
Prepaid benefit cost........................................  $  7,320   $  1,752
Accrued benefit liability...................................    (9,122)   (14,340)
Intangible asset............................................     2,761      1,704
Accumulated other comprehensive income......................     1,508      2,841
                                                              --------   --------
Net amount recognized.......................................  $  2,467   $ (8,043)
                                                              ========   ========
</TABLE>

                                      F-33
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 17--RETIREMENT BENEFITS (CONTINUED)
    The fair value of plan assets for funded plans with accumulated benefit
obligations in excess of plan assets amounted to $55.7 million as of
December 31, 1999.

    Net pension costs of the non-qualified defined benefit plans for the years
ended December 31, 1999, 1998 and 1997, include the following components (in
thousands):

<TABLE>
<CAPTION>
                                                                1999       1998       1997
                                                              --------   --------   --------
<S>                                                           <C>        <C>        <C>
Service cost--benefits earned during the year...............  $ 1,588    $ 2,809    $ 3,446
Interest cost on projected benefit obligation...............    6,611      6,922      6,956
Return on assets--expected gain on plan assets..............   (8,664)    (7,786)    (6,804)
Recognized actuarial gain...................................       21
Net amortization of prior service cost......................       17         70         35
Contributions to union plans and other......................    2,910      3,894      3,021
Amortization of gain........................................      127
Amortization of unrecognized net assets at transition.......     (122)      (123)      (132)
                                                              -------    -------    -------
Net pension cost............................................  $ 2,488    $ 5,786    $ 6,522
                                                              =======    =======    =======
</TABLE>

    At December 31, 1999 and 1998, the measurement of the projected benefit
obligation was based upon the following assumptions weighted average interest
rates:

<TABLE>
<CAPTION>
                                                                1999       1998
                                                              --------   --------
<S>                                                           <C>        <C>
Discount rate...............................................   6.67%      6.00%
Compensation increase for continuing plans..................   3.85%      4.72%
Long-term return on plan assets.............................   8.45%      8.77%
</TABLE>

    The U.S. plans' assets are invested in corporate bonds, U.S. government
securities and common stock mutual funds. The Canadian plan's assets are
invested in Canadian stocks, bonds, mutual funds, real estate and money market
funds. The UK plan's assets are invested in equity securities, fixed interest
securities and cash.

NOTE 18--EARNINGS PER SHARE ("EPS")

    Basic EPS for the years ended December 31, 1999, 1998 and 1997 was
calculated using 31,330,536, 34,172,249 and 30,925,000 weighted-average shares
outstanding. Diluted EPS for the years ended December 31, 1999, 1998 and 1997
was calculated as follows (in thousands, except share amounts):

<TABLE>
<CAPTION>
                                                              1999         1998         1997
                                                           ----------   ----------   ----------
<S>                                                        <C>          <C>          <C>
DILUTED EPS
Earnings available to common stockholders................  $   83,475   $   63,521   $   27,473
                                                           ==========   ==========   ==========
Weighted average common shares outstanding...............  31,330,536   34,172,249   30,925,000
Plus: Dilutive effect of the assumed exercise of stock
  options................................................     655,033      780,308      256,134
                                                           ----------   ----------   ----------
Adjusted weighted average shares outstanding.............  31,985,569   34,952,557   31,181,134
                                                           ==========   ==========   ==========
Diluted EPS..............................................  $     2.61   $     1.82   $     0.88
                                                           ==========   ==========   ==========
</TABLE>

                                      F-34
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 19--STOCK OPTION PLAN

    On September 23, 1997, the Avis Group Holdings, Inc. 1997 Stock Option Plan
(the "Stock Option Plan") was adopted by the Board of Directors under which
4,620,977 shares of Common Stock were reserved for issuance upon the exercise of
options granted to officers, key employees, independent contractors and
non-employee Directors of the Company and its designated subsidiaries. On
September 23, 1997, 3,953,900 options were granted at $17.00 per share, the fair
market value of the Company's common stock on the date of grant. On May 21,
1998, at the Annual Meeting of Stockholders, the shareholders approved an
amendment to the Company's Stock Option Plan, increasing the maximum number of
shares authorized for issuance under the Stock Option Plan to 6,000,000. On
November 8, 1999, the Board of Directors increased the maximum number of shares
authorized for issuance under the Stock Option Plan to 7,500,000. At December
31, 1999 and 1998, approximately 6,933,613 and 4,443,100, respectively, options
are outstanding under the Stock Option Plan. The primary purpose of the Stock
Option Plan is to provide additional incentive to officers, key employees,
independent contractors and non-employee directors of the Company and to
strengthen their commitment to the Company and its subsidiaries.

    Each non-employee director of the Company received an initial automatic
grant of an option to purchase 50,000 shares of Common Stock under the Stock
Option Plan. Subsequently elected non-employee directors will receive a like
grant under the Stock Option Plan upon election or appointment to the Board of
Directors.

    The exercise price of each option under the Stock Option Plan may not be
less than the fair market value of a share of Common Stock on the date the
option is granted. Options held by an optionee will generally become exercisable
as to 20% of the shares covered by such options on the first anniversary of the
date of grant and with respect to an additional 20% of the shares covered by
such options on each of the four succeeding anniversaries of the date of grant
if the optionee continues to be employed or retained as an independent
contractor by the Company, on each such date. All options held by an optionee
will become fully exercisable (to the extent not already exercisable) if a
"change of control transaction" (as defined in the Stock Option Plan) occurs.
Shares of Common Stock acquired upon the exercise of the options may be subject
to restrictions on transfer which will be set forth in the agreement evidencing
the grant of the option. Unless otherwise determined by the Compensation
Committee of the Board of Directors, all options granted under the Stock Option
Plan, to the extent not exercised, expire on the earliest of (i) the tenth
anniversary of the date of grant, (ii) two years following the optionee's
termination of employment on account of death, retirement, disability or (iii)
one year following the termination of optionee's employment for any other
reason. Grants of options under the Stock Option Plan are subject to an annual
per-participant maximum grant of shares of Common Stock.

    Generally, the Board of Directors of the Company may amend or terminate the
Stock Option Plan, provided that (i) no such amendment or termination may
adversely affect the rights of any participant without the consent of such
participant and (ii) to the extent required by any law, regulation or stock
exchange rule, no amendment shall be effective without the approval of the
Company's stockholders.

    The Company makes no recognition of the options in the financial statements
until they are exercised. The Company applies Accounting Principles Board
Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES" and related
Interpretations in accounting for its plans and does not recognize compensation
expense for its stock-based compensation plans. The Company has adopted only the
disclosure provisions of Statement of Financial Accounting Standard No. 123,
"ACCOUNTING FOR STOCK-BASED COMPENSATION" ("SFAS 123").

                                      F-35
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 19--STOCK OPTION PLAN (CONTINUED)
    The following is a summary of stock option activity for the years ended
December 31, 1999 and 1998 and for the period September 23, 1997 through
December 31, 1997:

<TABLE>
<CAPTION>
                                                                       WEIGHTED
                                                                       AVERAGE
                                                                       EXERCISE
                                                            SHARES      PRICE
                                                           ---------   --------
<S>                                                        <C>         <C>
Granted September 23, 1997 (inception of the stock option
  plan)..................................................  3,953,900    $17.00
    Forfeited............................................    (78,200)   $17.00
                                                           ---------    ------
Outstanding at December 31, 1997.........................  3,875,700    $17.00
    Granted..............................................  1,452,000    $23.47
    Forfeited............................................   (869,600)   $19.32
                                                           ---------    ------
Outstanding at December 31, 1998.........................  4,458,100    $18.65
    Granted..............................................  2,799,900    $25.41
    Exercised............................................   (198,187)   $17.00
    Forfeited............................................   (126,200)   $19.92
                                                           ---------    ------
Outstanding at December 31, 1999.........................  6,933,613    $21.41
                                                           =========    ======

Exercisable Options
December 31, 1999........................................  1,493,263    $17.87
                                                           =========    ======
</TABLE>

    Pro forma disclosures are provided for the years ended December 31, 1999,
1998 and 1997 as if the Company adopted the cost recognition requirements under
SFAS 123. The weighted average fair value of each option granted (estimated on
the date of grant using the Black-Scholes option-pricing model) is $12.95,
$11.73 and $9.80 for 1999, 1998 and 1997, respectively, using the following
assumptions:

<TABLE>
<CAPTION>
                                                         1999           1998           1997
                                                       --------       --------       --------
<S>                                                    <C>            <C>            <C>
Expected volatility..................................    40.0%          40.0%          45.0%
Risk-free interest rate..............................     6.0            6.0            5.7
Expected option life in years........................     6.5            6.5            7.5
</TABLE>

    The weighted-average remaining contractual life of the stock options is 7.7
years, 7.3 and 9.6 years at December 31, 1999, 1998 and 1997, respectively. Had
compensation expense been recognized for the years ended December 31, 1999 and
1998 and for the period September 23, 1997 through December 31, 1997, grants for
stock-based compensation plans in accordance with provisions of SFAS 123, the
Company would have recorded net income and earnings per share as follows (in
thousands, except per share data):

<TABLE>
<CAPTION>
                                                   1999                     1998                     1997
                                          ----------------------   ----------------------   ----------------------
                                                          PRO                      PRO                      PRO
                                          AS REPORTED    FORMA     AS REPORTED    FORMA     AS REPORTED    FORMA
                                          -----------   --------   -----------   --------   -----------   --------
<S>                                       <C>           <C>        <C>           <C>        <C>           <C>
Earnings applicable to common
  stockholders..........................    $83,475     $74,563      $63,521     $58,656      $27,473     $26,436
                                            =======     =======      =======     =======      =======     =======
Basic earnings per share................    $  2.66     $  2.38      $  1.86     $  1.72      $   .89     $   .85
                                            =======     =======      =======     =======      =======     =======
Diluted earnings per share..............    $  2.61     $  2.33      $  1.82     $  1.68      $   .88     $   .85
                                            =======     =======      =======     =======      =======     =======
</TABLE>

                                      F-36
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 20--LEASES, AIRPORT CONCESSION FEES AND COMMITMENTS

    The Company is committed to make rental payments under noncancelable
operating leases relating principally to vehicle rental facilities and
equipment. Under certain leases, the Company is obligated to pay certain
additional costs, such as property taxes, insurance and maintenance. Airport
concession agreements usually require a guaranteed minimum amount plus
contingent fees, which are generally based on a percentage of revenues.

    Operating lease payments and net airport concession fees charged to expense
for the years ended December 31, 1999, 1998 and 1997 are as follows (in
thousands):

<TABLE>
<CAPTION>
                                                   YEARS ENDED DECEMBER 31,
                                                ------------------------------
                                                  1999       1998       1997
                                                --------   --------   --------
<S>                                             <C>        <C>        <C>
Minimum fees..................................  $176,780   $147,034   $122,015
Contingent fees...............................    93,264     89,456     87,937
                                                --------   --------   --------
                                                 270,044    236,490    209,952
Sublease rentals..............................    (5,881)    (4,701)    (4,741)
                                                --------   --------   --------
                                                $264,163   $231,789   $205,211
                                                ========   ========   ========
</TABLE>

    Future minimum rental commitments under noncancelable operating leases
amounted to approximately $725.1 million at December 31, 1999. The minimum
rental payments due in each of the next five years ending December 31(st), and
thereafter, are as follows (in thousands):

<TABLE>
<S>                                                           <C>
2000........................................................  $138,180
2001........................................................   116,921
2002........................................................    96,665
2003........................................................    69,351
2004........................................................    52,603
Thereafter..................................................   251,384
</TABLE>

    At December 31, 1999, future minimum rental commitments include $70.6
million due to a subsidiary of Cendant, related to the Company's corporate
headquarters and Virginia Beach processing facility.

    In addition to the Company's lease commitments, the Company has outstanding
purchase commitments of approximately $2.1 billion at December 31, 1999, which
relate principally to vehicle purchases.

NOTE 21--GUARANTOR AND NON-GUARANTOR CONDENSED FINANCIAL STATEMENTS

    In connection with the VMS Acquisition and as part of the financing thereof,
Avis Group Holdings, Inc. (the "Parent") issued and sold the Senior Subordinated
Notes (see Note 10) in a transaction exempt from registration under the
Securities Act. These securities were subsequently registered on September 24,
1999. The Senior Subordinated Notes are general unsecured obligations of the
Parent, subordinated in right of payment to all existing and future senior
indebtedness of the Company, and guaranteed by certain of the Parent's domestic
subsidiaries. Accordingly, the following condensed consolidating financial
information presents the condensed consolidating financial statements as of
December 31, 1999 and 1998 and for the years ended December 31, 1999, 1998 and
1997, respectively, of: (a) the Parent; (b) the guarantor subsidiaries; (c) the
non-guarantor subsidiaries; (d) elimination entries necessary to consolidate
Parent with guarantor and non-guarantor subsidiaries; and (e) the Company on a
consolidated basis (in thousands).

                                      F-37
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 21--GUARANTOR AND NON-GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)

    Investments in subsidiaries are accounted for using the equity method for
purposes of the consolidating presentation. The principle elimination entries
eliminate investments in subsidiaries and intercompany balances and
transactions. Separate financial statements and other disclosures with respect
to the subsidiary guarantors have not been made because management believes that
such information is not material to holders of the Senior Subordinated Notes.

<TABLE>
<CAPTION>
                                                                          CONDENSED
                                                            CONSOLIDATING STATEMENT OF OPERATIONS
                                                             FOR THE YEAR ENDED DECEMBER 31, 1999
                                                                        (IN THOUSANDS)
                                             --------------------------------------------------------------------
                                                                                                      AVIS GROUP
                                                                           NON-                       HOLDINGS,
                                                         GUARANTOR      GUARANTOR                        INC.
                                              PARENT    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                             --------   ------------   ------------   ------------   ------------
<S>                                          <C>        <C>            <C>            <C>            <C>
Revenue....................................              $2,329,525     $1,003,202                    $3,332,727
                                                         ----------     ----------                    ----------
Costs and expenses:
Direct operating, net......................                 843,787        113,483                       957,270
Vehicle depreciation and lease charges,
  net......................................                 604,767        569,742                     1,174,509
Selling, general and administrative........                 486,295         95,761                       582,056
Interest, net..............................  $85,797        186,746        109,760                       382,303
Minority interest..........................                                  5,890                         5,890
Non-vehicle depreciation and
  amortization.............................                  16,586         18,014                        34,600
Amortization of cost in excess of net
  assets acquired..........................                  26,969          3,213                        30,182
                                             -------     ----------     ----------                    ----------
                                              85,797      2,165,150        915,863                     3,166,810
                                             -------     ----------     ----------                    ----------
                                             (85,797)       164,375         87,339                       165,917
Equity in earnings of subsidiaries.........  144,878         69,842                    $(214,720)
                                             -------     ----------     ----------     ---------      ----------
Income before provision for income taxes...   59,081        234,217         87,339      (214,720)        165,917
Provision (benefit) for income taxes.......  (33,504)        89,339         17,497                        73,332
                                             -------     ----------     ----------     ---------      ----------
  Net income...............................  $92,585     $  144,878     $   69,842     $(214,720)     $   92,585
                                             =======     ==========     ==========     =========      ==========
</TABLE>

                                      F-38
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 21--GUARANTOR AND NON-GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                          CONDENSED
                                                            CONSOLIDATING STATEMENT OF OPERATIONS
                                                             FOR THE YEAR ENDED DECEMBER 31, 1998
                                                                        (IN THOUSANDS)
                                             --------------------------------------------------------------------
                                                                                                      AVIS GROUP
                                                                           NON-                       HOLDINGS,
                                                         GUARANTOR      GUARANTOR                        INC.
                                              PARENT    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                             --------   ------------   ------------   ------------   ------------
<S>                                          <C>        <C>            <C>            <C>            <C>
Revenue....................................              $2,061,967      $235,615                     $2,297,582
                                                         ----------      --------                     ----------
Costs and expenses:
Direct operating, net......................                 826,370       101,560                        927,930
Vehicle depreciation and lease charges,
  net......................................                 531,830        61,234                        593,064
Selling, general and administrative........                 402,917        33,358                        436,275
Interest, net..............................  $ 13,836       174,016         4,228                        192,080
Non-vehicle depreciation and
  amortization.............................                  21,848         2,303                         24,151
Amortization of cost in excess of net
  assets acquired..........................                  11,702           152                         11,854
                                             --------    ----------      --------                     ----------
                                               13,836     1,968,683       202,835                      2,185,354
                                             --------    ----------      --------                     ----------
                                              (13,836)       93,284        32,780                        112,228
Equity in earnings of subsidiaries.........    72,514        23,700                     $(96,214)
                                             --------    ----------      --------       --------      ----------
Income before provision for income taxes...    58,678       116,984        32,780        (96,214)        112,228
Provision (benefit) for income taxes.......    (4,843)       44,470         9,080                         48,707
                                             --------    ----------      --------       --------      ----------
  Net income...............................  $ 63,521    $   72,514      $ 23,700       $(96,214)     $   63,521
                                             ========    ==========      ========       ========      ==========
</TABLE>

<TABLE>
<CAPTION>
                                                                          CONDENSED
                                                            CONSOLIDATING STATEMENT OF OPERATIONS
                                                             FOR THE YEAR ENDED DECEMBER 31, 1997
                                                                        (IN THOUSANDS)
                                             --------------------------------------------------------------------
                                                                                                      AVIS GROUP
                                                                           NON-                       HOLDINGS,
                                                         GUARANTOR      GUARANTOR                        INC.
                                              PARENT    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                             --------   ------------   ------------   ------------   ------------
<S>                                          <C>        <C>            <C>            <C>            <C>
Revenue....................................              $1,804,477      $241,677                     $2,046,154
                                                         ----------      --------                     ----------
Costs and expenses:
Direct operating, net......................                 744,355       109,412                        853,767
Vehicle depreciation and lease charges,
  net......................................                 459,963        65,180                        525,143
Selling, general and administrative........  $  8,073       370,635        34,583                        413,291
Interest, net..............................     5,765       169,983         4,860                        180,608
Non-vehicle depreciation and
  amortization.............................                  13,818         2,344                         16,162
Amortization of cost in excess of net
  assets acquired..........................                   6,728           132                          6,860
                                             --------    ----------      --------                     ----------
                                               13,838     1,765,482       216,511                      1,995,831
                                             --------    ----------      --------                     ----------
                                              (13,838)       38,995        25,166                         50,323
Equity in earnings of subsidiaries.........    36,468        16,203                     $(52,671)
                                             --------    ----------      --------       --------      ----------
Income before provision for income taxes...    22,630        55,198        25,166        (52,671)         50,323
Provision (benefit) for income taxes           (4,843)       18,730         8,963                         22,850
                                             --------    ----------      --------       --------      ----------
Net income.................................  $ 27,473    $   36,468      $ 16,203       $(52,671)     $   27,473
                                             ========    ==========      ========       ========      ==========
</TABLE>

                                      F-39
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 21--GUARANTOR AND NON-GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                        CONDENSED
                                                      CONSOLIDATING STATEMENT OF FINANCIAL POSITION
                                                                    DECEMBER 31, 1999
                                                                      (IN THOUSANDS)
                                         ------------------------------------------------------------------------
                                                                         NON-                        AVIS GROUP
                                                       GUARANTOR      GUARANTOR                    HOLDINGS, INC.
                                           PARENT     SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS    CONSOLIDATED
                                         ----------   ------------   ------------   ------------   --------------
<S>                                      <C>          <C>            <C>            <C>            <C>
ASSETS
Cash and cash equivalents..............  $       54    $   42,184     $   29,459                    $    71,697
Cash held on deposit with financial
  institution..........................                                   93,530                         93,530
Restricted cash........................                                  253,080                        253,080
Accounts receivable, net...............          (9)      210,962        904,787                      1,115,740
Finance lease receivables..............                                  871,034                        871,034
Prepaid expenses.......................                    41,282         23,034                         64,316
Vehicles, net-rental...................                   (75,581)     3,442,943                      3,367,362
Vehicles, net-leasing..................                    55,704      3,078,305                      3,134,009
Property and equipment, net............                   161,651         36,176                        197,827
Investment in subsidiaries.............   2,121,275     1,272,000                   $(3,393,275)
Other assets...........................       1,000        78,863         35,410                        115,273
Cost in excess of net assets acquired,
  net..................................                 1,595,529        198,861                      1,794,390
                                         ----------    ----------     ----------    -----------     -----------
Total assets...........................  $2,122,320    $3,382,594     $8,966,619    $(3,393,275)    $11,078,258
                                         ==========    ==========     ==========    ===========     ===========
LIABILITIES, PREFERRED STOCK AND COMMON
  STOCKHOLDERS' EQUITY
Accounts payable.......................                $  273,102     $  315,275                    $   588,377
Accrued liabilities....................  $   16,774       366,602        (13,923)                       369,453
Due (from) to affiliates...............     (84,266)     (119,494)       263,156                         59,396
Current income tax liabilities.........                    17,910            316                         18,226
Deferred income tax liabilities, net...     (42,982)      144,893         79,345                        181,256
Public liability, property damage and
  other insurance liabilities, net.....                   206,111         53,645                        259,756
Debt...................................   1,562,000        10,305      6,897,500                      8,469,805
Minority interest (preferred membership
  interest)............................                                   99,305                         99,305
Preferred stock........................                   371,000                                       371,000
Common stockholders' equity............     670,794     2,112,165      1,272,000    $(3,393,275)        661,684
                                         ----------    ----------     ----------    -----------     -----------
Total liabilities, preferred stock and
  common stockholders' equity..........  $2,122,320    $3,382,594     $8,966,619    $(3,393,275)    $11,078,258
                                         ==========    ==========     ==========    ===========     ===========
</TABLE>

                                      F-40
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 21--GUARANTOR AND NON-GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                         CONDENSED
                                                       CONSOLIDATING STATEMENT OF FINANCIAL POSITION
                                                                     DECEMBER 31, 1998
                                                                       (IN THOUSANDS)
                                            --------------------------------------------------------------------
                                                                                                     AVIS GROUP
                                                                          NON-                       HOLDINGS,
                                                        GUARANTOR      GUARANTOR                        INC.
                                             PARENT    SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                            --------   ------------   ------------   ------------   ------------
<S>                                         <C>        <C>            <C>            <C>            <C>
ASSETS
Cash and cash equivalents.................  $     11    $    9,776     $   19,964                    $   29,751
Restricted cash...........................                   2,000        131,284                       133,284
Accounts receivable, net..................                 136,112        224,462                       360,574
Prepaid expenses..........................                  34,666          7,417                        42,083
Vehicles, net-rental......................                 (73,213)     3,238,029                     3,164,816
Property and equipment, net...............                 129,090         15,955                       145,045
Investment in subsidiaries................   533,274       422,146                    $(955,420)
Other assets..............................                  38,127          2,463                        40,590
Deferred income tax assets................     9,686       107,973                                      117,659
Cost in excess of net assets acquired,
  net.....................................                 460,441          2,819                       463,260
                                            --------    ----------     ----------     ---------      ----------
  Total assets............................  $542,971    $1,267,118     $3,642,393     $(955,420)     $4,497,062
                                            ========    ==========     ==========     =========      ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable..........................              $  112,220     $   86,261                    $  198,481
Accrued liabilities.......................  $    969       277,018         48,217                       326,204
Due (from) to affiliates, net.............   (80,612)      112,605         (9,700)                       22,293
Current income tax liabilities............                  19,413          3,632                        23,045
Deferred income tax liabilities, net......                                 28,504                        28,504
Public liability, property damage and
  other insurance liabilities, net........                 210,811         50,398                       261,209
Debt......................................                   1,777      3,012,935                     3,014,712
Stockholders' equity......................   622,614       533,274        422,146     $(955,420)        622,614
                                            --------    ----------     ----------     ---------      ----------
Total liabilities and stockholders'
  equity..................................  $542,971    $1,267,118     $3,642,393     $(955,420)     $4,497,062
                                            ========    ==========     ==========     =========      ==========
</TABLE>

                                      F-41
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 21--GUARANTOR AND NON-GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                        CONDENSED
                                                                          CONSOLIDATING STATEMENT OF CASH FLOWS
                                                                          FOR THE YEAR ENDED DECEMBER 31, 1999
                                                                                     (IN THOUSANDS)
                                                        -------------------------------------------------------------------------
                                                                                         NON-                        AVIS GROUP
                                                                       GUARANTOR      GUARANTOR                    HOLDINGS, INC.
                                                          PARENT      SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS    CONSOLIDATED
                                                        -----------   ------------   ------------   ------------   --------------
<S>                                                     <C>           <C>            <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................  $    92,585     $ 144,878    $    69,842      $(214,720)    $    92,585
Adjustments to reconcile net income to net cash (used
  in) provided by operating activities:...............     (151,326)      686,838        469,846                      1,005,358
                                                        -----------     ---------    -----------      ---------     -----------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES...      (58,741)      831,716        539,688       (214,720)      1,097,943
                                                        -----------     ---------    -----------      ---------     -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for vehicle additions........................                     87,291     (5,692,785)                    (5,605,494)
Vehicle deletions.....................................                   (465,991)     4,671,212                      4,205,221
Increase in finance lease receivables.................                   (117,407)        94,744                        (22,663)
Payments for additions to property and equipment......                    (38,798)        (9,442)                       (48,240)
Retirements of property and equipment.................                    (20,478)        14,059                         (6,419)
Investment in subsidiaries............................     (141,241)      (69,840)                      211,081
Payment for purchase of rental car franchise
  licensees, net of cash acquired.....................                    (44,934)          (258)                       (45,192)
Payment for purchase of PHH Holdings, net of cash
  acquired............................................   (1,325,781)                                                 (1,325,781)
Proceeds from sale and leaseback of UK office
  building............................................                                    32,156                         32,156
                                                        -----------     ---------    -----------      ---------     -----------
NET CASH USED IN INVESTING ACTIVITIES.................   (1,467,022)     (670,157)      (890,314)       211,081      (2,816,412)
                                                        -----------     ---------    -----------      ---------     -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Purchases of treasury stock.........................      (53,868)                                                    (53,868)
  Net increase in (repayment of) debt.................    1,562,000      (117,759)       368,767                      1,813,008
  Payments for debt issuance costs....................       21,313       (16,453)       (11,403)                        (6,543)
  Increase in minority interest (preferred membership
    interest).........................................                                    99,305                         99,305
  Cash dividends......................................                      5,926         (5,926)
                                                        -----------     ---------    -----------      ---------     -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES...    1,529,445      (128,286)       450,743                      1,851,902
                                                        -----------     ---------    -----------      ---------     -----------
  Effect of exchange rate changes on cash.............       (3,639)         (865)         2,908          3,639           2,043
                                                        -----------     ---------    -----------      ---------     -----------
  Net increase in cash and cash equivalents and cash
    held on deposit with financial institutions.......           43        32,408        103,025                        135,476
  Cash and cash equivalents and cash held on deposit
    with financial institutions at beginning of
    year..............................................           11         9,776         19,964                         29,751
                                                        -----------     ---------    -----------      ---------     -----------
CASH AND CASH EQUIVALENTS AND CASH HELD ON DEPOSIT
  WITH FINANCIAL INSTITUTIONS AT END OF YEAR..........  $        54     $  42,184    $   122,989      $             $   165,227
                                                        ===========     =========    ===========      =========     ===========
Supplemental disclosure of cash flow information:
  Cash paid during the year for:
    Interest..........................................                                                              $   370,247
                                                                                                                    ===========
    Income taxes......................................                                                              $    28,877
                                                                                                                    ===========
BUSINESSES ACQUIRED:
  Fair value of assets acquired, net of cash
    acquired..........................................                                                              $ 6,004,777
  Liabilities assumed.................................                                                                4,271,804
                                                                                                                    -----------
  Net assets acquired.................................                                                                1,732,973
  Less issuance of Series A and Series C Preferred
    Stock.............................................                                                                  362,000
                                                                                                                    -----------
NET CASH PAID FOR ACQUISITIONS........................                                                              $ 1,370,973
                                                                                                                    ===========
</TABLE>

                                      F-42
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 21--GUARANTOR AND NON-GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                          CONDENSED
                                                                            CONSOLIDATING STATEMENT OF CASH FLOWS
                                                                            FOR THE YEAR ENDED DECEMBER 31, 1998
                                                                                       (IN THOUSANDS)
                                                            ---------------------------------------------------------------------
                                                                                                                      AVIS GROUP
                                                                                           NON-                       HOLDINGS,
                                                                         GUARANTOR      GUARANTOR                        INC.
                                                             PARENT     SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                            ---------   ------------   ------------   ------------   ------------
<S>                                                         <C>         <C>            <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income..............................................  $  63,521     $  72,514    $    23,700      $ (96,214)   $    63,521
  Adjustments to reconcile net income to net cash (used
    in) provided by operating activities:.................   (101,241)      593,335         96,973                       589,067
                                                            ---------     ---------    -----------      ---------    -----------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES.......    (37,720)      665,849        120,673        (96,214)       652,588
                                                            ---------     ---------    -----------      ---------    -----------
CASH FLOWS FORM INVESTING ACTIVITIES:
  Payments for vehicle additions..........................                   49,363     (4,352,411)                   (4,303,048)
  Vehicle deletions.......................................                 (218,228)     3,828,949                     3,610,721
  Payments for additions to property and equipment........                  (39,691)        (3,242)                      (42,933)
  Retirements of property and equipment...................                    4,965            638                         5,603
  Investment in subsidiaries..............................    (72,514)     (131,677)                      204,191
  Payment for purchase of rental car franchise licensees,
    net of cash acquired..................................                 (227,213)        (9,969)                     (237,182)
                                                            ---------     ---------    -----------      ---------    -----------
NET CASH USED IN INVESTING ACTIVITIES.....................    (72,514)     (562,481)      (536,035)       204,191       (966,839)
                                                            ---------     ---------    -----------      ---------    -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from pubic offerings net.......................    161,194                                                    161,194
  Purchases of treasury stock.............................    (50,960)                                                   (50,960)
  Net (decrease) increase in debt.........................                 (116,137)       309,994                       193,857
  Payments for debt issuance costs........................                   (4,654)                                      (4,654)
  Capital contribution in Argentina.......................                                   1,000         (1,000)
  Investment in AESOP Leasing LP..........................                                 110,000       (110,000)
  Cash dividends..........................................                                  (3,023)         3,023
                                                            ---------     ---------    -----------      ---------    -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES.......    110,234      (120,791)       417,971       (107,977)       299,437
                                                            ---------     ---------    -----------      ---------    -----------
  Effect of exchange rate changes on cash.................                                    (334)                         (334)
                                                            ---------     ---------    -----------      ---------    -----------
  Net (decrease) increase in cash and cash equivalents....                  (17,423)         2,275                       (15,148)
  Cash and cash equivalents at beginning of year..........         11        27,199         17,689                        44,899
                                                            ---------     ---------    -----------      ---------    -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR..................  $      11     $   9,776    $    19,964      $            $    29,751
                                                            =========     =========    ===========      =========    ===========
Supplemental disclosure of cash flow information:
  Cash paid during the year for:
    Interest..............................................                                                           $   209,977
                                                                                                                     ===========
    Income taxes..........................................                                                           $    13,338
                                                                                                                     ===========
BUSINESSES ACQUIRED:
  Fair value of assets acquired, net of cash acquired.....                                                           $   244,501
  Liabilities assumed.....................................                                                                 7,319
                                                                                                                     -----------
NET CASH PAID FOR ACQUISITIONS............................                                                           $   237,182
                                                                                                                     ===========
</TABLE>

                                      F-43
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 21--GUARANTOR AND NON-GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                                                       CONDENSED
                                                                         CONSOLIDATING STATEMENT OF CASH FLOWS
                                                                         FOR THE YEAR ENDED DECEMBER 31, 1997
                                                                                    (IN THOUSANDS)
                                                         ---------------------------------------------------------------------
                                                                                                                   AVIS GROUP
                                                                                        NON-                       HOLDINGS,
                                                                      GUARANTOR      GUARANTOR                        INC.
                                                          PARENT     SUBSIDIARIES   SUBSIDIARIES   ELIMINATIONS   CONSOLIDATED
                                                         ---------   ------------   ------------   ------------   ------------
<S>                                                      <C>         <C>            <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income...........................................  $  27,473    $  36,468     $    16,203     $ (52,671)    $    27,473
  Adjustments to reconcile net income to net cash (used
    in) provided by operating activities:..............   (350,310)     909,073        (170,637)                      388,126
                                                         ---------    ---------     -----------     ---------     -----------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES....   (322,837)     945,541        (154,434)      (52,671)        415,599
                                                         ---------    ---------     -----------     ---------     -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Payments for vehicle additions.......................                 (73,731)     (4,167,078)                   (4,240,809)
  Vehicle deletions....................................                (287,267)      3,669,444                     3,382,177
  Payments for additions to property and equipment.....                 (19,588)         (5,145)                      (24,733)
  Retirements of property and equipment................                   3,814             157                         3,971
  Investment in subsidiaries...........................    (36,468)    (207,603)                      244,071
  Payment for purchase of rental car franchise
    licensees, net of cash acquired....................                (199,381)                                     (199,381)
                                                         ---------    ---------     -----------     ---------     -----------
NET CASH USED IN INVESTING ACTIVITIES..................    (36,468)    (783,756)       (502,622)      244,071      (1,078,775)
                                                         ---------    ---------     -----------     ---------     -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from public offerings, net..................    359,316                                                    359,316
  Net (decrease) increase in debt......................                (116,231)        465,519                       349,288
  Payments for debt issuance costs.....................                 (29,302)                                      (29,302)
  Investment in AESOP Leasing LP.......................                                 191,400      (191,400)
                                                         ---------    ---------     -----------     ---------     -----------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES....    359,316     (145,533)        656,919      (191,400)        679,302
                                                         ---------    ---------     -----------     ---------     -----------
  Effect of exchange rate changes on cash..............                                    (945)                         (945)
                                                         ---------    ---------     -----------     ---------     -----------
  Net increase (decrease) in cash and cash
    equivalents........................................         11       16,252          (1,082)                       15,181
  Cash and cash equivalents at beginning of year.......                  10,947          18,771                        29,718
                                                         ---------    ---------     -----------     ---------     -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR...............  $      11    $  27,199     $    17,689     $             $    44,899
                                                         =========    =========     ===========     =========     ===========
Supplemental disclosure of cash flow information:
  Cash paid during the year for:
    Interest...........................................                                                           $   189,086
                                                                                                                  ===========
    Income taxes.......................................                                                           $     8,899
                                                                                                                  ===========
BUSINESSES ACQUIRED:
  Fair value of assets acquired, net of cash
    acquired...........................................                                                           $   519,650
  Liabilities assumed..................................                                                               320,269
                                                                                                                  -----------
NET CASH PAID FOR ACQUISITIONS.........................                                                           $   199,381
                                                                                                                  ===========
</TABLE>

                                      F-44
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 22--SEGMENT INFORMATION

    Prior to the purchase of VMS on June 30, 1999 (see Note 2), the Company
operated in one industry segment; the rental car business. As of July 1, 1999,
the Company began operating in two business segments as follows:

<TABLE>
<S>                              <C>
Vehicle rental.................  The Company rents vehicles to business and leisure customers

Vehicle leasing and other fee
  based services...............  The Company leases vehicles to customers under closed-end
                                 and open-end leases. Fee based services include fuel and
                                 maintenance cards, accident management and various other
                                 vehicle services which enable customers to effectively
                                 manage costs and enhance productivity
</TABLE>

    Prior to the purchase of VMS on June 30, 1999, the Company operated in four
geographic areas: the United States, Australia/New Zealand, Canada and Other
Foreign Operations. As a result of the VMS acquisition, the Company added an
additional geographic area; the United Kingdom. Revenue generated from each of
the Company's business segments is recorded in the country in which rental,
vehicle leasing and other fee based services are provided. The accounting
policies of each segment and geographic area are the same as those described in
the summary of significant accounting policies (see Note 1). EBITDA represents
net income, plus non-vehicle interest expense (acquisition interest),
non-vehicle depreciation and amortization, and income taxes. Corporate
represents primarily acquisition related interest, amortization of net assets
acquired and amortization of deferred financing fees related to the VMS
acquisition. The operations within major business segments and major geographic
areas for the years ended December 31, 1999, 1998 and 1997, are summarized as
follows (in thousands):

                                      F-45
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 22--SEGMENT INFORMATION (CONTINUED)
BUSINESS SEGMENTS

<TABLE>
<CAPTION>
                                   YEAR ENDED DECEMBER 31, 1999               YEARS ENDED DECEMBER 31,
                        ---------------------------------------------------   -------------------------
                                      VEHICLE                                    1998          1997
                                      LEASING
                                     AND OTHER
                         VEHICLE     FEE BASED                                  VEHICLE       VEHICLE
                          RENTAL      SERVICES    CORPORATE    CONSOLIDATED     RENTAL        RENTAL
                        ----------   ----------   ----------   ------------   -----------   -----------
<S>                     <C>          <C>          <C>          <C>            <C>           <C>
Revenue...............  $2,500,746   $  831,981                $ 3,332,727    $2,297,582    $2,046,154
                        ==========   ==========                ===========    ==========    ==========
Interest expense,
  net.................  $  210,579   $   99,763   $   71,961   $   382,303    $  192,080    $  180,608
                        ==========   ==========   ==========   ===========    ==========    ==========
EBITDA................  $  201,648   $   99,961   $    1,051   $   302,660    $  148,233    $   73,345
                        ==========   ==========   ==========   ===========    ==========    ==========
Non-vehicle
  depreciation and
  amortization........  $   39,190   $   11,141   $   14,451   $    64,782    $   36,005    $   23,022
                        ==========   ==========   ==========   ===========    ==========    ==========
Income (loss) before
  provision for income
  taxes...............  $  162,458   $   88,820   $  (85,361)  $   165,917    $  112,228    $   50,323
                        ==========   ==========   ==========   ===========    ==========    ==========
Income tax expense....  $   50,536   $   22,367   $      429   $    73,332    $   48,707    $   22,850
                        ==========   ==========   ==========   ===========    ==========    ==========
Finance lease
  receivables.........               $  871,034                $   871,034
                                     ==========                ===========
Vehicles, net.........  $3,367,362   $3,134,009                $ 6,501,371    $3,164,816    $3,018,856
                        ==========   ==========                ===========    ==========    ==========
Debt and minority
  interest (preferred
  membership
  interest)...........  $3,393,422   $3,613,688   $1,562,000   $ 8,569,110    $3,014,712    $2,826,422
                        ==========   ==========   ==========   ===========    ==========    ==========
Total assets..........  $4,885,928   $6,107,019   $   85,311   $11,078,258    $4,497,062    $4,274,657
                        ==========   ==========   ==========   ===========    ==========    ==========
Capital expenditures
  for vehicles and
  property and
  equipment...........  $4,814,597   $  839,137                $ 5,653,734    $4,345,981    $4,265,542
                        ==========   ==========                ===========    ==========    ==========
</TABLE>

                                      F-46
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 22--SEGMENT INFORMATION (CONTINUED)
GEOGRAPHIC AREAS

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31, 1999
                                    ---------------------------------------------------------------------------
                                                              AUSTRALIA/                OTHER
                                      UNITED       UNITED        NEW                   FOREIGN
                                      STATES      KINGDOM      ZEALAND      CANADA    OPERATIONS   CONSOLIDATED
                                    ----------   ----------   ----------   --------   ----------   ------------
<S>                                 <C>          <C>          <C>          <C>        <C>          <C>
Revenue...........................  $2,910,712   $  130,298    $124,263    $127,619     $39,835    $ 3,332,727
                                    ==========   ==========    ========    ========     =======    ===========
Interest expense, net.............  $  342,320   $   27,343    $    655    $  8,778     $ 3,207    $   382,303
                                    ==========   ==========    ========    ========     =======    ===========
EBITDA............................  $  219,333   $   46,927    $ 25,450    $ 18,670     $(7,720)   $   302,660
                                    ==========   ==========    ========    ========     =======    ===========
Non-vehicle depreciation and
  amortization....................  $   43,465   $   17,805    $  1,303    $  1,528     $   681    $    64,782
                                    ==========   ==========    ========    ========     =======    ===========
Income (loss) before provision for
  income taxes....................  $  104,170   $   29,122    $ 24,147    $ 17,142     $(8,664)   $   165,917
                                    ==========   ==========    ========    ========     =======    ===========
Income tax expense................  $   57,224   $    4,259    $  5,652    $  4,939     $ 1,258    $    73,332
                                    ==========   ==========    ========    ========     =======    ===========
Finance lease receivables.........  $  129,188   $  725,740                $ 16,106                $   871,034
                                    ==========   ==========                ========                ===========
Vehicles, net.....................  $5,937,503   $  168,476    $ 75,238    $224,704     $95,450    $ 6,501,371
                                    ==========   ==========    ========    ========     =======    ===========
Debt and minority interest
  (preferred membership
  interest).......................  $7,545,835   $  850,443    $  5,433    $148,022     $19,377    $ 8,569,110
                                    ==========   ==========    ========    ========     =======    ===========
Total assets......................  $9,159,879   $1,416,598    $107,341    $317,298     $77,142    $11,078,258
                                    ==========   ==========    ========    ========     =======    ===========
Capital expenditures for vehicles
  and property and equipment......  $5,040,195   $   42,668    $ 88,429    $436,065     $46,377    $ 5,653,734
                                    ==========   ==========    ========    ========     =======    ===========
</TABLE>

                                      F-47
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 22--SEGMENT INFORMATION (CONTINUED)
GEOGRAPHIC AREAS

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31, 1998
                                         --------------------------------------------------------------
                                                      AUSTRALIA/                OTHER
                                           UNITED        NEW                   FOREIGN
                                           STATES      ZEALAND      CANADA    OPERATIONS   CONSOLIDATED
                                         ----------   ----------   --------   ----------   ------------
<S>                                      <C>          <C>          <C>        <C>          <C>
Revenue................................  $2,061,967    $115,790    $ 92,402     $27,423     $2,297,582
                                         ==========    ========    ========     =======     ==========
Interest expense, net..................  $  184,869    $    633    $  5,587     $   991     $  192,080
                                         ==========    ========    ========     =======     ==========
EBITDA.................................  $  121,803    $ 20,118    $  5,984     $   328     $  148,233
                                         ==========    ========    ========     =======     ==========
Non-vehicle depreciation and
  amortization.........................  $   33,186    $  1,210    $    909     $   700     $   36,005
                                         ==========    ========    ========     =======     ==========
Income (loss) before provision for
  income taxes.........................  $   88,617    $ 18,908    $  5,075     $  (372)    $  112,228
                                         ==========    ========    ========     =======     ==========
Income tax expense.....................  $   38,395    $  5,925    $  3,641     $   746     $   48,707
                                         ==========    ========    ========     =======     ==========
Vehicles, net..........................  $2,942,760    $ 72,609    $118,078     $31,369     $3,164,816
                                         ==========    ========    ========     =======     ==========
Debt...................................  $2,930,154    $ 15,881    $ 56,977     $11,700     $3,014,712
                                         ==========    ========    ========     =======     ==========
Total assets...........................  $4,192,961    $ 98,361    $148,230     $57,510     $4,497,062
                                         ==========    ========    ========     =======     ==========
Capital expenditures for vehicles and
  property and equipment...............  $3,988,072    $ 87,310    $244,891     $25,708     $4,345,981
                                         ==========    ========    ========     =======     ==========
</TABLE>

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31, 1997
                                         --------------------------------------------------------------
                                                      AUSTRALIA/                OTHER
                                           UNITED        NEW                   FOREIGN
                                           STATES      ZEALAND      CANADA    OPERATIONS   CONSOLIDATED
                                         ----------   ----------   --------   ----------   ------------
<S>                                      <C>          <C>          <C>        <C>          <C>
Revenue................................  $1,801,278    $132,309    $ 85,021     $27,546     $2,046,154
                                         ==========    ========    ========     =======     ==========
Interest expense, net..................  $  173,269    $  1,192    $  5,343     $   804     $  180,608
                                         ==========    ========    ========     =======     ==========
EBITDA.................................  $   37,331    $ 25,551    $  8,150     $ 2,313     $   73,345
                                         ==========    ========    ========     =======     ==========
Non-vehicle depreciation and
  amortization.........................  $   20,186    $  1,457    $    931     $   448     $   23,022
                                         ==========    ========    ========     =======     ==========
Income before provision for income
  taxes................................  $   16,601    $ 24,094    $  7,219     $ 2,409     $   50,323
                                         ==========    ========    ========     =======     ==========
Income tax expense.....................  $   11,957    $  6,088    $  3,902     $   903     $   22,850
                                         ==========    ========    ========     =======     ==========
Vehicles, net..........................  $2,821,297    $ 67,818    $100,985     $28,756     $3,018,856
                                         ==========    ========    ========     =======     ==========
Debt...................................  $2,744,714    $ 19,637    $ 50,741     $11,330     $2,826,422
                                         ==========    ========    ========     =======     ==========
Total assets...........................  $3,988,117    $ 99,001    $133,178     $54,361     $4,274,657
                                         ==========    ========    ========     =======     ==========
Capital expenditures for vehicles and
  property and equipment...............  $3,915,299    $ 85,748    $239,276     $25,219     $4,265,542
                                         ==========    ========    ========     =======     ==========
</TABLE>

                                      F-48
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 23--SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    QUARTERS ENDED
                                                  (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                               --------------------------------------------------------
                                                MARCH 31,     JUNE 30,     SEPTEMBER 30,   DECEMBER 31,
                                                  1999          1999           1999            1999
                                               -----------   -----------   -------------   ------------
<S>                                            <C>           <C>           <C>             <C>
Revenue......................................  $  566,917    $  637,457      $1,122,818     $1,005,535
Cost and expenses............................     540,087       589,913       1,051,044        985,766
                                               ----------    ----------      ----------     ----------
Income before provision for income taxes.....      26,830        47,544          71,774         19,769
Provision for income taxes...................      11,644        20,262          32,399          9,027
                                               ----------    ----------      ----------     ----------
Net income...................................      15,186        27,282          39,375         10,742
Preferred dividends..........................                                     4,555          4,555
                                               ----------    ----------      ----------     ----------
Earnings applicable to common stockholders...  $   15,186    $   27,282      $   34,820     $    6,187
                                               ==========    ==========      ==========     ==========
Earnings per share:
Basic........................................  $      .48    $      .87      $     1.12     $      .20
                                               ==========    ==========      ==========     ==========
Diluted......................................  $      .47    $      .85      $     1.10     $      .20
                                               ==========    ==========      ==========     ==========
Shares of common stock used in computing
  earnings per share:........................
Basic........................................  31,873,031    31,188,977      31,129,164     31,130,973
                                               ==========    ==========      ==========     ==========
Diluted......................................  32,517,570    32,237,810      31,760,213     31,426,681
                                               ==========    ==========      ==========     ==========
</TABLE>

<TABLE>
<CAPTION>
                                                                    QUARTERS ENDED
                                                  (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
                                               --------------------------------------------------------
                                                MARCH 31,     JUNE 30,     SEPTEMBER 30,   DECEMBER 31,
                                                  1998          1998           1998            1998
                                               -----------   -----------   -------------   ------------
<S>                                            <C>           <C>           <C>             <C>
Revenue......................................    $511,390      $575,280        $652,385       $558,527
Cost and expenses............................     498,161       535,370         599,679        552,144
                                               ----------    ----------      ----------     ----------
Income before provision for income taxes.....      13,229        39,910          52,706          6,383
Provision for income taxes...................       5,821        17,560          22,568          2,758
                                               ----------    ----------      ----------     ----------
Net income...................................    $  7,408      $ 22,350        $ 30,138       $  3,625
                                               ==========    ==========      ==========     ==========
Earnings per share:
Basic........................................    $    .24      $    .62        $    .85       $    .11
                                               ==========    ==========      ==========     ==========
Diluted......................................    $    .23      $    .61        $    .83       $    .11
                                               ==========    ==========      ==========     ==========
Shares of Common Stock used in computing
  earnings per share:
Basic........................................  31,425,000    35,925,000      35,608,000     33,690,798
                                               ==========    ==========      ==========     ==========
Diluted......................................  32,561,483    36,730,233      36,180,000     34,068,603
                                               ==========    ==========      ==========     ==========
</TABLE>

                                      F-49
<PAGE>
           AVIS GROUP HOLDINGS, INC. (FORMERLY AVIS RENT A CAR, INC.)

           NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 24--RELATED PARTY TRANSACTIONS

    The Company and Avis Europe, plc cooperate jointly in marketing and
promotional activities, the exchange of reservations, the honoring of charge
cards and vouchers, and the transfer of the related billings. Two members of the
Company's board of directors are executive officers of Cendant and one of these
two Cendant executive officers also serves on the board of Avis Europe Limited,
the parent company of Avis Europe, plc.

    The Company is affiliated with Cendant, which at January 1, 2000, owned
approximately 18% of the common stockholders' equity of the Company, excluding
potential conversion of Preferred Stock (see Notes 14 and 16). For the years
ended December 31, 1999, 1998 and 1997, the Company earned vehicle rental
revenues of approximately $63.6 million $62.1 million and $2.2 million,
respectively, from Cendant and its subsidiary companies, of which approximately
$1.1 million and $745 thousand was outstanding and is included in accounts
receivable on the accompanying consolidated statements of financial position at
December 31, 1999 and 1998, respectively. The Company purchased approximately
$106.4 million, $90.4 million and $90.1 million in 1999, 1998 and 1997,
respectively, of goods and services from these affiliated companies.

NOTE 25--LITIGATION

    From time to time, the Company is subject to routine litigation incidental
to its business. The Company maintains insurance policies that cover most of the
actions brought against the Company. The Company is not currently involved in
any legal proceeding which it believes would have a material adverse effect upon
its financial position or results of operations.

                                      F-50