D'Ieteren Annual Report 2008 by The Crew Communication

ANNUAL REPORT 2008

D’Ieteren ANNUAL REPORT 2008

Jean-Joseph d’ieteren Wheelmaking Jean-Joseph opens his wheelwright workshop and provides various horse carriage makers in Brussels with wheels as a subcontractor.

Alexandre d’ieteren Horse-carriagemaking Alexandre opens his own factory on the rue Neuve and starts building complete vehicles.

Alfred et Emile d’ieteren Horse-carriagebuilding The two brothers move their father’s workshop to the chaussée de Charleroi. They participate in numerous industrial exhibitions and give the workshop an international character. They become suppliers to the Court of Holland and later to the Court of Belgium.

2008

D’Ieteren

1805

www.dieteren.com

Contents 2

Message to Shareholders

Group Activities

Automobile Distribution –

D’Ieteren Auto

LUCIEN d’ieteren Automobile coachworking In 1919, after his brother Albert left, Lucien renames the company “Les Anciens Etablissements D’Ieteren Frères. Carrosserie de Grand Luxe.” and specialises in the design and production of bodies fitted on the chassis of many different brands. In 1931, the company starts importing and distributing American car brands like Studebaker e.g..

20 Short-Term Car Rental –

PIERRE d’ieteren Distribution and industrialization Pierre signs an agreement with Volkswagen in 1948 to distribute the famous Beetle throughout Belgium. A new assembly plant is opened in Forest and the first Studebaker comes there from the production line in 1949. The Beetle comes next in 1954. Pierre also launches “Dit’Rent-a-car”, the short-term car rental.

103 Corporate Governance

ROLAND d’ieteren Internationalization The takeover of Avis Europe in 1989 and the purchase of Belron in 1999 demonstrate the will of the family to carry on with the development of the company while emphasising its automobile experience.

Avis Europe plc

30 Vehicle Glass Repair and

Replacement – Belron s.a.

40 Financial Report 102 Major Risk Factors 106 Share Information 108 Index of Management Report

ANNUAL REPORT 2008

D’Ieteren ANNUAL REPORT 2008

Jean-Joseph d’ieteren Wheelmaking Jean-Joseph opens his wheelwright workshop and provides various horse carriage makers in Brussels with wheels as a subcontractor.

Alexandre d’ieteren Horse-carriagemaking Alexandre opens his own factory on the rue Neuve and starts building complete vehicles.

2008

D’Ieteren

1805

www.dieteren.com

Contents 2

Message to Shareholders

Group Activities

Automobile Distribution –

D’Ieteren Auto

20 Short-Term Car Rental –

103 Corporate Governance

Avis Europe plc

30 Vehicle Glass Repair and

Replacement – Belron s.a.

40 Financial Report 102 Major Risk Factors 106 Share Information 108 Index of Management Report

D’Ieteren. The Facts.

External sales by activity VAR.

D’Ieteren is an international group, active in three sectors of services to the motorist: > Automobile Distribution in Belgium of Volkswagen, Audi, Seat, Škoda, Bentley, Lamborghini, Bugatti, Porsche and Yamaha; > Short-Term Car Rental in Europe, Africa, the Middle East and Asia through Avis Europe plc and the Avis and Budget brands; > Vehicle Glass Repair and Replacement in Europe, North and South America, Australia and New-Zealand through Belron s.a. and notably its CARGLASS®, AUTOGLASS®, SAFELITE® AUTO GLASS, SPEEDY®, LEBEAU®, SMITH&SMITH® and O’BRIEN® brands. D’Ieteren and its activities are present in 120 countries on 5 continents serving more than 18 million customers a year.

An international group

s.a. D’Ieteren n.v. 100%

59.6%*

77.4%

D’Ieteren Auto

Avis Europe plc

Belron s.a.

● Automobile Distribution

1.4%

● Car Rental

-1.0%

● Vehicle Glass

7.8%

Total

3.0%

Total: EUR 6,146.8 million 43.6% 35.1%

40.4%

● Vehicle Glass Repair and Replacement ● Car Rental

6.3% 16.3% 21.3%

London Stock Exchange

* I ndirect interest through D’Ieteren Car Rental s.a.

Minority Shareholders

Cobepa Group

Financing structure: 3 separate financing pools (net debt as per 31 December 2008)

Current operating result1 by activity Key figures Consolidated results (EUR million) Sales6 Current operating result1,6 Current result, group’s share: - before tax1,6 - after tax1,2 Group’s share in the result for the period3

Net debt by activity

VAR.

IFRS 2008 6,146.8 375.1

2007 5,967.1 361.7

2006 5,253.7 291.6

2005 4,757.3 255.7

2004 4,459.8 274.4

Belgian GAAP 2004 3,335.2 176.1

191.7 159.0 32.2

194.3 166.3 127.7

149.3 134.3 97.9

118.6 97.6 76.2

124.0 94.0 43.2

– 96.4 45.6

● Automobile Distribution2 ● Car Rental

● Car Rental and Vehicle Glass Repair and Replacement ● Automobile Distribution, Car Rental and Vehicle Glass Repair and Replacement

1200

-10.3% 5.8%

● Vehicle Glass

11.1%

Total

3.7%

1000

800

Total: EUR 375.1 million 23.6%

600

400

46.4% 200

Financial structure (EUR million) Equity of which: - Capital and reserves attributable to equity holders - Minority interest Net debt Data per share (EUR) Current result after tax1,2,4, group’s share Group’s share in the result for the period3,4 Gross dividend per ordinary share Net dividend per ordinary share Net dividend per ordinary share + strip VVPR Capital and reserves attributable to equity holders Highest share price Lowest share price Share price as at 31/12 Average share price Average daily volume (in number of shares) Market capitalisation as at 31/12 (EUR million) Total number of shares issued

1,140.2 917.7 222.5 2,089.6

1,030.8 896.1 134.7 2,209.7

28.9 5.9 3.0000 2.2500 2.5500 162.0 248.0 72.2 75.1 175.3 8,024 415.3 5,530,262

30.2 23.2 3.0000 2.2500 2.5500 165.9 343.8 236.7 246.0 297.5 7,713 1,360.4 5,530,262

1,019.2 789.1 230.1 1,875.8

24.3 17.7 2.6400 1.9800 2.2440 142.7 272.5 218.5 269.7 250.9 6,207 1,491.5 5,530,262

945.5 709.9 235.6 1,893.1

17.7 13.8 2.4000 1.8000 2.0400 130.1 239.9 138.5 232.5 185.3 4,920 1,285.8 5,530,262

990.8 687.1 303.7 1,748.1

17.0 7.8 2.3100 1.7325 1.9635 125.8 189.1 135.1 136.5 161.5 4,723 754.9 5,530,260

30.0%

1,064.2 789.7 274.5 1,472.8

17.2 8.1 2.3100 1.7325 1.9635 141.2 189.1 135.1 136.5 161.5 4,723 754.9 5,530,260

Automobile Distribution

Current result before tax1, group’s share, by activity ● Automobile Distribution ● Car Rental

28,450

26,004

20,578

18,690

17,453

1200

-18.9%

● Vehicle Glass

11.3%

Total

-1.3%

5. As restated following application of IAS 21 revised. 6. Excluding in 2006 and 2007 the discontinued operation in Greece (application of IFRS 5). 7. As restated in 2006 following the malpractice identified in Portugal.

Website: www.dieteren.com VAT BE 0403.448.140 - Brussels RPM Ce rapport annuel est également disponible en français. Dit jaarverslag is ook beschikbaar in het Nederlands.

2.3% 1000

Concept and realisation: The Crew www.thecrewcommunication.com

800

Total: EUR 191.7 million 31.6%

Photography: Jean-Michel Byl - Clair Obscur, Nicolas Van Haren and picture libraries Audi, Avis, Belron, Bentley, Budget, Carglass, Lamborghini, Seat, Škoda, Porsche, VW, Yamaha, GettyImages, Shutterstock

600

400

56.7%

200

Printing: Joh. Enschedé - Van Muysewinkel

7,659 Automobile Distribution

1. Under IFRS: before unusual items and re-measurements. 2. Under Belgian GAAP: before amortisation of consolidation differences. 3. Result attributable to equity holders of D’Ieteren, as defined by IAS 1. 4. Under IFRS: calculated in accordance with IAS 33. Under Belgian GAAP: calculated on the basis of the number of shares in circulation at the end of the period (adjusted to take into account the 500 000 participating shares each granting a right to 1/8 of the ordinary dividend).

Vehicle Glass

Net debt maturity profile by activity

VAR. 2

Car Rental

● Bonds under securitisation programme ● Bonds and loan notes ● Bank loans and commercial paper ● Obligations under finance leases

11.7%

Average workforce (average full time equivalents)

Press and investor relations Stéphanie Ceuppens Financial Communication s.a. D’Ieteren n.v. rue du Mail, 50 B-1050 Brussels Belgium Tel.: + 32-2-536.54.39 Fax: + 32-2-536.91.39 E-mail: financial.communication@dieteren.be

1. Under IFRS: before unusual items and re-measurements. 2. The Automobile Distribution segment includes all costs related to the corporate activities, including (concerning current result), finance costs resulting from the investment in the Car Rental and Vehicle Glass segments..

● Less than 1 year ● Between 1 and 5 years ● More than 5 years

Car Rental

Vehicle Glass

The major trading brands of the Belron® Group: Belron®, the Belron® Device, Autoglass®, Carglass®, Glass Medic®, Lebeau Vitres d’autos®, Duro®, Speedy Glass®, Apple Auto Glass®, Safelite® Auto Glass, Elite Auto Glass™, Auto Glass Specialists®, Diamond Triumph Glass™, Cindy Rowe Auto Glass™, O’Brien® and Smith & Smith® are trademarks or registered trademarks of Belron S.A. and its affiliated companies.

D’Ieteren. The Facts.

External sales by activity VAR.

An international group

s.a. D’Ieteren n.v. 100%

59.6%*

77.4%

D’Ieteren Auto

Avis Europe plc

Belron s.a.

● Automobile Distribution

1.4%

● Car Rental

-1.0%

● Vehicle Glass

7.8%

Total

3.0%

Total: EUR 6,146.8 million 43.6% 35.1%

40.4%

● Vehicle Glass Repair and Replacement ● Car Rental

6.3% 16.3% 21.3%

London Stock Exchange

* I ndirect interest through D’Ieteren Car Rental s.a.

Minority Shareholders

Cobepa Group

Financing structure: 3 separate financing pools (net debt as per 31 December 2008)

Net debt by activity

VAR.

IFRS 2008 6,146.8 375.1

2007 5,967.1 361.7

2006 5,253.7 291.6

2005 4,757.3 255.7

2004 4,459.8 274.4

Belgian GAAP 2004 3,335.2 176.1

191.7 159.0 32.2

194.3 166.3 127.7

149.3 134.3 97.9

118.6 97.6 76.2

124.0 94.0 43.2

– 96.4 45.6

● Automobile Distribution2 ● Car Rental

● Car Rental and Vehicle Glass Repair and Replacement ● Automobile Distribution, Car Rental and Vehicle Glass Repair and Replacement

1200

-10.3% 5.8%

● Vehicle Glass

11.1%

Total

3.7%

1000

800

Total: EUR 375.1 million 23.6%

600

400

46.4% 200

1,140.2 917.7 222.5 2,089.6

1,030.8 896.1 134.7 2,209.7

28.9 5.9 3.0000 2.2500 2.5500 162.0 248.0 72.2 75.1 175.3 8,024 415.3 5,530,262

30.2 23.2 3.0000 2.2500 2.5500 165.9 343.8 236.7 246.0 297.5 7,713 1,360.4 5,530,262

1,019.2 789.1 230.1 1,875.8

24.3 17.7 2.6400 1.9800 2.2440 142.7 272.5 218.5 269.7 250.9 6,207 1,491.5 5,530,262

945.5 709.9 235.6 1,893.1

17.7 13.8 2.4000 1.8000 2.0400 130.1 239.9 138.5 232.5 185.3 4,920 1,285.8 5,530,262

990.8 687.1 303.7 1,748.1

17.0 7.8 2.3100 1.7325 1.9635 125.8 189.1 135.1 136.5 161.5 4,723 754.9 5,530,260

30.0%

1,064.2 789.7 274.5 1,472.8

17.2 8.1 2.3100 1.7325 1.9635 141.2 189.1 135.1 136.5 161.5 4,723 754.9 5,530,260

Automobile Distribution

Current result before tax1, group’s share, by activity ● Automobile Distribution ● Car Rental

28,450

26,004

20,578

18,690

17,453

1200

-18.9%

● Vehicle Glass

11.3%

Total

-1.3%

Website: www.dieteren.com VAT BE 0403.448.140 - Brussels RPM Ce rapport annuel est également disponible en français. Dit jaarverslag is ook beschikbaar in het Nederlands.

2.3% 1000

Concept and realisation: The Crew www.thecrewcommunication.com

800

Total: EUR 191.7 million 31.6%

600

400

56.7%

200

Printing: Joh. Enschedé - Van Muysewinkel

7,659 Automobile Distribution

Vehicle Glass

Net debt maturity profile by activity

VAR. 2

Car Rental

● Bonds under securitisation programme ● Bonds and loan notes ● Bank loans and commercial paper ● Obligations under finance leases

11.7%

Average workforce (average full time equivalents)

● Less than 1 year ● Between 1 and 5 years ● More than 5 years

Car Rental

Vehicle Glass

D’Ieteren. The Facts.

External sales by activity VAR.

An international group

s.a. D’Ieteren n.v. 100%

59.6%*

77.4%

D’Ieteren Auto

Avis Europe plc

Belron s.a.

● Automobile Distribution

1.4%

● Car Rental

-1.0%

● Vehicle Glass

7.8%

Total

3.0%

Total: EUR 6,146.8 million 43.6% 35.1%

40.4%

● Vehicle Glass Repair and Replacement ● Car Rental

6.3% 16.3% 21.3%

London Stock Exchange

* I ndirect interest through D’Ieteren Car Rental s.a.

Minority Shareholders

Cobepa Group

Financing structure: 3 separate financing pools (net debt as per 31 December 2008)

Net debt by activity

VAR.

IFRS 2008 6,146.8 375.1

2007 5,967.1 361.7

2006 5,253.7 291.6

2005 4,757.3 255.7

2004 4,459.8 274.4

Belgian GAAP 2004 3,335.2 176.1

191.7 159.0 32.2

194.3 166.3 127.7

149.3 134.3 97.9

118.6 97.6 76.2

124.0 94.0 43.2

– 96.4 45.6

● Automobile Distribution2 ● Car Rental

● Car Rental and Vehicle Glass Repair and Replacement ● Automobile Distribution, Car Rental and Vehicle Glass Repair and Replacement

1200

-10.3% 5.8%

● Vehicle Glass

11.1%

Total

3.7%

1000

800

Total: EUR 375.1 million 23.6%

600

400

46.4% 200

1,140.2 917.7 222.5 2,089.6

1,030.8 896.1 134.7 2,209.7

28.9 5.9 3.0000 2.2500 2.5500 162.0 248.0 72.2 75.1 175.3 8,024 415.3 5,530,262

30.2 23.2 3.0000 2.2500 2.5500 165.9 343.8 236.7 246.0 297.5 7,713 1,360.4 5,530,262

1,019.2 789.1 230.1 1,875.8

24.3 17.7 2.6400 1.9800 2.2440 142.7 272.5 218.5 269.7 250.9 6,207 1,491.5 5,530,262

945.5 709.9 235.6 1,893.1

17.7 13.8 2.4000 1.8000 2.0400 130.1 239.9 138.5 232.5 185.3 4,920 1,285.8 5,530,262

990.8 687.1 303.7 1,748.1

17.0 7.8 2.3100 1.7325 1.9635 125.8 189.1 135.1 136.5 161.5 4,723 754.9 5,530,260

30.0%

1,064.2 789.7 274.5 1,472.8

17.2 8.1 2.3100 1.7325 1.9635 141.2 189.1 135.1 136.5 161.5 4,723 754.9 5,530,260

Automobile Distribution

Current result before tax1, group’s share, by activity ● Automobile Distribution ● Car Rental

28,450

26,004

20,578

18,690

17,453

1200

-18.9%

● Vehicle Glass

11.3%

Total

-1.3%

Website: www.dieteren.com VAT BE 0403.448.140 - Brussels RPM Ce rapport annuel est également disponible en français. Dit jaarverslag is ook beschikbaar in het Nederlands.

2.3% 1000

Concept and realisation: The Crew www.thecrewcommunication.com

800

Total: EUR 191.7 million 31.6%

600

400

56.7%

200

Printing: Joh. Enschedé - Van Muysewinkel

7,659 Automobile Distribution

Vehicle Glass

Net debt maturity profile by activity

VAR. 2

Car Rental

● Bonds under securitisation programme ● Bonds and loan notes ● Bank loans and commercial paper ● Obligations under finance leases

11.7%

Average workforce (average full time equivalents)

● Less than 1 year ● Between 1 and 5 years ● More than 5 years

Car Rental

Vehicle Glass

Ever since its first days, more than 200 years ago, D'Ieteren has considered external crises as opportunities. Viewing them as a catalyst for internal change, the Company has consistently demonstrated a unique ability to remain flexible, yet strong, open to novelty whilst remaining in control. D'Ieteren has once again managed to close a difficult year quite successfully. We look forward to another year of driving change, and welcome you on the journey.

THE GROUP

ANNUAL REPORT 2008 | THE GROUP | 1

ANNUAL REPORT 2008 | MESSAGE TO SHAREHOLDERS

2008. Promise kept. In a year as difficult and as full of unexpected events as 2008, we can be justly proud of keeping our promise of achieving an almost stable consolidated current pre-tax result, group’s share. The main producers of this superb success are undoubtedly the teams in our three activities. We congratulate them warmly. The Belron teams have achieved remarkable results, strengthening the company’s presence in the USA by acquiring and then very rapidly integrating Diamond Glass Inc. They have also maintained organic sales and profit growth in markets which are slightly falling for the first time. The Avis Europe teams, with their recovery plan and a series of vigorous cost control measures, have been able to produce slightly rising earnings in a car rental market which fell sharply in the second half. In the current context, the D'Ieteren Auto teams achieved an excellent result, with notably record new vehicle registrations in a record Belgian market. These collective efforts have enabled the Group to end 2008 with a consolidated current result before tax, group’s share, slightly down by 1.3% to EUR 191.7 million.

ANNUAL REPORT 2008 | MESSAGE TO SHAREHOLDERS | 3

In 2009 the car market promises to be significantly down on 2008. In this context, D’Ieteren Auto will still be doing everything possible to increase its market share, in particular through new vehicle launches and initiatives to gain and maintain customer loyalty. In Vehicle Glass Repair and Replacement, Belron again produced a very good performance, thanks to sustained organic growth, despite a slight decline of the VGRR market owing the difficult economic conditions and the high fuel prices which affected the number of miles driven. Two factors in particular explain this continuing success. The first is the sharing of best practices within the group. This includes the further introduction of the new internet site which allows customers to fix appointments online. Belron has also tested a new advertising campaign in a number of countries, using TV for the first time with very promising results. The second factor is the constant attention accorded to improving the conversion rate and customer satisfaction, which reached a record level in 2008. Belron

continued its geographical expansion by acquiring Diamond Glass Inc. in the USA and fully integrating it into the existing US activities by year-end. It also acquired Mobilglas Denmark, giving it market leader position in this country. In 2009 Belron should continue its internal growth, based on its service efforts towards customers, insurers and fleet partners, and on increasing operational efficiency. In Car Rental, Avis Europe achieved a slightly better pre-tax result than in 2007 in a very difficult economic context. Average rental revenue per day at constant exchange rate increased for the second year running, with volume stable compared with 2007. These achievements prove the effectiveness of the recovery programme initiated in 2005, and the well-foundedness of the investments in revenue management. However, as at D’Ieteren Auto, major losses on the residual values of the car fleet have severely depressed results. Avis Europe reacted with new cost reduction initiatives during the year, in particular through vigorous management of fleet levels, a recruitment freeze and paring discretionary expenditure. The morose economic climate has not prevented Avis Europe from continuing its threepronged strategy of make differentiation (the “3-minute promise” has now been generalized), pursuing revenue management initiatives and its partnership policy (that with the SNCF was renewed for a further 5 years).

precedent. 2008 held several surprises, but finally ended with a number of successes. 2009 will without any doubt be a source of opportunities and new challenges. Let us therefore view this crisis as a catalyst for change, which will enable us to be even more innovative and agile in an increasingly turbulent environment. More than ever before the involvement, enthusiasm and talent of all our staff are the key factors of our success. Their unfailing commitment to the growth of the Company, year by year, is exemplary and deserves our full gratitude. We would equally thank our customers, shareholders and partners for their confidence and their loyalty, the solid foundations on which our future is built.

Avis Europe expects to pursue its strategy in 2009 whilst continuing to benefit further from the flexibility of the business. However, the deterioration of the economy led D'Ieteren's Board to review the carrying value of the company’s investment in Avis Europe: in the consolidated accounts, as prescribed by the accounting norm IAS 36. A non-cash impairment charge has therefore been recorded at the end of the financial year. The economic and financial crisis that the world is passing through is without recent

Jean-Pierre Bizet Managing director

Roland D’Ieteren Chairman

MESSAGE TO SHAREHOLDERS

In Automobile Distribution, D’Ieteren Auto has continued to advance, on the back of a record Belgian new vehicle market, offering a constantly expanding range of products and services in response to growing client expectations for product quality and environmental performance. Registrations reached a record level, with deliveries relatively stable compared with the exception year 2007. The market share has, however, dipped slightly owing to supply not always keeping up with strong demand. On the other hand, earnings have been negatively affected by losses on sales of less-than-a-year-old used cars owing to the weakness of the second hand car market and the deteriorating economic climate. In a highly competitive market, D’Ieteren Auto still comes out ahead of the pack thanks to two major strengths: its specialist networks for each car make and its many initiatives to better satisfy its customers and earn their loyalty. But what makes D’Ieteren Auto what it is today is also its close, 60-year relationship with the Volkswagen group.

ANNUAL REPORT 2008 | Group activities

One goal: leadership. Automobile Distribution > 9 well-known car makes. > 120,000 new vehicles delivered.

Car Rental > Over 3,900 locations in Europe, Africa, the Middle East and Asia. > Serving more than 8 million customers.

Vehicle Glass > The world leader in vehicle glass repair and replacement.

Our role > I mportation and distribution of Volkswagen, Audi, SEAT, Škoda, Bentley, Lamborghini, Bugatti and Porsche vehicles in Belgium; >M anagement of 5 distribution networks with more than 300 independent dealers throughout Belgium; >M anagement of 17 corporate-owned D’Ieteren Car Centers and 4 Porsche Centers, mainly in the Brussels and Antwerp regions; > L ong-term car rental and finance

leases through D’Ieteren Lease and D’Ieteren Vehicle Trading; > Used car sales through two “My Way” centres at Drogenbos and Kortenberg and around 80 dealers affiliated to the “My Way Network”; > Distribution of Yamaha products in Belgium and Luxembourg through D'Ieteren Sport; > Importation and distribution of spare parts and accessories to all dealers.

Our role > Supply of short-term car rental services through: • two brands: Avis and Budget in close cooperation with Avis Budget Group, Inc., which owns the global rights to the two brands; • a network of over 3,900 locations, corporately-owned or licensed, in more than 100 countries in Europe, Africa, the Middle East and Asia. > A leading car rental company adopting the “We Try Harder.” ethos in every business relationship with

customers, employees, shareholders, suppliers, licensees, partnerships and society as a whole. Our strengths > Two strong global brands - Avis and Budget; > Leading market position; > An extensive worldwide network with representation at key airport and train station locations; > Strong travel-related partnerships with airlines, rail, credit card and hotel companies;

Our role > World n°1 in vehicle glass repair and replacement (VGRR), with 1,800 branches and 7,900 mobile vans, serving more than 9 million customers in 28 countries across 4 continents; > A 24 hour, 7 days a week repair and replacement service, mobile or at its branches, generating high customer satisfaction; > A unique business model delivering its insurance partners significant savings in the cost of their glass claims.

Our strengths > A clear dedication to, and focus on, vehicle glass repair and replacement; > An extensive network of corporatelyowned and franchised businesses across Europe, North and South America, Australia and New Zealand; > A portfolio of business units operating in markets at different stages of maturity, enabling both profitability and growth opportunities; > The best known brands in the industry: CARGLASS® across continental Europe and in Brazil, AUTOGLASS® in the UK, O’BRIEN®

Our strengths > A more than 60-year relationship with the Volkswagen group; > In-depth knowledge of the Belgian automobile market, enabling to tailor product and service offerings to customer wishes; > A proven network organization that is both flexible and close to the customer; > Logistics, IT and marketing experience; > A 19.8% share of the new car market in 2008. > A customer-oriented website making car rental reservations both fast and straightforward; > Diversified customer base and sales channels; > Strong central support services.

in Australia, SMITH & SMITH® in New Zealand, LEBEAU®, SPEEDY GLASS®, DURO VITRES D’AUTOS® and APPLE AUTO GLASS® in Canada, and SAFELITE® AUTO GLASS, ELITE AUTO GLASS™, AUTO GLASS SPECIALISTS®, DIAMOND TRIUMPH GLASS™ and CINDY ROWE AUTO GLASS™ in the US; > Highly efficient operations achieved by the sharing of best practices across the group; > Numerous long-term partnerships with leading insurers and fleet partners.

ANNUAL REPORT 2008 | Group activities | 5

D’Ieteren’s activities are – or have the potential to become – market leaders. With very different geographic footprints, they offer attractive growth opportunities, either organically or through acquisition.

Avis Europe plc

2007

2006

2005

2004

New vehicles delivered (in units)

119,967

120,774

112,944

103,239

99,587

External sales

2,679.4

2,642.4

2,491.4

2,227.2

2,088.6

2,158.3

Current operating result1,2

88.5

98.7

81.9

56.1

64.1

60.7

Current result, group’s share before tax1,2 after tax1,2,4

60.6 59.3

74.7 65.2

59.5 57.0

36.1 35.2

48.7 39.3

– 43.9

Average workforce (average full time equivalents)

1,650

1,601

1,571

1,505

1,493

Key figures (EUR million)

IFRS

Belgian GAAP

2008

2007

200610

2005

2004

1,311.3

1,324.7

1,255.0

1,276.4

1,252.8

1,176.9

112.7

106.5

89.8

100.4

114.2

115.4

Current result, group’s share before tax1,9 after tax1,5

22.5 13.0

22.0 17.7

17.8 14.6

22.7 16.6

31.1 23.3

– 24.3

Average workforce (average full time equivalents)

5,967

6,122

6,276

6,253

6,166

Current operating result1,9

Key figures (EUR million)

IFRS

Belgian GAAP

2008

2007

2006

2005

2004

9.46

8.46

6.16

5.36

4.96

4.87

2,156.1

2,000.0

1,507.3

1,253.7

1,118.4

1,120.3

Current operating result1,3

173.9

156.5

119.9

99.2

96.1

95.6

Current result, group’s share before tax1 after tax1,8

108.6 86.7

97.6 83.4

72.0 62.7

59.8 45.8

44.2 31.4

– 28.2

Average workforce (average full time equivalents)

20,833

18,281

12,731

10,932

9,794

Total jobs (in million units) External sales

Belgian GAAP

2008

External sales9

Belron s.a.

IFRS

4. Under Belgian GAAP: after allocation to the Vehicle Glass segment of a net financial charge after tax associated with D’Ieteren’s investment in this segment. 5. Under Belgian GAAP: before amortisation of consolidation differences. 6. Including Brazil. 7. Excluding Brazil. 8. Under Belgian GAAP: contribution of the former Dicobel group to D’Ieteren’s current result after tax, before amortisation of consolidation differences and

after allocation to the Vehicle Glass segment of a net financial charge after tax associated with D’Ieteren’s investment in this segment. 9. Excluding in 2006 and 2007 the discontinued operation in Greece (application of IFRS 5). 10. As restated in 2006 following the malpractice identified in Portugal.

Group activities

D’Ieteren Auto

Key figures (EUR million)

D’Ieteren Auto. Market leader. 6|

ANNUAL REPORT 2008 | D’IETEREN AUTO

Despite the economic slowdown, the Belgian car market reached the higher than expected level of 535,947 new car registrations in 2008, which is also higher than previous years. Thanks to its resourcefulness, D’Ieteren Auto kept its leadership, with a market share of 19.8%. Deliveries reached 119,967 units, almost the record level of 2007.

2008 deliveries (in units):

119,967

D’IETEREN AUTO

ANNUAL REPORT 2008 | D’IETEREN AUTO | 7

ANNUAL REPORT 2008 | D’IETEREN AUTO

An organization focused on its customers. Constantly striving to strengthen customer satisfaction and loyalty, D’Ieteren Auto has developed the programme “Lead” to deepen its knowledge of its customers' needs. This program, which formalizes the customer sales and follow-up process, was introduced into half the network in 2008. N. Kamoen:

“This is a new commercial approach, focused on the customer rather than the product…” G. Debruyn:

Nicolas Kamoen and Gert Debruyn, respectively Manager and Sales Manager of the Audi Center Zaventem, are among the first to put this new approach into practice.

“The salesperson’s role does not end with the offer, or even with the sale. It is important to keep the customer contact. Our new approach allows us to engage in continuous dialogue with the customer who appreciates this attention. Even a customer with a problem is an opportunity to show that we do things differently. ‘Turning bad news into good news’ is one of the strengths of this approach…”

D’IETEREN AUTO

ANNUAL REPORT 2008 | D’IETEREN AUTO | 9

10 |

ANNUAL REPORT 2008 | D’IETEREN AUTO

Key figures. Belgian market up 2.1% to a record level of 535,947 new car registrations. | Share in registrations slightly down to 19.76% but strongly up to 20.82% during the second half. The Volkswagen group could not adapt deliveries to the unexpected record demand in the first half. | VW remains market leader. Audi's market share exceeds 5% for the first time. | Sales up 1.4%. | Current operating result down only 10.3% to EUR 88.5 million vs 2007 record. Contribution from new vehicle sales growth was more than offset by marketing costs increases linked to the Brussels Car Show and losses on sales of less-than-a-year-old used cars. | Current result before tax, group’s share, down 18.9% to EUR 60.6 million.

Financial highlights (EUR million)

2008

2007

change

New vehicles delivered (in units)

119,967

120,774

-0.7%

External sales

2,679.4

2,642.4

1.4%

Current operating result

88.5

98.7

-10.3%

Current operating margin

3.3%

3.7%

–

Current net finance costs

-27.9

-23.7

17.7%

Current result before tax

60.6

75.0

-19.2%

Current result before tax, group’s share

60.6

74.7

-18.9%

2.4

-2.9

–

Unusual items and re-measurements, before tax

Sales breakdown by activity 5%

19.76

19.97

19.43

19.01

18.11

17.76

18.02

Registrations (in thousands)

19.82

Market of new cars and market share of D’Ieteren Auto

19.61

20.11

2% 5%

550

82%

Market share (%) 20

500 450 15

400

change

350

● New vehicles

1.3%

300

● Used vehicles

-1.5%

● Spare parts and accessories

1.3%

● D’Ieteren Car Centers (after-sales)

6.0%

526

525

536

480

1.4%

485

D’Ieteren Auto

459

10.7%

100

468

● D’Ieteren Lease

150

489

-16.2%

200

515

● D’Ieteren Sport

10 250

490

Sales evolution by activity

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

● Market share (%)

● Market (in thousands)

ANNUAL REPORT 2008 | D’IETEREN AUTO | 11

January. | 01 | D’Ieteren takes part in the Brussels Car and Motorcycle Show, with its emphasis on ecology. Its leading exhibits are the Volkswagen BlueMotion ecological range and the new Volkswagen Tiguan and Audi A4 models. | 02 | Inauguration of the new D’Ieteren Expo facilities. | D’Ieteren Auto introduces its new customer dialogue program into the network (see page 8). | D’Ieteren Auto also begins separating out after-sales activities of the Volkswagen and Audi makes, finalizing them for the Stockel and Jubilé Car Centers in 2008. April. | 03 | Official inauguration of the Lamborghini showroom at Zaventem. June. | 04 | 25% of electricity needs at the Audi Center Zaventem will now be generated by photovoltaic panels on the roof of the building (see page 14). A cogeneration unit is also installed at the rue du Mail site. July. | 05 | D’Ieteren celebrates the 60th anniversary of the signing of the Volkswagen import contract by Pierre D’Ieteren in March 1948 (see page 13). October. | 06 | 07 | Launch of the Volkswagen Golf VI and Scirocco. | Volkswagen now offers customers the option of subscribing a 2 year guarantee extension: “Garantie +2 by Wecare”. December. | 08 | D’Ieteren Auto launches its new “D'Ieteren Campus” employee training and development program. | 09 | The “My Way Network” now has 82 My Way contracts covering 174 showrooms. | 10 | D’Ieteren Sport begins marketing the new e-Solex, the electric motor two-wheeler, in Benelux. | D’Ieteren Auto finalizes the development of the new dealer management system and implements it in the network. January 2009. | D’Ieteren participates in the Brussels Motor Show for Light Commercial, Recreational Vehicles and Motorcycles, featuring in particular the new Audi Q5 and the e-Solex. | Opening of a SEAT and Škoda Contact Center.

D’IETEREN AUTO

Key events 2008.

12 |

ANNUAL REPORT 2008 | D’IETEREN AUTO

Growing in a year of contrasts. Current result before tax, group's share: EUR 60.6 million, down 18.9% vs a record year 2007. Contribution from new vehicle sales growth was more than offset by marketing costs increases and losses on sales of less-than-a-year-old used cars. Activities and results D’Ieteren Auto sales grew by 1.4% to EUR 2,679.4 million, as a result of sales growth in new vehicles. Total new vehicles delivered by D’Ieteren Auto were roughly stable compared to the 2007 record level. New vehicles New car registrations in Belgium achieved a record level of 535,947 units, up 2.1%, notably benefiting from the Brussels Car Show. The makes distributed by D’Ieteren Auto achieved 19.76% market share, slightly down compared with 19.97% for the full year 2007. This is mainly due to the market share decline of Volkswagen, which remains nevertheless market leader in Belgium, offset by market share gains by Audi and Seat. The supply delays which impacted Volkswagen and Audi market shares have gradually been resolved during the year. Audi's market share exceeded 5% for the first time and its registrations achieved a record level. Seat's market share increased, supported by the demand for the Seat Ibiza Ecomotive, launched at the end of 2007, and the new Seat Ibiza. Škoda achieved a record level of registrations but its market share was nevertheless slightly lower. The light commercial vehicles market amounted to 65,268 new registrations in 2008, down 1.2%. D'Ieteren Auto achieved 9.00% market share (8.93% in 2007), and a record amount of registrations, supported by demand for the Caddy, Caddy Maxi and Crafter.

Total new vehicles, including commercial vehicles, delivered by D’Ieteren Auto, were down 0.7% to 119,967 units, vs the 2007 record level. New vehicles sales were up 1.3% to EUR 2,162.7 million. Other activities Used car sales amounted to EUR 114.0 million, down 1.5%, reflecting tougher nearly new used car markets in Europe. This resulted in a significant decrease of the results of that activity during the second semester. Sales of spare parts and accessories were up 1.3% to EUR 141.5 million. After-sales activities by D’Ieteren Car Centers were up 6.0% to EUR 51.4 million. Sales of D’Ieteren Lease, active in longterm car rental of D’Ieteren Auto brands, increased by 10.7% to EUR 139.4 million. At 31 December 2008, its fleet amounted to more than 23,400 rented vehicles, up 7%. D’Ieteren Sport sales, mainly Yamaha motorbikes, quads and scooters, were down 16.2% to EUR 47.1 million due to a less favourable product mix. In a 0.2% decreasing market, Yamaha’s share amounted to 13.62% (16.86% in 2007). Results Current operating result amounted to EUR 88.5 million, down 10.3% compared to the record result of EUR 98.7 million in 2007. Contribution from new vehicle sales growth was more than offset by marketing costs increases linked to the Brussels Car

Show and losses on sales of less-than-ayear-old used cars. The result on resale of D’Ieteren Lease’s vehicles, although lower than in 2007, remained positive. However, compared to the previous biennial car show year 2006, current operating result was up 8.1% (2006: EUR 81.9 million). Total net finance costs amounted to EUR 25.5 million (2007: EUR 26.7 million). Excluding re-measurements of financial instruments (mainly interest rate swaps) at fair value, current net finance costs amounted to EUR 27.9 million (2007: EUR 23.7 million), as a result of the increase of the average net debt and average interest rate. Current result before tax, group’s share, amounted to EUR 60.6 million (2007: EUR 74.7 million).

Key developments D’Ieteren Auto undertook several actions to enhance customer satisfaction and loyalty. The “Customer Relationship Management”, which formalizes the sales and customer follow-up processes, was introduced into half the network during the year. Moreover, D’Ieteren Auto pursued the development of the “My Way Authorized Distributor” network which now has 82 dealer affiliates. This initiative aims at improving voluntary used vehicle trade-in by dealers in order to stimulate the sales and after-sales activities of each make. D’Ieteren Auto also started the separation of the after-sales activities of the Volkswagen and Audi makes in the independent dealers network and in its own D’Ieteren Car Centers. Furthermore, D’Ieteren Auto finalised the development of its new dealer management system and started its implementation in the network, which should be finalised by the end of 2010.

Outlook 2009 As previously announced by Febiac, the Belgian automobile market is expected to decrease by 10 to 20% compared to 2008. In this context, D’Ieteren Auto keeps up its objective of a continuous market share improvement. The new Golf, introduced in October 2008, will contribute to it. The models to be launched or renewed in 2009 include the VW Polo, Audi A5 Sportback and Convertible, Audi S4, New Seat Ibiza Ecomotive, Seat Exeo, Škoda Yeti and Porsche Panamera. Strong efforts will be made regarding cost control and capital employed management.

The roaring 60s. This year, the Company celebrated the 60th anniversary of the contract to import Volkswagen vehicles in Belgium, signed by Pierre D'Ieteren on 17 March 1948. Since 1948, the Company has constantly met new challenges in developing the Volkswagen make. At the time, D’Ieteren had already been in existence for near a century and a half. It had first hand experience of the birth of the automobile market and had both a network – a key strength – and Key dates since the signing of the import contract in 1948: a long-term vision. > 1949: building of the Forest car plant. This vision would The first “Made in Belgium” Beetle comes off the line in 1954. enable it to adapt to > 1956: launch of “Dit’Rent-a-Car”. In the ups and downs of collaboration with the SNCB, Beetles are available for hire at the country’s main the commercial and railway stations. economic environ> Between 1958 and 1970: development of the network to meet ment, and push it to strongly growing demand. be constantly looking > 1973: the Forest plant is sold to Volkswagen, after producing more for new opportunities. than a million Beetles. Today, D’Ieteren is an > 1974: sales of the first Golfs and Sciroccos. D’Ieteren begins importing international group, Audi and NSU cars. D’Ieteren Lease with three activities is set up. > Between 1984 and 2001: D’Ieteren serving motorists in becomes the distributor for, successively, over 120 countries. SEAT, Škoda, Bentley and Lamborghini. Opening of the Contact Center and Technical Center at Kortenberg. > 2008: D’Ieteren celebrates the 60th anniversary of the VW import contract. More than a million Volkswagen group vehicles are registered in Belgium.

D’IETEREN AUTO

ANNUAL REPORT 2008 | D’IETEREN AUTO | 13

14 |

ANNUAL REPORT 2008 | D’IETEREN AUTO

A constantly evolving approach to respecting the environment. Corporate Social Responsibility.

As a responsible player in terms of the environment and collective values, D'Ieteren Auto contributes to the well-being of society at large in a perspective of sustainable development. In some cases, it offers its services to these communities, while in other cases, it becomes involved with relevant social issues or pursues cultural or humanitarian goals. 1. The Clean Development Mechanism (CDM) is one of the three flexible mechanisms of the Kyoto Protocol designed to help industrialized countries achieve their greenhouse gas reduction objectives. It authorizes industrialized countries (having quantified emission reduction targets) to invest in greenhouse gas reduction projects in developing countries (which have not signed the protocol). These sustainable development projects generate “certified emission reduction units”, which are then taken into account in setting the developed country’s quotas.

Our products D’Ieteren Auto sells increasingly environmentally friendly vehicles. Fuel consumption and CO2 emissions have been greatly reduced, in particular by optimizing existing diesel (TDI) and petrol (TSI) engines. In 2007 Volkswagen launched the BlueMotion program across its range to stimulate respect of the environment and reduce fuel consumption. A “BlueMotion Attitude” of ecologically responsible driving behaviour is encouraged, notably through Ecodriving courses. SEAT has introduced the Ibiza Ecomotive, which emits only 98 grams of CO2 per kilometre, just like its Polo BlueMotion cousin. Audi and Škoda have launched the e-Audi and GreenLine ranges.

Our environment Since several years, D'Ieteren Auto has adopted an energy control program with three thrusts: > e nergy purchase and consumption monitoring; > integration of alternative energies; > rational energy use. Since 1 March 2008, all the electrical energy the Company consumes is purchased from the Bassin du Rhône hydroelectric generating stations (AlpEnergie project). This energy is guaranteed of 100% renewable origin. In the field of alternative energies, photovoltaic panels have been fitted on the roof of the Audi Center site at Zaventem. These produce 250 MW per year, equal to a quarter of total consumption at the site. A cogeneration power plant has also been installed at the rue du Mail site at Ixelles, covering 22% of annual electricity consumption. Rational energy use involves new operating techniques and one-off initiatives to reduce energy consumption in the buildings. The latter include dawn/ dusk switches, time switches and zoned heating and lighting. This energy control policy led to a reduction in electricity consumption in 2008 of 3% (or 510 MWh) and 14% lower heating consumption (or 3705 MWh - taking degree days into account) compared with 2007. This year, D’Ieteren continued initiatives around staff mobility, notably in order to reduce the CO2 emissions of vehicles made available to employees, by organizing ecological driving courses, by promoting alternative means of transport, etc. Furthermore, to neutralize the balance, the Company decided in 2008 to contribute to greenhouse gas reduction projects approved by the United Nations under the Kyoto protocol. D’Ieteren Auto worked here with two Belgian companies, CO2Logic and Climact, which offer projects which generate CO2 emission reduction certificates (CERs), issued by the Executive Council of the Clean Development Mechanism1. One of the selected projects is the “Wind Electricity Generation Project” in the village of Devarkulam in south-east India.

ANNUAL REPORT 2008 | D’IETEREN AUTO | 15

The Volkswagen division decided to support in 2008 the International Polar Foundation, one of whose projects was to build the Princess Elisabeth polar station as a base for studying climate variations.

This project contributes to the sustainable development of this region by giving local populations access to a less polluting source of alternative energy and combats poverty by developing economic activity. At the operational level, D’Ieteren Auto is working actively with Febiac, in the context of Febelauto, to recycle end-oflife cars and their components. At dealer outlets D’Ieteren Auto is also promoting selective waste sorting and collection, the safe storage of hazardous products and the use of water-based paints in car body repair shops.

D’IETEREN AUTO

Ecogymy

Born from the combination of the words Economy and Ecology, this little Eskimo named Ecogymy, who sees his ice pack disappear under the influence of global warming, now accompanies all environment related communication initiatives.

D’Ieteren Auto also provides significant support to various organizations. In partnership with the Royal Automobile Club of Belgium and Key Driving Competences, it has complemented its “responsible driving” courses for young drivers with “economic driving” courses for companies wishing to reduce fuel consumption by their car fleets. The Company has also committed to the Climate Education Program – an initiative by its partner CO2Logic (see above) – to help sensitize schoolchildren to the environment. Concretely, two associations, GREEN for French-speakers and WaterWeerWind for Dutch-speakers, have been mandated to send trainers into the schools. Our community D’Ieteren Auto supports a certain number of cultural organizations and programs, including the events organized by Flagey. In the social area, the Company supports the CAP48 fund-raising campaigns organized by the RTBF for handicapped persons’ associations, along with Child Focus – the European Centre for Missing and Sexually Exploited Children –, Médecins du Monde and the asbl RED for promoting road safety (in particular among young drivers). In 2008, the Škoda Import division sponsored the sale of stickers by the Rode Kruis-Vlaanderen during the Red Cross Fortnight by donating two vehicles. The Porsche division also supported LIVE, which collects funds for various heart surgery projects. D’Ieteren Lease is a partner of the asbl Special Olympics Belgium, that every year organizes sport competitions for mentally handicapped persons. D’Ieteren Lease provides vehicles for transporting athletes.

SOB_MonAuto2008 XP

3/04/08

13:33

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Jeux Special Olympics 2008 à Courtrai CÉRÉMONIE D’OUVERTURE : 30 AVRIL À 20H00 AU CENTRE SPORTIF WEMBLEY COMPÉTITIONS SPORTIVES : 1 > 3 MAI - LANGE MUNTE, WEMBLEY, KORTRIJK XPO www.specialolympics.be

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ANNUAL REPORT 2008 | D’IETEREN AUTO

2008-2009 key models.

Volkswagen Golf VI. The sixth generation Golf comes with a modernized but still immediately recognizable design. Volkswagen’s bestseller has been perfected in every detail. The new Golf completely redefines the quality and comfort level of its class, offering more customer value than ever before. With an average fuel consumption of only 4.5 litres per 100 kilometres for the 110 PS TDI engine, the Golf also perfectly reflects Volkswagen’s environmental commitment.

Audi Q5. The Audi Q5 combines the dynamism of a sports saloon with an interior that can be modified for numerous purposes. Like every Audi, the new four-ring SUV provides a level of quality and finish that has become the reference for the whole automobile sector. Strong points, such as the permanent 4-wheel drive quattro, the “S tronic” gearbox and the “Audi drive select” control system bear witness to the “Vorsprung durch Technik” slogan that has been associated with the brand for the last 38 years.

ANNUAL REPORT 2008 | D’IETEREN AUTO | 17

It’s never easy to improve a bestseller like the Octavia. That’s why the engineers from Škoda set out to retain the identity of the car while at the same time giving it a new look. The new Škoda Octavia is much more than a simple development. Not only is it designed to have a more modern appearance, but it has also inherited an astonishing 1.4-litre TSI engine and a whole host of extra accessories.

Seat EXEO. Launching the new SEAT EXEO in 2009 will give notice to a strong new period in the history of the brand which is expanding into a new segment. The SEAT EXEO is a dynamic and elegant car defined by a superior quality and equipped with advanced technology that reflects the values of SEAT: dynamism, livelyness and passion for design. The name EXEO, heralding excellence and maximum driving pleasure, stands for progression, power and technology.

D’IETEREN AUTO

New Škoda Octavia.

18 |

ANNUAL REPORT 2008 | D’IETEREN AUTO

Bentley Continental Supersports. The fastest and most powerful Bentley in the company’s 90-year history. The Continental Supersports reaffirms Bentley’s environmental commitment with the launch of its first FlexFuel performance car pioneering the use of bio fuel technology in the luxury sector. The result is a net reduction of up to 70% in CO2 emissions on a “well-towheel” basis (from fuel extraction to its combustion). The Supersports is the extreme Bentley delivering a highly focused driving experience.

Lamborghini Gallardo LP 560-4 Spyder. With the new Gallardo LP 560-4 spyder, Lamborghini has created a driving experience like absolutely no other – fascinating design and breathtaking performance. The Gallardo bears a suitably powerful name with a rich heritage from the bull fighting: it is a thoroughbred sports car with excep tionally refined power delivery and a razor-sharp precision handling. The finest exclusivity is the trademark of Lamborghini’s individualization program. “Think the Impossible” is its motto.

ANNUAL REPORT 2008 | D’IETEREN AUTO | 19

Porsche Panamera.

D’IETEREN AUTO

Conceived and designed as a four-door grand touring sports car, the Panamera combines numerous talents in typical Porsche style: sporting driving dynamics, a generous and variable interior, and the supreme driving comfort of a Gran Turismo. Joining the 911, Boxster and Cayman sports cars as well as the Cayenne Sports Utility, the Panamera is Porsche’s fourth model series.

Yamaha New VMAX. 1985. Yamaha launches the impressive VMAX. With its mighty V4 engine and its radical and muscled styling, it became a true legend. The legend has now returned. Re-thought and reloaded by Yamaha's team of engineers, the New VMAX stacks up perfectly against the iconic former VMAX. Those who are familiar with the first model as well as the new admirers can be sure of one thing: the New VMAX proves itself to be a worthy successor, a mix of sensation and innovation, of driving pleasure and safety.

Avis Europe. Resilience. 20 |

ANNUAL REPORT 2008 | AVIS EUROPE PLC

Avis Europe reported a strongly resilient underlying trading performance in 2008, despite the deteriorating economic environment and weak used car markets. Brand leadership, service differentiation and geographic diversification supported volumes. Rigorous revenue management and pricing actions helped to deliver a further 0.7%* improvement in rental revenue per day. Avis Europe achieved a significant reduction in the fixed cost base thereby delivering an underlying operating margin ahead by 0.6% points. * At constant currency.

Underlying operating margin ahead by

0.6%

points.

AVIS EUROPE PLC

ANNUAL REPORT 2008 | AVIS EUROPE PLC | 21

22 |

ANNUAL REPORT 2008 | AVIS EUROPE PLC

Revenue management in action Maximising price, yield and utilisation. This 3-year programme commenced in 2005 and represented a significant step change in the way the business is managed on a day-to-day basis. Applied at European, country and station level, it has involved the implementation of a demand forecasting system, as well as data tools to enable faster implementation of tactical price changes and the optimisation of fleet levels. After 3 years, the conclusion is very positiveâ&#x20AC;Ś P. Lewis:

Manager of Avis Heathrow, UK, Paul Lewis is an enthusiastic user of the revenue management system, and has been working with it since the beginning of 2006.

â&#x20AC;&#x153;The Revenue Management system makes recommendations in terms of maximising revenue and pricing opportunities. The information it provides enables the user to see opportunities to stimulate demand or make infleeting or de-fleeting decisions. It brings real operational discipline to the pricing function and also to other areas such as utilisation. It brings a more disciplined way of working across the entire network and is particularly important in terms of implementing the strategy. â&#x20AC;?

AVIS EUROPE PLC

ANNUAL REPORT 2008 | AVIS EUROPE PLC | 23

24 |

ANNUAL REPORT 2008 | AVIS EUROPE PLC

Key figures. Strongly resilient performance in 2008, despite deteriorating trading environment. | Brand leadership, service differentiation and geographic diversification supported volumes. | Further improvement in rental revenue per day (up 0.7% at constant currency – 1.2% lower at reported currency) resulting from rigorous revenue management and pricing actions. | Continuing positive performance by Licensees. | Increased fleet costs mainly due to weak used car markets, particularly in Spain and the UK. | Significant reduction in fixed cost base and maximised business flexibility to protect operating margin. Underlying operating margin ahead by 0.6% points to 8.6%. | External sales just 1.0% lower at EUR 1,311.3 million. | Current operating result up 5.8% to EUR 112.7 million. | Current result before tax, group’s share, up 2.3% to EUR 22.5 million.

Financial highlights (EUR million) External sales Current operating result

2008

2007

change

1,311.3

1,324.7

-1.0%

112.7

106.5

5.8%

Current operating margin

8.6%

8.0%

–

Current net finance costs

-75.1

-69.7

7.7%

Current result before tax

37.6

36.8

2.2%

Current result before tax, group’s share

22.5

22.0

2.3%

-278.4

-42.0

–

Unusual items & re-measurements, before tax

Note: the average shareholding used for consolidation of the result of Avis Europe in 2008 is 59.74% (59.72% in 2007).

Geographical sales breakdown 14%

PERFORMANCE INDICATORS

22%

Rentals

15%

-0.3%

Rental length 15%

0.4%

Billed days

17%

0.1%

Rental revenue per day

17%

change

0.7%

1. At constant currency.

Geographical sales evolution

CHANGE

● France

-2%

● Spain

-8%

● Italy

● Germany

● UK

● Other

–

Insurance/ replacement 11%

Corporate 35%

Individual intermediary 25% Individual direct 29%

ANNUAL REPORT 2008 | AVIS EUROPE PLC | 25

Expansion in China. | 01 | | 02 | In 2008 Avis opened new rental stations in 7 Chinese cities and reinforced its presence in existing cities with the opening of new terminals in both Shanghai and Beijing airports. Avis China plans to continue to strengthen its network in 2009. Airport transfers and chauffeur drive options, as well as rent-a-car with or without driver, are now bookable throughout the world. Further roll-out of the “3-minute promise”. | 03 | | 04 | This year, Avis Europe continued the roll-out of the “3- minute promise” which is now operating in 600 stations across corporate operations in six countries in Europe, with a 99% success rate. The service was also launched in the first Licensee country, Poland, at the end of the year. Further roll-out of the website. | 05 | Avis Europe's websites have been significantly enhanced over the past few years, to make them quick and easy to use and to work more effectively with search engines. The new websites are now operational in 5 major corporate markets and 4 licensees. Internet reservations continue to increase, with a distribution channel share of 31% in 2008. Renewal of the partnership with SNCF. | 06 | In March 2008 Avis announced the renewal of its exclusive partnership with SNCF for a further 5-year period. The companies have been working closely together since 1986. Awards. | 07 | | 08 | Avis Europe again won several important awards across its network, including the Business Travel Award for Middle East, the World Travel Award for Asia’s Leading Car Hire Company and the Reader's Digest Award for the most trusted brand 2008. Reinforcement of connectivity with airlines. | 09 | | 10 | Dedicated reservation websites were launched this year for key airline partners such as TAP, Iberia and Swiss.

AVIS EUROPE PLC

Key events 2008.

26 |

ANNUAL REPORT 2008 | AVIS EUROPE PLC

Increased flexibility in a tough economy. Current result before tax, group's share: EUR 22.5 million, up 2.3%. Strongly resilient performance in 2008, despite deteriorating trading environment. The following extracts are taken from the 2008 Annual report by Avis Europe plc.

Activities and results “Group revenues from continuing operations were ahead by 1.3% on a constant currency basis and just 1.0% lower at EUR 1,313.8 million on a reported basis, with good growth from licensees and in the Budget branded business offset by the impact of currency translation in the Avis corporate business. Revenue from continuing operations in the Avis corporately-owned business segment was broadly flat, being 0.4% ahead on a constant currency and 1.5% lower than the prior year at EUR 1,221.0 million on a reported basis. For the full year Avis Europe increased billed days volume by 0.1%, driven by an improvement in rental length. Rental revenue per day increased by 0.7% on a constant currency basis. This improvement was mainly due to the benefits of previous investment in revenue management initiatives and pricing actions. Rental revenue per day on a reported basis was 1.2% lower due to translation impacts from sterling and Swiss franc revenue. Overall revenue from licensee countries grew by 14.7% on a constant currency basis and by 7.3% on a reported basis. Excluding the impact of the licensing of the group’s operations in Greece, licensee revenues were 12.4% ahead on a constant currency basis and 4.9% ahead on a reported basis. Budget Corporate revenue of EUR 43.2 million was 1.4% ahead of prior year with volume growth in all corporate countries. Budget Licensee revenue of EUR 13.0 million was EUR 2.9 million ahead of prior year.

Underlying operating profit on continuing operations increased to EUR 112.7 million (2007: EUR 106.5 million), despite the very tough economic environment. This reflected the improvement in rental revenue per day on a constant currency basis, together with significant cost reductions as a result of strong actions taken by management on the group’s ongoing restructuring programme and from translational foreign exchange benefits on the sterling element of the group’s cost base. These cost reductions offset the negative impact of weaker used car markets on residual values on non-repurchase cars, particularly in Spain and the UK, as well as purchase price inflation from the car manufacturers (fleet costs increase: EUR 16.4 million or 3.8%). Underlying operating margin on continuing operations was 8.6%, being 0.6% points higher than the prior year, primarily reflecting the improvements in constant currency rental revenue per day and reductions in the cost base. Net underlying finance costs increased to EUR 75.1 million (2007: EUR 69.7 million) reflecting an increase in average net debt, offset by a reduction in the underlying effective finance rate from 6.7% to 6.2% per annum. The increase in average net debt of continuing operations from EUR 1,004 million to EUR 1,183 million primarily resulted from a reduction in net fleet creditors, offsetting the benefit from disposing of the operation in Greece. Net exceptional charges before taxation of EUR 27.5 million were incurred in the year. Restructuring costs of EUR 27.6 million included EUR 1.9 million of costs incurred in the first half in respect of a redundancy programme that commenced in December 2007.

Restructuring costs of EUR 25.7 million were then recognised in the second half reflecting a further rationalisation of operations in response to the deterioration in the trading environment, including redundancies, the closure of certain low margin rental locations, and the rationalisation of property with the transfer of the staff of the UK business head-office into the group headquarters building. In the prior year, restructuring costs of EUR 7.1 million were incurred with respect to the redundancy programme commenced in December 2007, and the final elements of a restructuring project commenced in 2005. During 2008, the group recognised an exceptional impairment provision against the goodwill arising on the acquisition of certain licensees in Holland. This followed a reappraisal of the business in conjunction with the restructuring referred to above. In the comparative year, the group acquired the assets of a licensee in Germany and an impairment provision was made in respect of the goodwill arising. In the prior year, the group disposed of its subsidiary in Greece. The group has recognised an exceptional credit of EUR 1.3 million in the current year to reflect the final settlement of a warranty provision.

Operational review Following the appointment of Pascal Bazin as Group Chief Executive on 1 January 2008, Avis Europe undertook an initial review of the strategy and decided to place more emphasis on brand leadership and service differentiation, geographic and customer diversification, cost reduction and improving the flexibility of the business model. The company also adopted a stronger operational approach with more emphasis on delivery and accountability, which are fundamental in a service, customer-facing and extensively-networked business, as well as on accelerating benefits from recent investment in initiatives such as revenue management. During the year Avis Europe made very good progress in implementing

ANNUAL REPORT 2008 | AVIS EUROPE PLC | 27

Outlook 2009 These actions put Avis Europe in a good position to face the challenges and opportunities of 2009 as recessionary pressures intensify. The company will remain focussed on its key strategic priorities, whilst continuing to benefit further from the flexibility of the business that was demonstrated in 2008. Whilst Avis Europe is anticipating lower volumes, it is tightening fleet capacity and planning a further improvement in pricing and a step-change improvement in utilisation. In addition, the full year benefits of last year’s restructuring together with the impact of further cost actions are now being realised. Avis Europe has ensured that it has sufficient committed liquidity for the next twelve months and, from the actions outlined above, anticipates a positive free cash flow, putting them in a strong position to face successfully the challenges of 2009.” End of extracts.

Having reviewed the carrying value of the company's investment in Avis Europe, the Board of D'Ieteren has decided to recognise an impairment charge of EUR 85 million after taxes, share of the group, in D’Ieteren's consolidated accounts, based on IAS 36 prescriptions, and a charge of EUR 48 million in D’Ieteren's unconsolidated accounts. The impairment charge of EUR 85 million after taxes corresponds to the share of the group in the EUR 223 million adjustment of the Avis licence rights and the corresponding EUR 67 million impact on deferred taxes. This impairment, a non-cash charge, does not impact the Group’s borrowing arrangements or covenants compliance.

Renewal of partnership with SNCF. In March 2008 Avis announced the renewal of its exclusive Marketing and Commercial partnership with SNCF, for a further 5-year period to 2013.

The partnership enables Avis and SNCF, both market leaders in France, to continue developing the rapidlygrowing “high-speed Train + Car” option, combining the comfort, security and speed of train travel with the flexibility and freedom of hiring a car at the end destination. SNCF customers benefit from Avis’ leading customer offer: - an international network of locations at railway stations; - a “3-minute promise” speed of service offering customers their rental car keys in less than 3 minutes; - simultaneous rail and car rental reservations; - and a 24-hour car rental key pick-up service.

Avis and the SNCF have worked together since 1986. From 1986 till 1995: Avis and SNCF work in partnership to offer customers a “Train + Car rental” travel solution. 1995: Avis wins the contract for an exclusive Marketing and Commercial partnership for a further five-year period from 1996 to 2000. 2000: Avis wins the contract for a second further five-year period. 2005: SNCF renews the partnership with Avis for a further three years until end 2008. 2008: Avis wins the contract for the third time for the period 2009-2013.

AVIS EUROPE PLC

this strategy, but also in reacting very quickly, particularly in the second half, as the trading environment weakened.

28 |

ANNUAL REPORT 2008 | AVIS EUROPE PLC

Trying even harder... Avis Europe's Corporate Social Responsibility (CSR) strategy is an integral part of their ‘We try harder.’ philosophy.

Our fleet Avis Europe seeks to minimise emissions from its fleet by introducing more environmentally friendly vehicles in more locations. In addition, its vehicles are changed very regularly, which ensures that the latest low emission vehicles are included on the fleet. As a result of these and other changes, a significant proportion of 2008 fleet purchases emitted below the European norm for CO2 emissions. In Paris the OKIGO initiative, undertaken jointly with Vinci Park, allows customers who pay a subscription to have an Avis car available 24/7 in one of the many Vinci car parks. During 2008 OKIGO was expanded to 100 cars in 25 stations mainly based in Paris, with a three-fold increase in the number of members to 1,500. Studies show that sharing a car in this way effectively replaces up to eight individual cars. Avis Europe has also signed a partnership with Vinci Park, the Paris Metro and SNCF to facilitate the operation of a public car sharing scheme with 4,000 vehicles in Paris in 2010. Our environment Avis Europe remains committed to reducing, where possible, negative impacts on the environment from its operations, of which by far the greatest are greenhouse gas emissions, and to offsetting non-reducible emissions.

With regard to the environment, Avis Europe’s strategy is to ensure it reduces progressively its CO2 emissions in its premises, offsets nonreducible emissions and continues to introduce less polluting vehicles

onto the fleet where possible. On community matters, Avis Europe aims to make a positive contribution to the quality of life in the communities where it operates.

Avis Europe’s European corporate operations and some of its licensees are CarbonNeutral. In 2008 emissions from its corporately-owned operations amounted to 14,648 tCO2. They focused on developing and completing a series of initiatives to improve environmental performance, including: > completing the integration of environmental reporting into financial reporting using a new finance system, which tracks utility use and business travel; > undertaking a number of environmental audits of headquarters buildings and major rental locations in the group’s main corporately-owned markets;

ANNUAL REPORT 2008 | AVIS EUROPE PLC | 29

> b eginning the implementation of the resulting recommendations to achieve further emissions reductions; >m aking better use of resources and making all staff aware of what they can do to reduce energy use; > f urther increasing the use of video conferencing between the group headquarters in Bracknell and the other country corporate head offices and >d eveloping closer links with customer groups to help reduce their environmental impact, including the launch of a bookable “green fleet” and a carbon offset tool for corporate customers.

AVIS EUROPE PLC

Avis Europe offset its emissions in 2008 in conjunction with The CarbonNeutral Company. Around 90% of total emissions was offset through renewable energy, independently credited to the Voluntary Carbon Standard: remaining offset was via tree planting; since 2000, it has offset over 118,896 tonnes of CO2. Our community Avis Europe community investment guidelines provide that it focuses on local environmental improvement and provision of free transport for community activities. In addition to this activity across the corporate and licensee network, it supports UNICEF on a variety of projects.

Avis Europe also supports initiatives which are particularly important to local staff. Some of the 2008 projects have included: > s upporting a road safety project for school children in Germany; > c ollecting food for Christmas on behalf of the NGO Caritas; > f undraising for a cancer care charity in the UK; > t he renovation of a forest path in Hungary; > t he establishment of a partnership with Action Aid in Italy; > f undraising for the Portuguese Community against Aids. In addition, it supports employee volunteering and fundraising. For example, in Barcelona, the Avis contact centre makes a quarterly contribution where staff commit to voluntary work for a charitable

organisation and, in the headquarters, Avis Europe matches sponsorship funding for individual and team efforts.

Belron. 30 |

ANNUAL REPORT 2008 | BELRON S.A.

Exploiting the unpre足dictable.

Belron has performed very well this year, despite the reduction of the Vehicle Glass Repair and Replacement market, due to the difficult economy and to fuel prices impacting miles driven. Belronâ&#x20AC;&#x2122;s sales are up with 8% thanks to sustained organic growth and continued external growth through the acquisition of Diamond Glass Inc.

Sales up

BELRON S.A.

ANNUAL REPORT 2008 | BELRON S.A. | 31

32 |

ANNUAL REPORT 2008 | BELRON S.A.

Acquisition of Diamond Glass Inc. In June 2008 Belron acquired Diamond Glass Inc., a nationwide network of vehicle glass repair and replacement specialists in the USA. Headquartered in Kingston, Pennsylvania, Diamond Glass Inc. operates 216 branches across the country and employs 1,600 people. The Diamond Glass acquisition is the continuation of Belron SA's strategic ambition to profitably grow in the United States. Just 16 months ago, Belron acquired Safelite Group, which was the largest vehicle glass repair and replacement company in the United States at that time. Chad Flowers:

Chad Flowers – Safelite Auto Glass General Manager Boston – here at the Columbus Supercenter, an important warehouse in Eastern USA.

“The acquisition by Belron US of Diamond has shown immediate benefits for my team and me here in Boston. It has meant that we now have access to a much larger supply of highly talented associates allowing us to offer even better customer service. The integration was completed in record time and we are all operating as one team now.”

BELRON S.A.

ANNUAL REPORT 2008 | BELRON S.A. | 33

34 |

ANNUAL REPORT 2008 | BELRON S.A.

Key figures. External sales up 8% comprising 7% organic growth, despite lower miles driven, and 6% acquired growth, offset by 5% adverse currency translation impact. | Current operating result up 11.1% to EUR 173.9 million. | Current result before tax, group's share, up 11.3% to EUR 108.6 million. | Acquired growth mostly in the USA, which is performing well ahead of original expectations. | Continued organic sales growth anticipated in 2009.

Financial highlights (EUR million) External sales Current operating result

2008

2007

change

2,156.1

2,000.0

7.8%

173.9

156.5

11.1%

Current operating margin

8.1%

7.8%

–

Current net finance costs

-33.6

-32.2

4.3%

Current result before tax

140.3

124.3

12.9%

Current result before tax, group’s share

108.6

97.6

11.3%

Unusual items and re-measurements, before tax

-27.5

-23.4

Note: the average shareholding used for consolidation of the result of Belron in 2008 is 77.38% (76.94% in 2007).

Geographical sales breakdown

42% 58%

> A job is completed every 3 seconds > 6,300 windscreens are repaired every day > 94,000 mobile jobs are completed every week Geographical sales evolution1 ● Europe: Belgium, Denmark, France, Germany, Greece, Ireland, Italy, Luxemburg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, UK ● Rest of the world: Australia, Brazil, Canada, New Zealand, United States 1. At actual exchange rate.

CHANGE 5.0%

indicators Total jobs (in million)

2007

9.4

8.4

> repair jobs

2.3

2.0

> mobile jobs

4.9

4.3

7,878

7,029

20,833

18,281

Mobile fleet (number of vans) 13.0%

2008

Employees

ANNUAL REPORT 2008 | BELRON S.A. | 35

April. | 01 | New Belron TV advert successfully screened in the UK (see page 37). May. | 02 | ‘Best of Belron’, the competition to elect the best technician across the business is held at MIRA in the UK. This event tests the technicians on the safety, quality and service elements of the job and illustrates the group’s commitment to develop the best technicians in the industry. More than 650 international representatives from the insurance, fleet and lease sectors and across Belron attend the event. June. | 03 | Belron strengthens its presence in North America by acquiring Diamond Glass Inc., the second largest VGRR company in the United States. August. | 04 | | 05 | Belron employees compete in the London Triathlon, and raise EUR 450,000 for MaAfrika Tikkun. The money will assist the disadvantaged people living in communities in South Africa, in particular the children affected by poverty and HIV/AIDS. September. | 06 | Carglass Greece opens a new distribution centre on the outskirts of Athens. | A research is published in collaboration with Henley Business School into the Belron approach to leadership development. October. | 07 | Belron comes first in Retail and Distribution category of European Supply Chain Excellence Awards. | 08 | Highest ever customer satisfaction scores achieved across Belron. Surveys were carried out with over 700,000 customers during 2008. November. | 09 | Carglass Denmark acquires its main competitor Mobilglas, which has been in business for 25 years and provides a mobile-only service. Belron is now market leader in the country. December. | 10 | Customers in 26 countries around the world now able to book a vehicle glass repair or replacement online using the centrally developed E-business channel.

BELRON S.A.

Key events 2008.

36 |

ANNUAL REPORT 2008 | BELRON S.A.

The growth strategy delivers results. Current result before tax, group's share: EUR 108.6 million, up 11.3%, primarily due to sustained organic growth, despite a deteriorating economy and lower miles driven. Activities and results Overall, in contrast to the continuous growth over the recent years, the VGRR market declined slightly due to lower miles driven as a result of the spike of petrol prices and the poor economic environment. Belron sales grew by 8% to EUR 2,156.1 million consisting of 7% organic growth and 6% acquired growth offset by a currency translation impact of 5%, mainly due to the strength of the Euro against the US dollar and GB pound. Total repair and replacement jobs grew by 11% to 9.4 million. In Europe, after both acquisitions and currency translation, sales growth amounted to 5% which comprised growth of 9% offset by an adverse currency impact of 4% due to the weak GB pound. The sales growth was delivered through increased marketing activities and by maintaining close relationships with insurers and fleet partners. Outside Europe, after both acquisitions and currency translation, sales growth amounted to 13%. This included 15% from acquisitions, primarily in the US following the acquisition of Safelite Group, Inc. on 1 March 2007, and the Diamond Glass business on 30 June 2008. The Diamond Glass business has been fully integrated during the second half of 2008. Organic growth was 4% reflecting increased marketing activities and continued close relationships with insurers and fleet partners. There was an offsetting currency impact of 6% due to the weak US dollar.

The current operating result amounted to EUR 173.9 million (2007: EUR 156.5 million). The increase in operating result is largely attributed to sales increases across the portfolio of businesses together with operational efficiency gains. The investment in marketing costs and branch expansion in order to drive sales offset market declines as a result of lower miles driven. Unusual costs before tax amounted to EUR 7.7 million. These comprised restructuring costs associated with the recent US acquisition of EUR 9.9 million. A release of an onerous lease accrual of EUR 2.2 million relating to a vacant UK property was also made at year-end. Re-measurements include amortization of some intangibles resulting from recent acquisitions and changes in the fair value of derivatives. Net finance costs amounted to EUR 38.1 million (2007: EUR 37.5 million). Before re-measurements resulting from changes in the fair value of derivatives, current net finance costs increased from EUR 32.2 million in 2007 to EUR 33.6 million due to additional borrowings used to finance the Safelite and Diamond Glass purchases offset by improved working capital. Current result before tax, groupâ&#x20AC;&#x2122;s share, rose by 11.3% to EUR 108.6 million (2007: EUR 97.6 million).

Key developments Belron continued to pursue its successful strategy, delivering sales growth and increased profitability despite slight market declines in the majority of countries. The business continued to focus on delivering an outstanding and convenient service to every customer it serves. A common new website was rolled out across all countries in order to offer a more convenient service to customers who wish to access the business via the internet. The business continued to develop and roll out new tools and processes to ensure that the work it performs is to the highest standard. In addition, new logistics processes and measures were implemented, and new warehouses were established in Greece and Brazil, in order to enable the business to improve its speed of service through the availability of glass. The Belron Supply Chain team won the European Supply Chain Excellence Award in the retail and distribution category in recognition of it successes. There was an increase in marketing expenditure, primarily using the standardised successful radio advert which was broadcast in 15 countries. In addition, the business maintained its strong

ANNUAL REPORT 2008 | BELRON S.A. | 37

On 30 June 2008 Belron completed the purchase of Diamond Glass, headquartered in Kingston, Pennsylvania. Diamond Glass operated 216 branches across the US employing circa 1,600 staff. Diamond Glass filed for protection under Chapter 11 of the US Bankruptcy Code on 1st April this year and the business was put up for sale under a S363 process. The integration of the Diamond Glass business into the existing US business was successfully completed in the second half of the year.

Outlook 2009 The outlook for 2009 is for continued organic sales growth as Belron remains committed to delivering outstanding service to its customers, its insurance and fleet partners, and improving its operational efficiency.

Belronâ&#x20AC;&#x2122;s first TV commercial. For many years Belron has focused all its advertising efforts on one medium only â&#x20AC;&#x201C; radio. This has been very successful, but some countries felt the need to explore other advertising tools.

Television was identified as an additional medium to both extend the reach of the brand and to visually put across the message that a chip in a windscreen should be repaired before it becomes a crack and then needs to be replaced. A group of Belron marketing executives from a number of countries formed a global team and produced a television advertisement that was first screened as a test in the UK in April 2008. Due to the success of this test, further advertisements (identical in content to the UK advertisement but filmed with local Carglass staff) were produced and screened in Belgium,

France and The Netherlands later in the year. In all these countries the advertisement has proven to be successful and there are now plans to use television in appropriate markets this year.

ď&#x201A;š

BELRON S.A.

strategic relationships with insurance and fleet partners through a continued focus on quality of service and reducing claims costs.

38 |

ANNUAL REPORT 2008 | BELRON S.A.

Working towards a sustainable futureâ&#x20AC;Ś Corporate social responsability has always been integral to Belron with the company having a demonstrable history of fund raising and social upliftment.

Our products When vehicle glass breaks a waste product is instantly generated. Belronâ&#x20AC;&#x2122;s repair service helps to minimise the amount of broken windscreens by repairing glass chips before the screen breaks thus reducing waste and conserving the natural resources required to produce new screens. In 2008 over 2 million windscreens across the world were repaired, up 15% from 2007. Furthermore, in order to ensure that glass waste is responsibly managed, Belron has assessed the lifecycle of both its repair and replacement products in order to better understand their respective environmental impacts and identify areas of improvement. One of the areas identified is glass waste from replacements. Glass is disposed of on behalf of the customer in order to ensure appropriate disposal methods are observed and where possible the glass is recycled. Among the products produced from its recycled vehicle glass

In recent years, Belron has placed increasing focus on reducing the negative environmental impacts of its business through firstly repairing rather than replacing windscreens and then driving efficiencies and eliminating waste. Unavoidable waste is responsibly managed and the processes are regularly scrutinised through its continuous improve-

ment programme. Belron has a caring organisational culture strongly committed to improving the quality of life in communities around the world. All its business units are involved in social initiatives, whether on a local, national or global level.

ANNUAL REPORT 2008 | BELRON S.A. | 39

is loft insulation – a product which further contributes to the environmental performance of the buildings where it is used - and pipe bedding. Moving forward, Belron plans to expand glass recycling into as many business units as possible and maximise the amount of recycled glass. Our environment

During 2008, Belron has implemented a number of initiatives aimed at fully understanding and quantifying its impacts on the environment and has already made significant progress. The appointment of a dedicated central CSR team has ensured that it is now focussed and is driving the environmental agenda across the group. Using 2007 data, it has developed and trialled a process for gathering environmental information, including CO2 emissions and waste. This process will be repeated using 2008 data to provide a baseline to measure and manage reduction over the coming years. Belron knows that its largest source of emissions globally comes from its fleet. As a result it has been investigating a variety of options at both global and local levels. These options such as efficient route planning and driver training not only help to reduce its own carbon footprint but by offering a more efficient mobile service will help to reduce total emissions from the customer VGRR process.

Within its own administrative processes Belron is actively seeking opportunities to eliminate waste and reduce the resource dependency in its branches and HQs. This is being addressed through improved facilities and encouraging sustainable employee behaviour. Our communities In 2008 Belron once again demonstrated its commitment to playing its part in improving the lives in the communities in which it operates. Belron’s business units positively engaged in their local community supporting social issues such as crime prevention and participating in local sporting, educational or cultural initiatives. The Brazil business supported ADD (“Associação Desportiva para Deficientes”), which is a non profitable institution providing physical development for people with special needs, and particularly their children’s basketball team. They have also introduced a Winter Warmer Campaign which is an employee’s initiative for donating clothes to poorer people in the region. Autoglass has continued to support the local community through sponsorship within all regions within the UK, aiding local projects which employees feel are important. They have continued to support the People’s charity and Children’s Hospices UK by holding fundraising events. Belron’s Australian employees opted to support the Star Light Children’s Foundation in addition to entering Team O’Brien in the Sydney running festival in September where employees, friends and family took part and raised money for the Global charity MaAfrika Tikkun.

BELRON S.A.

Belron knows that one of its most important environmental impacts is CO2 emissions. Belron takes its responsibility for this very seriously and is committed to minimising its impact.

At a global level, Belron employees from across the world entered the London Triathlon and 2008 saw nearly 600 Belron employees from 13 business units take part. Not only does this event create a powerful team experience; it also raised a considerable amount of money for the charity MaAfrika Tikkun. This year Belron invited three young people from the townships in South Africa, who had never ventured out of the country nor flown on an aeroplane, to take part in the event and join the Belron Team. Thanks to Belron, one of the youth leaders Daniel has great hopes to win a “big race” one day. He has also been inspired to study IT in 2009. The total amount of money raised was over EUR 450,000 for MaAfrika Tikkun whose emphasis for 2008 was to continue to focus on training care givers supporting the community. A large amount of the money raised will go to a new Health care and Development Centre in the township of Alexandra for 200 orphans.

40 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

s.a. Dâ&#x20AC;&#x2122;Ieteren n.v.

Consolidated Financial Statements 2008

ANNUAL REPORT 2008 | Consolidated Financial Statements | 41

s.a. D’Ieteren n.v. Consolidated Financial Statements 2008

42 CONSOLIDATED INCOME STATEMENT 43 CONSOLIDATED BALANCE SHEET 44 CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 45 CONSOLIDATED CASH FLOW STATEMENT 46 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 46 Note 1: General Information 46 Note 2: Accounting Policies 52 Note 3: Segment Information 56 Note 4: Sales 57 Note 5: Operating Result 58 Note 6: Net Finance Costs 58 Note 7: Entities Accounted for Using the Equity Method 59 Note 8: Tax Expense 60 Note 9: Unusual Items and Re-Measurements 63 Note 10: Earnings per Share 64 Note 11: Goodwill 65 Note 12: Business Combinations 67 Note 13: Other Intangible Assets 69 Note 14: Vehicles 70 Note 15: Other Property, Plant and Equipment 71 Note 16: Investment Property 71 Note 17: Available-for-Sale Financial Assets 71 Note 18: Derivative Hedging Instruments 73 Note 19: Derivatives Held for Trading 74 Note 20: Long-Term Employee Benefit Assets and Obligations 77 Note 21: Deferred Taxes

78 Note 22: Other Non-Current Receivables 78 Note 23: Non-Current Assets Classified as Held for Sale 79 Note 24: Inventories 79 Note 25: Other Financial Assets 79 Note 26: Current Tax Assets and Liabilities 79 Note 27: Trade and Other Receivables 80 Note 28: Cash and Cash Equivalents 81 Note 29: Equity 83 Note 30: Provisions 84 Note 31: Borrowings 87 Note 32: Net Debt 87 Note 33: Put Options Granted to Minority Shareholders 88 Note 34: Other Non-Current Payables 88 Note 35: Trade and Other Current Payables 88 Note 36: Employee Benefit Expense 89 Note 37: Share-Based Payments 90 Note 38: Financial Risk Management 92 Note 39: Contingencies and Commitments 93 Note 40: Related Party Transactions 94 Note 41: Discontinued Operations 95 Note 42: List of Subsidiaries, Associates and Joint Ventures 96 Note 43: Exchange Rates 96 Note 44: Subsequent Events 97 Note 45: Auditor’s Report 98 ABRIDGED STATUTORY FINANCIAL STATEMENTS 2008

FINANCIAL REPORT

CONTENTS Contents

42 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

Consolidated Income Statement Year ended 31 December

Consolidated Income Statement Year ended 31 December EUR million

Notes

2008

2007

Current

Unusual

(1)

items and

items

Total

Current

Unusual

(1)

items and

items

re-measurements Sales

Cost of sales Gross margin Commercial and administrative expenses Other operating income Other operating expenses

Total

re-measu-

(1)

rements

(1)

6,146.8

5,967.1

-4,243.3

-7.4

-4,250.7

-4,126.1

-0.8

-4,126.9

1,903.5

-7.4

1,896.1

1,841.0

-0.8

1,840.2

-1,518.7

3.7

-1,515.0

-1,472.5

3.1

-1,469.4

3.3

2.5

5.8

1.8

3.3

5.1

-13.0

-282.1

-295.1

-8.6

-50.5

-59.1

Operating result

375.1

-283.3

91.8

361.7

-44.9

316.8

Net finance costs

-136.6

-21.5

-158.1

-125.6

-7.5

-133.1

Result before tax

238.5

-304.8

-66.3

236.1

-52.4

183.7

Share of result of entities accounted for using the equity method

1.1

1.3

Tax expense

Result from continuing operations Discontinued operations

RESULT FOR THE PERIOD

-46.7

82.4

35.7

-41.0

8.9

-32.1

192.9

-222.4

-29.5

196.4

-43.5

152.9

1.3

3.5

-15.9

-12.4

192.9

-221.1

-28.2

199.9

-59.4

140.5

159.0

-126.8

32.2

166.3

-38.6

127.7

33.9

-94.3

-60.4

33.6

-20.8

12.8

Result attributable to: Equity holders of the Parent

9/29

Minority interest Earnings per share for result for the period attributable to equity holders of the Parent Basic (EUR)

28.90

-23.04

5.86

30.16

-6.99

23.17

Diluted (EUR)

28.86

-23.00

5.86

30.02

-6.96

23.06

Earnings per share for result from continuing operations attributable to equity holders of the Parent Basic (EUR)

28.90

-23.18

5.72

29.79

-5.28

24.51

Diluted (EUR)

28.86

-23.15

5.71

29.65

-5.26

24.39

(1) See summary of significant accounting policies in note 2 and unusual items and re-measurements in note 9.

ANNUAL REPORT 2008 | Consolidated Financial Statements | 43

Consolidated Balance Sheet At 31 December

Notes

2008

2007

Goodwill

852.0

786.6

Other intangible assets

804.2

1,055.3

Vehicles

781.4

761.3

Other property, plant and equipment

385.6

387.1

Investment property

6.8

6.1

14.8

12.7

Available-for-sale financial assets

1.0

1.2

Derivative hedging instruments

4.6

Derivatives held for trading

0.7

6.8

Long-term employee benefit assets

0.5

1.9

Deferred tax assets

81.0

78.1

Other receivables

2.5

2.1

2,930.5

3,103.8

Equity accounted investments

Non-current assets Non-current assets classified as held for sale

10.3

7.5

Inventories

519.9

483.6

Derivative hedging instruments

7.7

Derivatives held for trading

20.6

10.2

Other financial assets

53.3

47.5

Current tax assets

7.9

17.4

Trade and other receivables

1,717.7

1,740.2

Cash and cash equivalents

97.9

80.5

Current assets

2,435.3

2,386.9

TOTAL ASSETS

5,365.8

5,490.7

Capital and reserves attributable to equity holders

896.1

917.7

Minority interest

134.7

222.5

Equity

1,030.8

1,140.2

Long-term employee benefit obligations

106.9

114.1

Other provisions

189.2

139.4

Derivative hedging instruments

51.5

52.9

31/32

1,873.2

1,745.8

Borrowings Derivatives held for trading

0.6

0.3

Put options granted to minority shareholders

312.1

260.6

Other payables

3.7

10.6

Deferred tax liabilities

170.8

241.3

Non-current liabilities

2,708.0

2,565.0

Provisions

42.8

57.4

Derivative hedging instruments

1.8

0.5

31/32

443.7

416.2

Derivatives held for trading

47.9

14.3

Current tax liabilities

69.6

87.2

Trade and other payables

1,021.2

1,209.9

Current liabilities

1,627.0

1,785.5

TOTAL EQUITY AND LIABILITIES

5,365.8

5,490.7

Borrowings

FINANCIAL REPORT

EUR million

44 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

Consolidated Statement of Recognised Income and Expense Consolidated Statement of Recognised Income and Expense Year ended 31 December Year ended 31 December EUR million

Notes

Result for the period

2008

2007

-28.2

140.5

-21.3

39.7

-42.0

-5.8

Income and expense recognised directly in equity Actuarial gains (losses) on employee benefit obligations

Translation differences Fair value of available-for-sale financial instruments

-0.1

Cash flow hedges: fair value gains (losses) in equity

-1.8

-5.8

Cash flow hedges: transferred to income statement Share-based payments Tax on items taken directly to equity Subtotal Total recognised income and expense for the period being: attributable to equity holders of the Parent attributable to minority interest

2.2

9.9

-1.5

1.1

13.2

-11.1

-51.3

28.0

-79.5

168.5

-3.6

147.6

-75.9

20.9

ANNUAL REPORT 2008 | Consolidated Financial Statements | 45

Consolidated Cash Flow Statement Consolidated Cash Flow Statement Year ended 31 December Year ended 31 December EUR million

Notes

2008

2007

91.8

316.8

Operating profit from continuing operations Operating profit from discontinued operations Depreciation of vehicles for rent-a-car and operating lease activities

1.3

-8.0

182.0

188.5

Depreciation of other items

78.0

75.0

Amortisation of Avis licence rights

21.7

Amortisation of other intangible assets Impairment losses on goodwill and other non-current assets Non-cash operating lease charge on buy-back agreements

22.6

17.8

9/15/41

226.1

11.1

192.3

185.8

Other non-cash items Retirement benefit obligations Other cash items

64.1

31.9

-13.8

-22.7

-5.6

-3.3

Net payments with respect to vehicles purchased under buy-back agreements

-289.4

-335.9

Change in net working capital

-119.9

-89.3

451.2

389.4

Cash generated from operations Tax paid

-32.9

-39.7

Net cash from operating activities

418.3

349.7

-703.0

-702.3

477.8

528.3

-89.8

-92.9

Cash flows from investing activities Purchase of vehicles for rent-a-car and operating lease activities Sale of vehicles for rent-a-car and operating lease activities

(1)

Purchase of other items Sale of other items Net capital expenditure

5.6

11.7

-309.4

-255.2

Acquisition of equity instruments (net of cash acquired)

9/12

-46.4

-208.3

Disposal of equity instruments (net of cash disposed of)

19.8

Net investment in other financial assets

-6.7

0.6

-362.5

-443.1

Net cash from investing activities Cash flows from financing activities Net acquisition of treasury shares

Net capital element of finance lease payments Net change in other borrowings Net interest paid Dividends paid by Parent

Dividends paid by subsidiaries Net cash from financing activities TOTAL CASH FLOW FOR THE PERIOD

-1.5

-7.3

-70.9

-68.5

197.9

245.9

-137.8

-128.0

-16.5

-14.6

-3.0

-11.0

-31.8

16.5

24.0

-76.9

91.3

Reconciliation with balance sheet Cash at beginning of period

54.6

Cash equivalents at beginning of period

25.9

64.6

Cash and cash equivalents at beginning of period

80.5

155.9

Total cash flow for the period

24.0

-76.9

Translation differences

-6.6

1.5

97.9

80.5

Cash and cash equivalents at end of period (1) Excluding vehicles held under buy-back agreements.

FINANCIAL REPORT

Cash flows from operating activities

46 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

Notes to the Consolidated Financial Statements Notes to the Consolidated Financial Statements NOTE 1: GENERAL INFORMATION

s.a. D’Ieteren n.v. (the Company or the Parent) is a public company incorporated and domiciled in Belgium, whose controlling shareholders are listed in note 29. The address of the Company’s registered office is: Rue du Mail 50 B-1050 Brussels The Company and its subsidiaries (together the Group) form an international group, active in three sectors of services to the motorist: - Automobile distribution in Belgium of Volkswagen, Audi, Seat, Skoda, Bentley, Lamborghini, Bugatti, Porsche, and Yamaha; - Short-term car rental in Europe, Africa, the Middle East and Asia through Avis Europe plc and the Avis and Budget brands; - Vehicle glass repair and replacement in Europe, North and South America, Australia and New Zealand through Belron s.a. and notably its CARGLASS®, AUTOGLASS®, SAFELITE® AUTO GLASS, SPEEDY®, LEBEAU®, SMITH&SMITH® and O’BRIEN brands. The Group is present in 120 countries on 5 continents. The Company is listed on Euronext Brussels. These consolidated financial statements have been approved for issue by the Board of Directors on 5 March 2009. The owners of the Company have the power to amend the consolidated financial statements after issue at the Annual General Meeting of Shareholders, which will be held on 28 May 2009.

NOTE 2: ACCOUNTING POLICIES Note 2.1: Basis of Preparation These 2008 consolidated financial statements are for the 12 months ended 31 December 2008. They have been prepared in accordance with the International Financial Reporting Standards (“IFRS”) and the related International Financial Reporting Interpretations Committee (“IFRIC”) interpretations issued and effective, or issued and early adopted as at 31 December 2008 which have been adopted by the European Union (“EU”). They correspond to the standards and interpretations issued by the International Accounting Standards Board (“IASB”) and effective as at 31 December 2008. The policies set out below have been consistently applied to all the periods presented. The amendments of IAS 39 “Financial Instruments: Recognition and Measurement” and IFRS 7 “Financial Instruments: Disclosures – Reclassification of Financial Assets”, published by the IASB on 13 October 2008 and effective on or after 1 July 2008, did not affect the classification of any of the Group’s financial assets. These consolidated financial statements have been prepared under the historical cost convention, except for available-for-sale financial assets and derivative instruments that have been measured at fair value. These consolidated financial statements are prepared on an accruals basis and on the assumption that the Group is a going concern and will continue in operation for the foreseeable future. The preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of revenue, expenses, assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. If in the future such estimates and assumptions, which are based on management’s best judgement at the date of the financial statements, deviate from the actual circumstances, the original estimates and assumptions will be modified as appropriate in the period in which the circumstances change. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in the relevant notes. A summary of significant accounting policies is provided in note 2.2.

ANNUAL REPORT 2008 | Consolidated Financial Statements | 47

NOTE 2: ACCOUNTING POLICIES (continued) The standards, amendments and interpretations to existing standards that have been published and are mandatory for the Group’s accounting periods beginning on or after 1 January 2009 or later periods but which the Group has not early adopted, are: - IFRS 2 (Amendment) “Share-based payment – Vesting Conditions and Cancellations” (effective 1 January 2009); - IFRS 3 (Revised) “Business Combinations” and IAS 27 (Revised) “Consolidated and Separate Financial Statements”. This completes the second phase of IASB’s project on business combinations. The new requirements are applicable to business combinations for which the acquisition date is on or after the beginning of the first annual period beginning on or after 1 July 2009 and are subject to endorsement by the EU; - IFRS 8 “Operating Segments” (effective 1 January 2009); - IAS 1 (Revised) “Presentation of Financial Statements” (effective 1 January 2009); - IAS 23 (Revised) “Borrowing Costs” (effective 1 January 2009); - IFRIC 13 “Customer Loyalty Programmes” (effective 1 January 2009); - IFRIC 14 “IAS 19 – The limit on a defined benefit asset, minimum founding requirements and their interaction” (effective 1 January 2009). The Group is currently assessing the impact of the new standards, interpretations and amendments listed above.

Principles of Consolidation Subsidiary undertakings Subsidiary undertakings, which are those entities in which the Group has, directly or indirectly, an interest of more than half of the voting rights or otherwise has the power to exercise control over the operations are consolidated. Subsidiaries are consolidated from the date that control is transferred to the Group, and are no longer consolidated from the date that control ceases. All intercompany transactions, balances and unrealised gains on transactions between group companies are eliminated upon consolidation. Associated undertakings Investments in associated undertakings are accounted for using the equity method. These are undertakings over which the Group generally has between 20% and 50% of the voting rights, or over which the Group has significant influence, but which it does not control. Unrealised gains on transactions between the Group and its associated undertakings are eliminated to the extent of the Group’s interest in the associated undertakings; unrealised losses are also eliminated. The Group’s investment in associated undertakings includes goodwill on acquisition. Equity accounting is discontinued when the carrying amount of the investment in an associated undertaking reaches zero, unless the Group has incurred obligations or guaranteed obligations in respect of the associated undertaking. Interests in joint ventures Interests in jointly controlled entities are recognised using the equity method. The above principles regarding associated undertakings are also applicable to joint ventures. Foreign Currency Translation The Group consolidation is prepared in euro. Income statements of foreign operations are translated into euro at the weighted average exchange rates for the period and balance sheets are translated into euro at the exchange rate ruling on the balance sheet date. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as local currency assets and liabilities of the foreign entity and are translated at the closing rate. Foreign currency transactions are accounted for at the exchange rate prevailing at the date of the transaction. Gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement. Exchange movements arising from the retranslation at closing rates of the Group’s net investment in subsidiaries, joint ventures and associates are taken to the translation reserve. The Group’s net investment includes the Group’s share of net assets of subsidiaries, joint ventures and associates, and certain inter-company loans. The net investment definition includes loans between “sister” companies and certain inter-company items denominated in any currency. Other exchange movements are taken to the income statement. Where the Group hedges net investments in foreign operations, the gains and losses relating to the effective portion of the hedging instrument are recognised in the translation reserve in equity. The gain or loss relating to any ineffective portion is recognised in the income statement. Gains and losses accumulated in equity are included in the income statement when the foreign operation is disposed of.

FINANCIAL REPORT

Note 2.2: Summary of Significant Accounting Policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. The estimates of amounts reported in the interim financial reporting have not been changed significantly during the final interim period of the financial year.

48 |

RAPPORT REPORT ANNUAL ANNUEL2008 2008| |Consolidated ÉTATS FINANCIERS Financial CONSOLIDÉS Statements

NOTE 2: ACCOUNTING POLICIES (continued) Goodwill Business combinations are accounted for by applying the purchase method. The excess of the cost of the business combination over the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised in accordance with IFRS 3 constitutes goodwill, and is recognised as an asset. In case this excess is negative, it is recognised immediately in the income statement. After initial recognition, goodwill is measured at cost less any accumulated impairment losses. Intangible Assets An item of intangible assets is valued at its cost less any accumulated amortisation and any accumulated impairment losses. Generally, costs associated with developing or maintaining computer software programmes are recognised as an expense as incurred. However, costs that are directly associated with identifiable and unique software products controlled by the Group which have probable economic benefits exceeding the cost beyond one year, are recognised as intangible assets. Intangible assets with a finite useful life are amortised over their useful life in accordance with the following methods: - Computer software programmes: straight-line method over 2 to 7 years. - Avis licence rights: straight-line method until 2036 (the licenses being held until that year). - Safelite’s customer contracts: straight-line method over 10 years. - Diamond’s customer contracts: straight-line method over 5 years. - AUTO GLASS SPECIALISTS® and ELITE AUTO GLASS™ brands: straight-line method over 3 years (as from 1 July 2008). - DIAMOND TRIUMPH GLASS™ brand: straight-line method over 18 months (as from 1 July 2008). For the brands AUTO GLASS SPECIALISTS® and ELITE AUTO GLASS™, acquired in 2005, as well as the brand DIAMOND TRIUMPH GLASS™ acquired in 2008, there is now a limit to the period over which these assets are expected to generate net cash inflows and accordingly are amortised over their remaining useful lives. The brands CARGLASS® and AUTOGLASS®, acquired in 1999, as well as GLASPRO™, SPEEDY GLASS ®, APPLE AUTO GLASS® and WINDSHIELD PROS™ acquired in 2005, as well as SAFELITE® AUTO GLASS acquired in 2007, have indefinite useful lives, since there is no foreseeable limit to the period over which these assets are expected to generate net cash inflows for the Group. They are therefore not amortised but tested for impairment annually. For any intangible asset with a finite or indefinite useful life, where an indication of impairment exists, its carrying amount is assessed and written down immediately to its recoverable amount. Research and Development Expenditure on research (or on the research phase of an internal project) is recognised as an expense when it is incurred. An intangible asset arising from development (or from the development phase of an internal project) is recognised if, and only if, all of the following are demonstrated: (a) the technical feasibility of completing the intangible asset so that it will be available for use or sale; (b) the Group has the intention to complete the intangible asset and use or sell it; (c) the Group has ability to use or sell the intangible asset; (d) how the intangible asset will generate probable future economic benefits; (e) the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; (f) the Group has the ability to measure reliably the expenditure attributable to the intangible asset during its development. Property, Plant and Equipment An item of property, plant and equipment is initially measured at cost. This cost comprises its purchase price (including import duties and non- refundable purchase taxes, after deducting trade discounts and rebates), plus any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating. If applicable, the initial estimate of the cost of dismantling and removing the item and restoring the site is also included in the cost of the item. After initial recognition, the item is carried at its cost less any accumulated depreciation and any accumulated impairment losses. The depreciable amount of the item is allocated according to the straight-line method over its useful life. The main depreciation periods are the following: - Buildings: 40 to 50 years; - Plant and equipment: 3 to 15 years; - IT equipment: 2 to 7 years; - Leased assets: depending on the length of the lease.

ANNUAL REPORT 2008 | Consolidated Financial Statements | 49

NOTE 2: ACCOUNTING POLICIES (continued) Straight-line depreciation on the vehicle fleet is based on the acquisition costs of the vehicles, estimates of their future residual values, and expected holding periods. Where the carrying amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount. Leases Operating leases for which the Group is the lessor Assets leased out under operating leases (other than vehicles sold under buy-back agreements) are included in property, plant and equipment in the balance sheet. They are depreciated over their expected useful lives. Rental income is recognised on a straightline basis over the lease term.

Finance leases for which the Group is the lessee Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property or the present value of the minimum lease payments. Each lease payment is allocated between the liability and the finance charge so as to achieve a constant rate of return on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of the finance cost is charged to the income statement over the lease period. The leased assets are depreciated over their expected useful lives on a basis consistent with similar owned property, plant and equipment. If there is no reasonable certainty that ownership will be acquired by the end of the lease term, the asset is depreciated over the shorter of the lease term and its useful life. Vehicles sold under buy-back agreements Vehicles sold under buy-back agreements are accounted for as operating leases (lessor accounting), and are presented in the balance sheet under inventories. The difference between the sale price and the repurchase price (buy-back obligation) is considered as deferred income, while buy-back obligations are recognised in trade payables. Vehicles purchased under buy-back agreements Vehicles purchased under buy-back agreements are not recognised as assets since these arrangements are accounted for as operating leases (lessee accounting). The difference between the purchase price and the resale price (buy-back obligation of the supplier) is considered as deferred expense, while a trade receivable is recognised for the resale price. Investment Properties Investment properties are measured at cost less accumulated depreciation and accumulated impairment losses. Inventories Inventories are measured at the lower of cost and net realisable value. The cost of inventories comprises all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their location and condition at the balance sheet date. Items that are not interchangeable, like new vehicles and second-hand vehicles, are valued using specific identification of their individual costs. Other items are valued using the first in, first out or weighted average cost formula. When inventories are used, the carrying amount of those inventories are recognised as an expense in the period in which the related revenue is recognised. Losses and write-downs of inventories are recognised in the period in which they occur. Reversal of a write-down is recognised as a credit to cost of sales in the period in which the reversal occurs. Cash and Cash Equivalents Cash comprises cash on hand and demand deposits. Cash equivalents are short-term (maximum 3 months), highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificantrisk of changes in value. Equity Where the Company (or its subsidiaries) reacquires its own equity instruments, those instruments are deducted from equity as treasury shares. Where such equity instruments are subsequently sold, any consideration received is recognised in equity. Dividends to holders of equity instruments proposed or declared after the balance sheet date are not recognised as a liability at the balance sheet date; they are presented in equity.

FINANCIAL REPORT

Operating leases for which the Group is the lessee Lease payments under operating leases are recognised as expenses in the income statement on a straight-line basis over the lease term.

50 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 2: ACCOUNTING POLICIES (continued) Provisions A provision is recognised when: - there is a present obligation (legal or constructive) as a result of a past event; - it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and - a reliable estimate can be made of the amount of the obligation. If these conditions are not met, no provision is recognised. Post-employment Employee Benefits The Group has various defined benefit pension plans and defined contribution pension plans. Most of these plans are funded schemes, i.e. they are financed through a pension fund or an external insurance policy. The minimum funding level of these schemes is defined by national rules. Payments to defined contribution pension plans are charged as an expense as they fall due. The Group’s commitments under defined benefit pension plans, and the related costs, are valued using the “projected unit credit method”, with actuarial valuations being carried out at least on a yearly basis. Actuarial gains and losses are recognised in full in the period in which they occur. They are recognised outside the income statement, and are presented in the statement of recognised income and expense. Past service cost is recognised immediately to the extent that the benefits have already vested, and otherwise is amortised on a straight-line basis over the average period until the benefits become vested. The long-term employee benefit obligation recognised in the balance sheet represents the present value of the defined benefit obligations as reduced by the fair value of scheme assets. Any asset resulting from this calculation is limited to past service cost, plus the present value of any refunds and reductions in future contributions to the plan. Financial Instruments Excluding Derivatives IAS 32 and 39 are applied to measure financial instruments: (a) Available-for-sale financial assets are measured at fair value through equity. Impairment losses are recorded in the income statement. (b) The carrying amount of treasury shares is deducted from equity. (c) Trade and other receivables are measured at their amortised cost using the effective interest method, as reduced by appropriate allowances for irrecoverable amounts. (d) Financial assets held for trading are measured at fair value. (e) Trade and other payables, as well as borrowings, are measured at amortised cost using the effective interest method. Financial Instruments – Derivatives Derivatives are used as hedges in the financing and financial risk management of the Group. IAS 32 and IAS 39 are applied. The Group’s activities expose it to the financial risks of changes in foreign currency exchange rates and interest rates. The Group uses foreign exchange forward contracts, interest rate swaps, cross currency interest rate swaps, and options to hedge these exposures. The Group does not use derivatives for speculative purposes. However, certain financial derivative transactions, while constituting effective economic hedges, do not qualify for hedge accounting under the specific rules in IAS 39. Derivatives are recorded initially at fair value. Unless accounted for as hedges, they are classified as held for trading and are subsequently measured at fair value. Changes in fair value of derivatives that do not qualify for hedge accounting are recognised in the income statement as they arise. Changes in the fair value of derivative financial instruments that are designated and effective as hedges of future cash flows are recognised directly in equity and any ineffective portion is recognised immediately in the income statement. If the cash flow hedge is a firm commitment or the forecasted transaction results in the recognition of an asset or a liability, then, at the time the asset or liability is recognised, the associated gains or losses on the derivative that had previously been recognised in equity are included in the initial measurement of the asset or liability. For hedges that do not result in the recognition of an asset or a liability, amounts deferred in equity are recognised in the income statement in the same period in which the hedged item affects net profit or loss. For an effective hedge of an exposure to changes in the fair value, the hedged item is adjusted for changes in fair value attributable to the risk being hedged with a corresponding entry in profit or loss. Gains or losses from re-measuring the derivative, or for nonderivatives the foreign currency component of its carrying amount, are recognised in profit or loss. Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, or exercised, or no longer qualifies for hedge accounting. At that time, any cumulative gain or loss recognised in equity is transferred to profit or loss in accordance with IAS 39. Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of the host contracts, and the host contracts are not carried at fair value with unrealised gains or losses reported in income statement.

ANNUAL REPORT 2008 | Consolidated Financial Statements | 51

NOTE 2: ACCOUNTING POLICIES (continued)

Revenue Recognition Revenue from the sale of goods is recognised when all the following conditions have been satisfied: (a) the Group has transferred to the buyer the significant risks and rewards of ownership of the goods; (b) the Group retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold; (c) the amount of revenue can be measured reliably; (d) it is probable that the economic benefits associated with the transaction will flow to the Group; and (e) the cost incurred or to be incurred in respect of transaction can be measured reliably. When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction is recognised by reference to the stage of completion of the transaction at the balance sheet date. The outcome of a transaction can be estimated reliably when all the following conditions are satisfied: (a) the amount of revenue can be measured reliably; (b) it is probable that the economic benefits associated with the transaction will flow to the Group; (c) the stage of completion of the transaction at the balance sheet date can be measured reliably; and (d) the cost incurred for the transaction and the costs to complete the transaction can be measured reliably. Interest is recognised on a time proportion basis that takes into account the effective yield on the asset. Royalties are recognised on an accrual basis in accordance with the substance of the relevant agreement. Dividends are recognised when the shareholder’s right to receive payment has been established. In the income statement, sales of goods, rendering of services and royalties are presented under the heading “sales”. Interest income is presented under the heading “net finance costs”. Share-Based Payments Share-based payments are exclusively made in connection with employee stock option plans (“ESOP”). For equity-settled ESOP, IFRS 2 is not applied to shares, share options or other equity instruments that were granted before or on 7 November 2002 and which had not vested at 1 January 2004. Equity-settled ESOP granted after that date are accounted for in accordance with IFRS 2, such that their cost is recognised in the income statement over the related performance period. All cash-settled ESOP (i.e. granted before, on, or after 7 November 2002) are recognised as liabilities, and their cost is recognised in the income statement over the related vesting period. Borrowing Costs Borrowing costs are recognised as an expense in the period in which they are incurred. Government Grants Government grants related to assets are presented in liabilities as deferred income, and amortised over the useful life of the related assets. Income Taxes Current taxes relating to current and prior periods are, to the extent unpaid, recognised as a liability. If the amount already paid in respect of current and prior periods exceeds the amount due for those periods, the excess is recognised as an asset. The benefit relating to a tax loss that can be carried back to recover current tax of a previous period is recognised as an asset. Deferred taxes are provided in full using the balance sheet liability method, on temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred taxes are not calculated on the following temporary differences: (i) the initial recognition of goodwill and (ii) the initial recognition of assets and liabilities that affects neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the unused tax losses and credits can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

FINANCIAL REPORT

Put Options Granted to Minority Shareholders The Group is committed to acquiring the minority shareholdings owned by third parties in Belron, should these third parties wish to exercise their put options. IAS 32 requires that the exercise price of such options granted to minority interest be reflected as a financial liability in the consolidated balance sheet. The goodwill is adjusted at period end to reflect the change in the exercise price of the options and the carrying value of minority interest to which they relate. This treatment reflects the economic substance of the transaction.

52 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 2: ACCOUNTING POLICIES (continued) Unusual Items and Re-measurements Each line of the income statement, and each subtotal of the segment income statement, is broken down in order to provide information on the current result and on unusual items and re-measurements. Unusual items and re-measurements comprise the following items: (a) Recognised fair value gains and losses on financial instruments, excluding the accrued cash flows that occur under the Group’s hedging arrangements, where hedge accounting is unable to be applied under IAS 39. (b) Exchange gains and losses arising upon the translation of foreign currency borrowings at the closing rate. (c) Impairment of goodwill and other non-current assets. (d) Amortisation of intangible assets with finite useful lives recognised in the framework of the allocation as defined by IFRS 3 of the cost of a business combination. (e) Other unusual items. They are material items that derive from events or transactions that fall within the ordinary activities of the Group, and which individually or, if of a similar type, in aggregate, are separately disclosed by virtue of their size or incidence. All other items are recognised as part of the current result.

NOTE 3: SEGMENT INFORMATION Note 3.1: Basis of Segmentation The Group’s primary segment reporting format is by business segment. Reportable business segments are Automobile Distribution, Car Rental and Vehicle Glass. The Automobile Distribution segment includes the automobile distribution activities (see note 1) as well as corporate activities. The Car Rental segment comprises Avis Europe plc and its subsidiaries, joint ventures and associates (see note 1). The Vehicle Glass segment comprises Belron s.a. and its subsidiaries (see note 1). This segmentation is consistent with the Group’s organisational and internal reporting structure.

ANNUAL REPORT 2008 | Consolidated Financial Statements | 53

NOTE 3: SEGMENT INFORMATION (continued) Note 3.2: Segment Income Statement - Business Segments (Year ended 31 December) Notes

2008 Automobile

Car Rental

2007

Vehicle Glass

Eliminations

Group

Distribution External sales

Inter-segment sales Segment sales

Automobile

Car Rental

Vehicle Glass

Eliminations

Group

Distribution

2,679.4

1,311.3

2,156.1

6,146.8

2,642.4

1,324.7

2,000.0

6.5

2.5

3.1

-12.1

4.1

2.1

-8.3

5,967.1 -

2,685.9

1,313.8

2,159.2

-12.1

6,146.8

2,646.5

1,326.8

2,002.1

-8.3

5,967.1

Operating result (being segment result)

88.5

-147.6

150.9

91.8

98.8

79.6

138.4

316.8

of which: current items

88.5

112.7

173.9

375.1

98.7

106.5

156.5

361.7

-260.3

-23.0

-283.3

0.1

-26.9

-18.1

-44.9

Net finance costs

-25.5

-94.5

-38.1

-158.1

-26.7

-68.9

-37.5

-133.1

Result before taxes

63.0

-242.1

112.8

-66.3

72.1

10.7

100.9

183.7

of which: current items

60.6

37.6

140.3

238.5

75.0

36.8

124.3

236.1

unusual items and re-measurements

2.4

-279.7

-27.5

-304.8

-2.9

-26.1

-23.4

-52.4

Share of result of entities accounted for using the equity method

0.7

0.4

1.1

0.5

0.8

1.3

Tax expense

unusual items and re-measurements

-5.0

59.4

-18.7

35.7

-9.1

-11.2

-11.8

-32.1

Result from continuing operations

58.7

-182.3

94.1

-29.5

63.5

0.3

89.1

152.9

of which: current items

59.3

21.8

111.8

192.9

65.4

26.2

104.8

196.4

-0.6

-204.1

-17.7

-222.4

-1.9

-25.9

-15.7

-43.5

unusual items and re-measurements Discontinued operations

1.3

-12.4

58.7

-181.0

94.1

-28.2

63.5

-12.1

89.1

140.5

58.7

-99.4

72.9

32.2

63.3

-7.0

71.4

127.7

59.3

13.0

86.7

159.0

65.2

17.7

83.4

166.3

-0.6

-112.4

-13.8

-126.8

-1.9

-24.7

-12.0

-38.6

-81.6

21.2

-60.4

0.2

-5.1

17.7

12.8

58.7

-181.0

94.1

-28.2

63.5

-12.1

89.1

140.5

RESULT FOR THE PERIOD Attributable to: Equity holders of the Parent of which: current items unusual items and re-measurements Minority interest RESULT FOR THE PERIOD

FINANCIAL REPORT

EUR million

54 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 3: SEGMENT INFORMATION (continued) Note 3.3: Segment Balance Sheet - Business Segments (At 31 December) EUR million

Goodwill Other intangible assets Vehicles Other property, plant and equipment Investment property Equity accounted investments Available-for-sale financial assets Derivative hedging instruments Derivatives held for trading Long-term employee benefit assets Deferred tax assets Other receivables Non-current assets Non-current assets classified as held for sale Inventories Derivative hedging instruments Derivatives held for trading Other financial assets Current tax assets Trade and other receivables Cash and cash equivalents Current assets TOTAL ASSETS of which: segment assets Capital and reserves attributable to equity holders Minority interest Equity Long-term employee benefit obligations Other provisions Derivative hedging instruments Borrowings Derivatives held for trading Put options granted to minority shareholders Other payables Deferred tax liabilities Non-current liabilities Provisions Derivative hedging instruments Borrowings Derivatives held for trading Current tax liabilities Trade and other payables Current liabilities TOTAL EQUITY AND LIABILITIES of which: segment liabilities

Notes

11 13 14 15 16 7 17 18 19 20 21 22 23 24 18 19 25 26 27 28

29 20 30 18 31/32 19 33 34 21 30 18 31/32 19 26 35

2008

2007

Automobile

Car

Vehicle

Distribution

Rental

Glass

2.6 0.2 2.8 394.8 340.4 441.0 140.5 71.7 6.8 2.6 12.2 0.5 0.4 0.7 3.7 31.7 1.1 501.0 952.7 10.3 352.4 6.9 0.7 12.1 8.5 36.3 5.7 2.0 152.2 1,351.7 1.2 52.1 559.9 1,432.2 1,060.9 2,384.9 998.8 2,276.6

849.2 406.6 173.4 0.1 0.5 45.6 1.4 1,476.8 160.6 7.0 17.0 0.2 213.8 44.6 443.2 1,920.0 1,805.5

896.1 1.5 133.2 897.6 133.2 6.3 70.9 30.2 25.6 51.5 489.2 863.8 312.1 17.0 146.5 854.8 1,158.3 33.8 1.8 134.0 278.0 18.5 19.6 3.7 24.4 156.9 539.2 313.1 896.8 2,065.5 2,188.3 193.4 669.5

29.7 133.4 520.2 0.6 3.7 7.3 694.9 9.0 31.7 9.8 41.5 325.1 417.1 1,112.0 500.9

Group

Automobile

Car Vehicle

Group

Distribution

Rental

Glass

852.0 804.2 781.4 385.6 6.8 14.8 1.0 0.7 0.5 81.0 2.5 2,930.5 10.3 519.9 7.7 20.6 53.3 7.9 1,717.7 97.9 2,435.3 5,365.8 5,080.9

2.6 2.7 312.6 140.1 6.1 1.9 0.5 1.7 1.5 469.7 0.4 322.9 4.4 24.4 3.3 136.7 1.9 494.0 963.7 925.6

0.3 636.7 448.7 78.0 10.8 0.6 4.6 5.6 49.5 1,234.8 7.1 7.7 3.8 5.4 3.0 1,391.8 60.9 1,479.7 2,714.5 2,570.3

783.7 415.9 169.0 0.1 1.2 1.9 26.9 0.6 1,399.3 153.0 2.0 17.7 11.1 211.7 17.7 413.2 1,812.5 1,735.8

786.6 1,055.3 761.3 387.1 6.1 12.7 1.2 4.6 6.8 1.9 78.1 2.1 3,103.8 7.5 483.6 10.2 47.5 17.4 1,740.2 80.5 2,386.9 5,490.7 5,231.7

896.1 134.7 1,030.8 106.9 189.2 51.5 1,873.2 0.6 312.1 3.7 170.8 2,708.0 42.8 1.8 443.7 47.9 69.6 1,021.2 1,627.0 5,365.8 1,363.8

917.7 1.7 919.4 6.6 31.8 477.8 260.6 12.5 789.3 31.9 11.3 3.7 223.8 270.7 1,979.4 262.2

220.8 220.8 97.5 22.3 52.9 730.2 228.8 1,131.7 45.1 0.5 304.3 1.5 33.3 670.3 1,055.0 2,407.5 835.2

10.0 85.3 537.8 0.3 10.6 644.0 12.3 80.0 1.5 50.2 315.8 459.8 1,103.8 434.0

917.7 222.5 1,140.2 114.1 139.4 52.9 1,745.8 0.3 260.6 10.6 241.3 2,565.0 57.4 0.5 416.2 14.3 87.2 1,209.9 1,785.5 5,490.7 1,531.4

Segment assets, as defined by IAS 14, consist of goodwill, other intangible assets, vehicles, other property, plant and equipment, investment property, long-term employee benefit assets, non-current assets classified as held for sale, inventories, trade receivables and other receivables. Segment liabilities, as defined by IAS 14, comprise long-term employee benefit obligations, provisions, trade payables and other payables.

ANNUAL REPORT 2008 | Consolidated Financial Statements | 55

NOTE 3: SEGMENT INFORMATION (continued) Note 3.4: Segment Cash Flow Statement - Business Segments (Year ended 31 December) Notes

Cash flows from operating activities Operating profit from continuing operations Operating profit from discontinued operations

2008

2007

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

88.5 -

-147.6 1.3

150.9 -

91.8 1.3

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

98.8 -

79.6 -8.0

138.4 -

316.8 -8.0

Depreciation of vehicles for rent-a-car and operating lease activities

66.9

115.1

182.0

56.2

132.3

188.5

Depreciation of other items Amortisation of Avis licence rights Amortisation of other intangible assets

5 9 5

12.1 0.2

17.1 21.7 3.4

48.8 19.0

78.0 21.7 22.6

11.6 -

20.5 21.7 4.9

42.9 12.9

75.0 21.7 17.8

9/15/41

226.1

11.1

192.3

185.8

1.1 -

5.9 -2.2 -5.6

57.1 -11.6 -

64.1 -13.8 -5.6

-7.8 0.2 -

-6.3 -3.9 -3.3

46.0 -19.0 -

31.9 -22.7 -3.3

-289.4

-335.9

-122.3 46.5 -4.6 41.9

4.5 142.6 -10.6 132.0

-2.1 262.1 -17.7 244.4

-119.9 451.2 -32.9 418.3

12.4 171.4 -11.1 160.3

-45.0 53.5 -9.9 43.6

-56.7 164.5 -18.7 145.8

-89.3 389.4 -39.7 349.7

-211.5

-491.5

-703.0

-209.8

-492.5

-702.3

122.1

355.7

477.8

117.5

410.8

528.3

-13.7 2.5 -100.6

-26.3 0.6 -161.5

-49.8 2.5 -47.3

-89.8 5.6 -309.4

-13.7 0.3 -105.7

-28.6 7.7 -102.6

-50.6 3.7 -46.9

-92.9 11.7 -255.2

9/12

-1.9

-44.5

-46.4

-34.8

-5.0

-168.5

-208.3

19.8

-11.6 -112.2

5.6 -157.8

-0.7 -92.5

-6.7 -362.5

1.5 -139.0

17.2 -70.6

-18.1 -233.5

0.6 -443.1

-1.5 112.6 -24.8 -16.5 -0.2 69.6

-53.5 147.9 -76.6 17.8

-17.4 -62.6 -36.4 -2.8 -119.2

-1.5 -70.9 197.9 -137.8 -16.5 -3.0 -31.8

-4.6 -6.4 -22.2 -14.6 26.9 -20.9

-2.7 -57.6 112.4 -80.4 -28.3

-10.9 139.9 -25.4 -37.9 65.7

-7.3 -68.5 245.9 -128.0 -14.6 -11.0 16.5

-0.7

-8.0

32.7

24.0

0.4

-55.3

-22.0

-76.9

1.9 -

35.0 25.9

17.7 -

54.6 25.9

1.5 -

52.0 64.6

37.8 -

91.3 64.6

1.9

60.9

17.7

80.5

1.5

116.6

37.8

155.9

-0.7 1.2

-8.0 -0.8 52.1

32.7 -5.8 44.6

24.0 -6.6 97.9

0.4 1.9

-55.3 -0.4 60.9

-22.0 1.9 17.7

-76.9 1.5 80.5

Impairment losses on goodwill and other non-current assets Non-cash operating lease charge on buy-back agreements Other non-cash items Retirement benefit obligations Other cash items Net payments with respect to vehicles purchased under buy-back agreements Change in net working capital Cash generated from operations Tax paid Net cash from operating activities Cash flows from investing activities Purchase of vehicles for rent-a-car and operating (1) lease activities Sale of vehicles for rent-a-car and operating (1) lease activities Purchase of other items Sale of other items Net capital expenditure Acquisition of equity instruments (net of cash acquired) Disposal of equity instruments (net of cash disposed of) Net investment in other financial assets Net cash from investing activities Cash flows from financing activities Net acquisition of treasury shares Net capital element of finance lease payments Net change in other borrowings Net interest paid Dividends paid by Parent Dividends paid by subsidiaries Net cash from financing activities TOTAL CASH FLOW FOR THE PERIOD Reconciliation with balance sheet Cash at beginning of period Cash equivalents at beginning of period Cash and cash equivalents at beginning of period Total cash flow for the period Translation differences Cash and cash equivalents at end of period

(1) Excluding vehicles held under buy-back agreements.

28 28

FINANCIAL REPORT

EUR million

56 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 3: SEGMENT INFORMATION (continued) Note 3.5: Other Segment Information - Business Segments (Year ended 31 December) EUR million

Capital additions

2008

(1)

2007

Automobile

Car

Vehicle

Distribution

Rental

Glass

225.4

543.8

116.4

Group

Automobile

Car

Vehicle

Distribution

Rental

Glass

229.3

683.6

343.2

885.6

Group 1,256.1

(1) Capital additions include both additions and acquisitions through business combinations including goodwill.

Besides depreciation and amortisation of segment assets (which are provided in note 5), the operating lease charges on buy-back agreements (also disclosed in note 5) and the charge arising from the long-term management incentive schemes are the other significant non-cash expense deducted in measuring segment result. Note 3.6: Geographical Segment Information (Year ended 31 December) The Group’s three business segments operate in three main geographical areas, being Belgium (main market for the Automobile Distribution segment), the rest of Europe and the rest of world. EUR million

2008 Belgium

Segment sales from external customers Segment assets Capital additions

(1)

(2) (3)

2007

Rest of

Europe

world

Group

2,625.7

2,590.0

931.1

6,146.8

1,101.5

3,376.1

603.3

5,080.9

231.3

577.8

76.5

885.6

Belgium

Rest of

Europe

world

Group

2,545.5

2,593.8

827.8

1,016.8

3,667.3

547.6

5,231.7

232.7

718.3

305.1

1,256.1

5,967.1

(1) Based on the geographical location of the customers. (2) Segment assets are defined above (see note 3.3). (3) Capital additions include both additions and acquisitions through business combinations including goodwill.

NOTE 4: SALES EUR million

2008

2007

New vehicles

2,162.7

2,135.8

Used cars

114.0

115.7

Spare parts and accessories

141.5

139.7

After-sales activities by D’Ieteren Car Centers

51.4

48.5

D’Ieteren Sport

47.1

56.2

D’Ieteren Lease

139.4

125.9

Rental income under buy-back agreements Other sales

3.0

2.7

20.3

17.9

Subtotal Automobile Distribution

2,679.4

2,642.4

Avis

1,255.1

1,272.0

56.2

52.7

Subtotal Car Rental

Budget

1,311.3

1,324.7

Vehicle Glass

2,156.1

2,000.0

SALES (EXTERNAL)

6,146.8

5,967.1

of which: sales of goods

2,630.6

2,623.8

3,465.7

3,298.4

50.5

44.9

rendering of services royalties

Interest income and dividend income (if any) are presented among net finance costs (see note 6).

ANNUAL REPORT 2008 | Consolidated Financial Statements | 57

NOTE 5: OPERATING RESULT Operating result is stated after charging: EUR million

2008

2007

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

Current items: Purchases and changes in inventories

-2,252.6

-62.1

-532.4

-2,847.1

-2,225.2

-56.8

-518.3

-2,800.3

Depreciation of vehicles

-66.9

-115.1

-182.0

-56.2

-122.8

-179.0

Depreciation of other items (excl. investment property)

-11.6

-17.1

-48.8

-77.5

-11.1

-20.3

-42.9

-74.3

-0.2

-3.4

-11.1

-14.7

-4.9

-8.8

-13.7

-192.3

-176.8

-55.2

-53.7

-119.7

-93.5

-213.2

-132.2

-88.4

-220.6

Amortisation (excl. re-measurements - see note 9) Operating lease charge on buy-back agreements Contingent operating lease rentals

(1)

Other operating lease rentals Write-down on inventories

-6.9

0.2

-6.7

0.5

-1.1

-0.6

Net gain (loss) on vehicles

5.2

-10.3

-5.1

3.5

14.1

17.6

-119.8

-283.0

-786.4

-1,189.2

-121.2

-291.7

-676.1

-1,089.0

-3.0

-2.2

-138.2

-337.9

-499.9

-976.0

-135.1

-367.1

-503.8

-1,006.0

-2.8

-2.4

-0.4

-5.6

1.4

-5.9

-2.6

-7.1

Employee benefit expenses (see note 36) Research and development expenditure Sundry Bad and doubtful debts Investment property expenses: Depreciation Operating expenses

(2)

Sundry Subtotal other operating expenses

-0.5

-0.1

0.2

-0.1

-6.9

-6.8

-0.4

-0.1

-0.4

-0.9

-3.2

-2.5

-7.3

-13.0

0.4

-6.0

-3.0

-8.6

Other operating income: Gain on property, plant and equipment Rental income from investment property

(3)

1.9

0.1

1.1

1.2

0.7

0.6

Sundry

0.7

Subtotal other operating income

3.3

0.7

1.1

1.8

-2,590.9

-1,198.6

-1,982.2

-5,771.7

-2,543.7

-1,218.2

-1,843.5

-5,605.4

-260.3

-23.0

-283.3

0.1

-26.9

-18.1

-44.9

-2,590.9

-1,458.9

-2,005.2

-6,055.0

-2,543.6

-1,245.1

-1,861.6

-5,650.3

Subtotal current items Unusual items and re-measurements (see note 9) NET OPERATING EXPENSES

(1) Contingent rentals primarily arise with respect to airport rental desk concessions, and are ordinarily based on the level of revenue generated by the individual concession. (2) The full amount is related to investment property that generated rental income. (3) Does not include any contingent rent.

FINANCIAL REPORT

Other operating expenses:

58 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 6: NET FINANCE COSTS Net finance costs are broken down as follows: EUR million

2008

2007

Automobile

Car

Vehicle

Distribution

Rental

Glass

-29.2

-77.6

-37.2

-0.2

0.5

0.3

-29.4

-77.1

-36.9

Group

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

-144.0

-26.2

-75.7

-33.4

0.6

0.7

0.6

0.5

1.8

-143.4

-25.5

-75.1

-32.9

-133.5

Current items: Finance costs: Interest expense Transfer from re-measurements Current interest expense

-135.3

Other financial charges

-0.3

-0.2

Subtotal finance costs

-29.7

-77.1

-36.9

-143.7

-25.7

-75.1

-32.9

-133.7

Finance income Current net finance costs

1.8

2.0

3.3

7.1

2.0

5.4

0.7

8.1

-27.9

-75.1

-33.6

-136.6

-23.7

-69.7

-32.2

-125.6

-2.2

Unusual items and re-measurements (see note 9): Unusual items Re-measurements of financial instruments: (1)

2.2

-18.4

-4.2

-20.4

-2.3

-2.4

-2.6

-7.3

Transfer to current items

0.2

-0.5

-0.3

-0.6

-0.7

-0.6

-0.5

-1.8

Subtotal gains (losses) on “clean” (1) fair value of derivatives

2.4

-18.9

-4.5

-21.0

-3.0

-3.1

-9.1

Gains (losses) on “dirty” fair value of derivatives

Foreign exchange gain (loss) on net debt Unusual items and re-measurements NET FINANCE COSTS

-0.5

3.8

2.4

-19.4

-4.5

-21.5

-3.0

0.8

-5.3

-7.5

-25.5

-94.5

-38.1

-158.1

-26.7

-68.9

-37.5

-133.1

(1) Change in “dirty” fair value of derivatives corresponds to the change of value of the derivatives between the beginning and the end of the period. Change in “clean” fair value of derivatives corresponds to the change of “dirty” fair value excluding the accrued cash flows of the derivatives that occurred during the period.

NOTE 7: ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD Four group entities are accounted for using the equity method. D’Ieteren Vehicle Trading s.a. is a 49%-owned associate which provides finance lease services to customers of the Automobile Distribution segment. At year end, the Automobile Distribution’s interest in this associate comprised: EUR million Share of gross assets Share of gross liabilities

2008

2007

32.1

28.9

-29.5

-27.0

Share of net assets

2.6

1.9

Share of sales

9.3

7.5

Share of profit (loss)

0.7

0.5

Mercury Car Rentals Ltd is a 33%-owned associate of Avis Europe plc which provides short-term car rental services in India under the Avis brand. At year end, the Car Rental’s interest in this associate comprised: EUR million Share of gross assets (incl. goodwill)

2008

2007

3.1

2.9

-2.6

-2.4

Share of net assets

0.5

Share of sales

3.8

3.9

Share of profit (loss)

0.1

0.2

Share of gross liabilities

ANNUAL REPORT 2008 | Consolidated Financial Statements | 59

NOTE 7: ENTITIES ACCOUNTED FOR USING THE EQUITY METHOD (continued) Anji Car Rental and Leasing Company Ltd and OKIGO (investment in 2008) are 50%-owned joint ventures of Avis Europe plc which provide, under the Avis brand, short-term car rental services in China and France respectively. At year end, the Car Rentalâ&#x20AC;&#x2122;s interest in these both joint ventures comprised: EUR million

2008

2007

Share of non-current assets (incl. goodwill)

25.0

18.5

5.8

2.7

Share of current assets Share of non-current liabilities Share of current liabilities

-0.7

-18.4

-10.9

Share of net assets

11.7

10.3

Share of sales

13.5

14.5

0.3

0.6

Share of profit (loss)

During the year, Avis Europe plc invested in a French joint venture, OKIGO, for a cash consideration of EUR 0.1 million. The Car Rentalâ&#x20AC;&#x2122;s 50% share of net liabilities acquired was EUR 0.6 million.

NOTE 8: TAX EXPENSE Tax expense is broken down as follows: 2008

2007

Automobile

Car

Vehicle

Distribution

Rental

Glass

Current year income tax

-1.9

4.2

-17.8

Prior year income tax

-0.8

-2.9

Movement in deferred taxes

-2.3

55.2

Tax expense

-5.0

of which: current items unusual items and re-measurements (see note 9)

Group

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

-15.5

-7.8

-15.8

-14.9

-38.5

-3.7

-1.2

-1.1

-2.3

2.0

54.9

-0.1

4.6

4.2

8.7

59.4

-18.7

35.7

-9.1

-11.2

-11.8

-32.1

-2.0

-16.2

-28.5

-46.7

-10.1

-11.4

-19.5

-41.0

-3.0

75.6

9.8

82.4

1.0

0.2

7.7

8.9

In the Car Rental segment, the movement in deferred taxes includes the movement of EUR 66.9 million in relation with the impairment charge on Avis licence rights (see notes 13 and 21). The relationship between tax expense and accounting profit is explained below: EUR million

Result before taxes

2008

2007

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

63.0

-242.1

112.8

-66.3

72.1

10.7

100.9

183.7

-21.4

82.3

-38.3

22.6

-24.5

-3.6

-34.3

-62.4

Reconciling items (sum of items marked (a) and (b) below)

16.4

-22.9

19.6

13.1

15.4

-7.6

22.5

30.3

Actual tax on result before taxes

-5.0

59.4

-18.7

35.7

-9.1

-11.2

-11.8

-32.1

Tax at the Belgian corporation tax rate of 33.99%

FINANCIAL REPORT

EUR million

60 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 8: TAX EXPENSE (continued) The reconciling items are provided below: EUR million

2008

Current PBT Tax at the Belgian corporation tax rate of 33.99%

2007

Automobile

Car

Vehicle

Distribution

Rental

Glass

60.6

37.6

140.3

-20.6

-12.8

-47.7

Group

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

238.5

75.0

36.8

124.3

236.1

-81.1

-25.5

-12.5

-42.2

-80.2

Rate differential

(a)

7.3

-5.7

1.6

7.4

2.4

9.8

Permanent differences

(a)

27.3

-2.7

23.7

48.3

25.6

-3.0

17.0

39.6 5.9

Utilisation of tax losses

(a)

0.4

3.7

4.1

0.6

5.3

Other temporary differences

(a)

0.1

Adjustments in respect of prior years

(a)

0.1

3.4

-1.7

1.8

-0.7

2.1

-1.5

-0.1

Deferred tax assets not recognised

(a)

-6.7

-11.1

-1.1

-18.9

-5.6

-8.0

-0.6

-14.2

Impact of dividends

(a)

-1.3

-3.7

Other

(a)

-1.3

-0.3

0.3

-1.3

-0.2

2.0

0.1

1.9

Actual tax on current PBT

-2.0

-16.2

-28.5

-46.7

-10.1

-11.4

-19.5

-41.0

Actual tax rate on current PBT

43%

20%

13%

31%

16%

17%

Unusual items and re-measurements in PBT

2.4

-279.7

-27.5

-304.8

-2.9

-26.1

-23.4

-52.4

-0.8

95.1

9.3

103.6

1.0

8.9

7.9

17.8

Tax at the Belgian corporation tax rate of 33.99% Rate differential

(b)

-11.3

0.5

-10.8

-0.5

-0.2

-0.7

Permanent differences

(b)

0.1

-2.6

Adjustments in respect of prior years

(b)

0.1

Deferred tax assets not recognised

(b)

-2.2

-7.7

-9.9

-1.4

Other

(b)

-0.7

-4.2

-3.0

75.6

9.8

82.4

1.0

0.2

7.7

8.9

Actual tax on unusual items and re-measurements in PBT

NOTE 9: UNUSUAL ITEMS AND RE-MEASUREMENTS Result for the Period Current result after tax (“current PAT”) consists of the reported result from continuing operations (or the result for the period when no discontinued operation is reported), excluding unusual items and re-measurements as defined in note 2, and excluding their tax impact. Current result before tax (“current PBT”) consists of the reported result before tax excluding unusual items and re-measurements as defined in note 2. Current PAT, Group’s share, and current PBT, Group’s share, exclude the share of minority shareholders in current PAT and current PBT. Current result is a non-GAAP measure, i.e. its definition is not addressed by IFRS. The Group does not represent current result as an alternative to financial measures determined in accordance with IFRS. Current result as reported by the Group may differ from similarly titled measures by other companies. The Group uses the concept of current result to reflect its underlying performance.

ANNUAL REPORT 2008 | Consolidated Financial Statements | 61

NOTE 9: UNUSUAL ITEMS AND RE-MEASUREMENTS (continued) EUR million

2008

2007

Automobile

Car

Vehicle

Distribution

Rental

Glass

63.0

-242.1

112.8

Group

Automobile

Car

Vehicle

Distribution

Rental

Glass

-66.3

72.1

10.7

100.9

15.2

3.0

0.5

Group

From reported PBT to current PBT, Group’s share: Reported PBT

183.7

Less: Unusual items and re-measurements in PBT: Foreign exchange

-2.4 -

(a)

5.7

(b)

11.9

0.5

(c)

(d)

1.5

21.7

Impairment losses on goodwill

1.5

Amortisation of Avis licence rights

21.7

Impairment of Avis licence rights

223.0

Amortisation of customer contracts

Amortisation of brands with finite useful life

Other unusual items

27.3

Current PBT Share of minority interest in current PBT Current PBT, Group’s share

(e)

(f)

(g)

1.3

(b)

3.9

-3.8

(c)

4.0

(d)

4.0

21.7

(a)

223.0

5.2

(h)

5.2

2.7

(i)

2.7

7.7

(j)

35.0

-0.1

2.9

(e)

(f)

(g)

8.2 -3.8

4.1

(h)

4.1

(i)

15.4

(j)

18.2

60.6

37.6

140.3

238.5

75.0

36.8

124.3

-15.1

-31.7

-46.8

-0.3

-14.8

-26.7

-41.8

60.6

22.5

108.6

191.7

74.7

22.0

97.6

194.3

60.6

22.5

108.6

191.7

74.7

22.0

97.6

194.3

0.7

0.2

0.9

0.5

0.4

0.9

236.1

From current PBT, Group’s share, to current PAT, Group’s share: Current PBT, Group’s share Share of the group in current result of equity accounted entities Tax on current PBT, Group’s share

-2.0

-9.7

-21.9

-33.6

-10.0

-6.8

-14.2

-31.0

Current PAT, Group’s share

59.3

13.0

86.7

159.0

65.2

15.6

83.4

164.2

59.3

13.0

86.7

159.0

65.2

15.6

83.4

164.2

2.1

59.3

13.0

86.7

159.0

65.2

17.7

83.4

166.3

From current PAT, Group’s share, to current result for the period attributable to equity holders of the Parent: Current PAT, Group’s share Share of the group in current discontinued operations Current result for the period attributable to equity holders of the Parent

Automobile Distribution (a) Net finance costs include re-measurements of financial instruments amounting to EUR 2.4 million (2007: EUR -3.0 million) arising from changes in the “clean” fair value of derivatives. Car Rental (b) Net finance costs and commercial and administrative expenses include re-measurements of financial instruments amounting to respectively EUR -18.9 million (2007: EUR -3.0 million) and EUR 13.2 million (2007: EUR 1.7 million) arising from changes in the “clean” fair values of derivatives. (c) Foreign exchange loss on net debt amounts to EUR -0.5 million (2007: EUR 3.8 million) recognised in net finance costs. (d) During the year, Avis Europe recognised an impairment charge of EUR 1.5 million against the goodwill arising on the acquisition of certain licensees in Holland (see note 12). This followed a reappraisal of the business in conjunction with the restructuring mentionned below (see point (f)). In the prior year, Avis Europe acquired the assets of a licensee in Germany and an impairment provision was made in respect of the goodwill arising (EUR 4.0 million). (e) The Board of Directors of the Parent has reviewed the carrying amount of its investment in Avis Europe in accordance with the requirements of IAS 36 “Impairment of Assets”. This review has led to the conclusion that the carrying amount of the Avis Europe cash-generating unit should be reduced to its value in use. The resulting impairment was fully allocated to the value of the Avis licence rights. As a result, a gross impairment charge (presented in other operating expenses) of EUR 223.0 million has been recognised. See note 13 for other disclosures required by IAS 36.

FINANCIAL REPORT

Re-measurements of financial instruments

62 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 9: UNUSUAL ITEMS AND RE-MEASUREMENTS (continued) f)

Other unusual items of the Car Rental segment are set out below: - Restructuring costs of EUR 27.6 million included EUR 1.9 million incurred in the first half of the year in respect of a redundancy programme that commenced in December 2007. In the second half of the year, restructuring costs of EUR 25.7 million were recognised reflecting a further rationalisation of operations in response to the deterioration in the trading environment, including redundancies, the closure of certain low margin rental locations and the rationalisation of property with the transfer of the staff of the UK business head-office into the Avis Europe headquarters building. These restructuring costs include redundancy costs, onerous lease provisions, fixed asset impairments (see note 15) and unusual pension curtailments (see note 20). In the prior year, restructuring costs of EUR 7.1 million were incurred with respect to the redundancy programme commenced in December 2007, and the final elements of a restructuring project commenced in 2005. Restructuring costs and unusual pension curtailments are presented in other operating expenses, fixed asset impairments in commercial and administrative expenses. - During the current and prior year, the collection of credit hire receivable balances in the closed Centrus business was more successful than previously anticipated and resulted in an unusual credit of EUR 0.3 million (2007: EUR 0.7 million), reflecting a partial reversal of the receivable write-offs recognised in previous years. These unusual income were recognised in other operating income. - In 2007, following the identification of potential malpractice in Portugal, Avis Europe had recognised EUR 4.8 million of costs in the year in respect of an independent investigation, both in Portugal and throughout Avis Europe’s corporately owned operations in Europe, together with certain directly related employee termination costs. These costs were recognised in other operating expenses. - Following the Avis Europe's decision in 2004 to terminate an agreement with an IT contractor upon the conclusion of a legal case, a net unusual credit (in other operating income) was recognised in the prior year (EUR 2.6 million). - During the second half of 2007, Avis Europe reviewed its methodology for calculating the level of provision required in respect of third party motor liability losses, including those not yet reported. The provision re-assessment resulted in an unusual credit to the income statement of EUR 5.7 million, presented in commercial and administrative expenses

In the prior year, Avis Europe disposed of its subsidiary in Greece, Olympic Commercial and Tourist Enterprises SA. Avis Europe has recognised an unusual income of EUR 1.3 million in the current year to reflect the final settlement of a warranty provision made in the prior year. In 2007, an unusual impairment charge on goodwill of EUR 7.1 million was recorded to write down the associated goodwill to its estimated fair value. These unusual charge and income are presented in discontinued operations (see note 41). Vehicle Glass (g) Net finance costs and cost of sales include re-measurements of financial instruments amounting to respectively EUR -4.5 million (2007: EUR -3.1 million) and EUR -7.4 million (2007: EUR -0.8 million) arising from changes in the “clean” fair value of derivatives. (h) In the framework of Diamond and Safelite acquisitions in 2008 and 2007, customer contracts were recognised as an intangible asset (see note 13) with a finite useful life. The 2008 amortisation (in commercial and administrative expenses) amounted to EUR 5.2 million (2007: EUR 4.1 million). (i) The brands AUTO GLASS SPECIALISTS® and ELITE AUTO GLASS™, acquired in 2005, as well as the brand DIAMOND TRIUMPH GLASS™ acquired in 2008, are no longer considered to be intangibles with indefinite useful lives, since there is now a limit to the period over which these assets are expected to generate cash inflows. The 2008 amortisation (in commercial and administrative expenses) amounted to EUR 2.7 million (2007: nil). (j) Other unusual items of the Vehicle Glass segment are set out below: - Restructuring costs of EUR 9.9 million (in other operating expenses) were incurred in relation to restructuring within the United States. In 2007, restructuring costs of EUR 10.4 million (in other operating expenses) were incurred to capture the significant synergies arising from the Safelite acquisition. - In 2008, an unusual credit of EUR 2.2 million (in other operating income) was recognised following the partial release of an onerous lease provision set-up in 2007 for a vacant UK property. The 2007 unusual charge of EUR 2.8 million was presented in other operating expenses. - In 2007, net finance costs included the full amortisation (EUR 2.2 million) of deferred financing costs following the refinancing required for the Safelite acquisition. Cash Flows The line “Acquisition of equity instruments” for the period to 31 December 2008 includes the business combinations disclosed in note 12. The line “Disposal of equity instruments” for the period to 31 December 2007 included the net cash inflow arising from the disposal of Avis Greece (see note 41).

ANNUAL REPORT 2008 | Consolidated Financial Statements | 63

NOTE 10: EARNINGS PER SHARE

2008

2007

Result for the period attributable to equity holders

32.2

127.7

Adjustment for participating shares

-0.3

-1.4

31.9

126.3

159.0

166.3

Numerator for EPS (EUR million)

(a)

Current result for the period attributable to equity holders Adjustment for participating shares Numerator for current EPS (EUR million)

(b)

Result from continuing operations

-1.8

-1.9

157.2

164.4

-29.5

152.9

Share of minority interest in result from continuing operations

60.9

-17.8

Result from continuing operations attributable to equity holders

31.4

135.1

Adjustment for participating shares Numerator for continuing EPS (EUR million)

(c)

-0.3

-1.5

31.1

133.6

Current result from continuing operations

192.9

196.4

Share of minority interest in current result from continuing operations

-33.9

-32.2

Current result from continuing operations attributable to equity holders (“Current PAT, Group’s share” as defined in note 9)

159.0

164.2

-1.8

Numerator for current continuing EPS (EUR million)

Adjustment for participating shares (d)

157.2

162.4

Weighted average number of ordinary shares outstanding during the period

(e)

5,439,276

5,451,181

Adjustment for stock option plans Weighted average number of ordinary shares taken into account for diluted EPS

(f)

7,698

25,366

5,446,974

5,476,547

Result for the period attributable to equity holders Basic EPS (EUR)

(a)/(e)

5.86

23.17

Diluted EPS (EUR)

(a)/(f)

5.86

23.06

Basic current EPS (EUR)

(b)/(e)

28.90

30.16

Diluted current EPS (EUR)

(b)/(f)

28.86

30.02

Result from continuing operations attributable to equity holders Basic continuing EPS (EUR)

(c)/(e)

5.72

24.51

Diluted continuing EPS (EUR)

(c)/(f)

5.71

24.39

Basic current continuing EPS (EUR)

(d)/(e)

28.90

29.79

Diluted current continuing EPS (EUR)

(d)/(f)

28.86

29.65

FINANCIAL REPORT

Earnings per share (“EPS”) and earnings per share for continuing operations (“Continuing EPS”) are shown above, on the face of the consolidated income statement. Basic and diluted EPS are based on the result for the period attributable to equity holders of the Parent (based on the result from continuing operations attributable to equity holders of the Parent for the continuing EPS), after adjustment for participating shares (each participating share confers one voting right and gives right to a dividend equal to one eighth of the dividend of an ordinary share). Current EPS and current continuing EPS, which do not include unusual items and re-measurements as defined in note 9, are presented to highlight underlying trading performance. The weighted average number of ordinary shares in issue for the period is shown in the table below. The Group has granted options to employees over ordinary shares of the Parent and of Avis Europe plc. Such shares constitute the only category of potentially dilutive ordinary shares. The options over ordinary shares of Avis Europe plc did not impact earnings per share in either 2007 or 2008 as the option exercise prices were in excess of the prevailing market share price, or exercise of the options is subject to performance conditions which had not been fully satisfied by the year end. The options over ordinary shares of the Parent increased the weighted average number of shares of the Parent in 2007 and 2008 as some option exercise prices were below the market share price. These options are dilutive. The computation of basic and diluted EPS is set out below:

64 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 11: GOODWILL EUR million

2008

2007

Gross amount at 1 January

841.1

687.8

Accumulated impairment losses at 1 January

-54.5

-43.4

Carrying amount at 1 January

786.6

644.4

Additions

35.3

116.2

Increase arising from put options granted to minority shareholders (see note 33)

37.6

40.2

Impairment losses

-1.5

-11.1

Adjustments

-0.6

0.7

-0.5

Discontinued operations (see note 41) Translation differences

-5.4

-3.3

Carrying amount at 31 December

852.0

786.6

of which: gross amount

908.0

841.1

-56.0

-54.5

accumulated impairment losses

The additions arising from business combinations that occurred in the period are detailed in note 12. The adjustments result from subsequent changes in the deferred consideration payable in relation to the acquisition by the Vehicle Glass segment in 2007 of minority interest of its subsidiary in Brazil and in the fair value of the net assets of Safelite acquired in 2007 by the Vehicle Glass segment. In 2007, the adjustments resulted from subsequent changes in the fair value of the net assets of the Italian and Greek businesses acquired in 2006 by the Vehicle Glass segment. In accordance with the requirements of IAS 36 â&#x20AC;&#x153;Impairment of Assetsâ&#x20AC;?, the Group completed a review of the carrying value of goodwill and of the other intangible assets with indefinite useful lives (see note 13) as at each year end. The impairment review, undertaken by calculating value in use, was carried out to ensure that the carrying value of the Groupâ&#x20AC;&#x2122;s assets are stated at no more than their recoverable amount, being the higher of fair value less costs to sell and value in use. The impairment losses of 2008 and 2007 arose in the Car Rental segment (see note 9). In determining the value in use, the Group calculated the present value of the estimated future cash flows expected to arise from the continuing use of the assets using pre-tax discount rates in the range from 7% to 9% (2007: from 7% to 9%). The discount rate applied is based upon the weighted average cost of capital of each segment with appropriate adjustment for the relevant risks associated with the businesses. Estimated future cash flows are based on long-term plans (i.e. over 3 or 5 years) for each cashgenerating unit, with extrapolation thereafter based on long-term average growth rates for the individual cash-generating units. This growth rate is in the range from 2% to 4% (2007: 2% to 4%) for most of the units, including the ones that carry the most significant goodwill and intangible assets with indefinite useful lives. Future cash flows are estimates that are likely to be revised in future periods as underlying assumptions change. Key assumptions in supporting the value of goodwill and intangible assets with indefinite useful lives include long-term interest rates and other market data. Should the assumptions vary adversely in the future, the value in use of goodwill and intangible assets with indefinite useful lives may reduce below their carrying amounts. Based on current valuations, headroom appears to be sufficient to absorb a normal variation in the underlying assumptions.

ANNUAL REPORT 2008 | Consolidated Financial Statements | 65

NOTE 11: GOODWILL (continued) The allocation of goodwill to cash-generating units is set out below (the allocation of other intangible assets with indefinite useful lives is set out in note 13): EUR million Automobile Distribution

2008

2007

2.6

Car Rental France

0.2

Holland

0.3

China (presented in equity-accounted investments, see note 7)

0.9

Subtotal Car Rental

1.1

1.2

United Kingdom

96.4

96.9

France

64.8

Italy

54.2

53.8

Germany

47.8

47.1

Canada

34.2

35.7

Holland

29.1

Belgium

27.1

Australia United States Spain

24.8

110.6

83.8

15.7

Norway

6.9

7.0

New Zealand

6.4

Greece

3.8

Sweden

3.9

3.2

Switzerland

2.2

2.1

Portugal

1.2

Denmark

4.9

0.8

15.7

18.3

Unallocated

299.5

262.1

Subtotal Vehicle Glass

849.2

783.7

GROUP

852.9

787.5

Brazil

The unallocated amount in the Vehicle Glass segment comes from the acquisition of Belron by the Group in 1999, from the transactions entered into with the minority shareholders of Belron since 1999, and from the recognition of the put options granted to minority shareholders of Belron following the introduction of IAS 32 from 1 January 2005 onwards (see note 33).

NOTE 12: BUSINESS COMBINATIONS During the period, the Group made the following acquisitions: Car Rental - During the year, Avis Europe acquired the assets and activities of certain rental locations in both Holland and France which were formerly Avis licensees. The businesses provide vehicle rental services. The goodwill arising from the business combination that occurred in Holland was immediately impaired. Vehicle Glass - On 2 January 2008, Belron acquired a 100% interest in Allgäuer Autoglas which operates two branches in Germany. - On 30 June 2008, Belron substantially acquired all of the net assets of Diamond Glass, Inc which operates 216 branches in the United States. - On 1 July 2008, Belron acquired a 100% interest in AGS-Regner which operates two branches in Germany. - On 1 August 2008, Belron acquired a 100% interest in Bilglascompagniet i Skandinavian AB which operates three branches in Sweden. - On 1 August 2008, Belron acquired a 100% interest in Atelier Lookauto, Inc which operates one branch in Canada. - On 31 August 2008, Belron acquired a 100% interest in A1 Autoglas which operates one branch in Germany. - On 10 October 2008, Belron acquired a 100% interest in Radio d’Auto de Québec (RAQ) 1994 Inc which operates one branch in Canada.

FINANCIAL REPORT

Vehicle Glass

66 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 12: BUSINESS COMBINATIONS (continued) -

On 31 October 2008, Belron acquired a 100% interest in Redline Inc, a non-trading parent company of Mobilglas Denmark and Mobilglas Sweden. Both Mobilglas Denmark and Sweden are 100% mobile with no branches. On 1 December 2008, Belron acquired a 100% interest in Techauto SRL which operates one branch in Italy. On 31 December 2008, Belron acquired a 100% interest in Cindy Rowe, Inc which operates twelve branches in the United States.

The sales arising subsequent to these acquisitions amount approximately to EUR 51 million (approximately EUR 118 million if they had occurred on the first day of the period). The results arising subsequent to these acquisitions (even if they had occurred on the first day of the period) are not considered material to the Group and accordingly are not disclosed separately. The acquisitions have been accounted for using the acquisition method of accounting. The details of the net assets acquired, goodwill and consideration of the acquisitions are set out below: EUR million Brands

Book

Adjustment

(1)

value

Provisional fair value

(2)

1.0

Other intangibles

0.1

2.3

2.4

Vehicles

0.2

Other property, plant & equipment

3.1

4.7

7.8

Inventories

5.7

-0.6

5.1 10.8

Trade and other receivables

10.8

Cash and cash equivalents

2.4

-3.3

Non-current borrowings Deferred tax liabilities Current borrowings

-0.1

-2.1

Trade and other payables

-9.7

Net assets acquired

12.5

2.0

14.5

Goodwill (see note 11)

35.3

CONSIDERATION

49.8

Consideration satisfied by: Cash payment

44.0

Deferred consideration

3.5

Associated costs arising on acquisition

2.3 49.8

(1) Fair value and accounting policy adjustments. (2) The fair values are provisional since the integration process of the acquired entities and businesses is still ongoing.

The goodwill on the 2007 acquisitions was decreased by EUR 2.9 million reflecting fair value adjustments made to the initial valuations disclosed in note 12 of the 2007 annual report. This decrease reflects changes in the fair value of the net assets acquired.

ANNUAL REPORT 2008 | Consolidated Financial Statements | 67

NOTE 13: OTHER INTANGIBLE ASSETS Goodwill is analysed in note 11. All the other intangible assets have finite useful lives, unless specified otherwise. EUR million

Avis licence rights

Other licenses and similar rights

Brands (with finite and indefinite useful lives)

Customer contracts

Computer software

Intangibles under development

Other

Total

Gross amount at 1 January 2008

711.5

0.4

334.7

48.2

60.9

44.9

0.3

1,200.9

Accumulated amortisation and impairment losses at 1 January 2008

-86.8

-0.4

-4.1

-40.9

-13.1

-0.3

-145.6

Carrying amount at 1 January 2008

624.7

334.7

44.1

20.0

31.8

1,055.3

Internal development

0.2

8.5

8.7

Items separately acquired

10.1

-21.7

-2.7

-5.2

-14.7

-44.3

-223.0

Amortisation Impairment losses (see note 9) Transfer from (to) another caption

39.6

-38.0

1.6

Items acquired through business combinations

1.0

2.3

0.1

3.4

Translation differences Carrying amount at 31 December 2008 of which: gross amount accumulated amortisation and impairment losses

2.2

0.8

-10.2

-0.4

-7.6

380.0

335.2

42.0

45.1

1.9

804.2

711.5 -331.5

0.4 -0.4

337.8 -2.6

51.8 -9.8

105.0 -59.9

1.9 -

0.3 -0.3

1,208.7 -404.5

Gross amount at 1 January 2007

711.5

0.4

247.0

46.9

37.7

0.3

1,043.8

Accumulated amortisation and impairment losses at 1 January 2007

-65.1

-0.3

-34.5

-7.5

-0.1

-107.5

Carrying amount at 1 January 2007

646.4

0.1

247.0

12.4

30.2

0.2

936.3

Additions: Internal development

6.8

Items separately acquired

7.0

6.3

13.3

Disposals Amortisation

-0.1

-21.7

-0.1

-4.1

-6.9

-6.5

-0.2

-39.5

Transfer to another caption

3.0

-3.1

-0.1

Items acquired through business combinations

92.4

50.4

5.6

148.4

Discontinued operations (see note 41)

-0.4

0.2

-0.2

Translation differences

-4.7

-2.2

-0.6

-2.1

-9.6

Carrying amount at 31 December 2007

624.7

334.7

44.1

20.0

31.8

1,055.3

of which: gross amount accumulated amortisation and impairment losses

711.5 -86.8

0.4 -0.4

334.7 -

48.2 -4.1

60.9 -40.9

44.9 -13.1

0.3 -0.3

1,200.9 -145.6

The Board of Directors of the Parent has reviewed the carrying amount of its investment in Avis Europe in accordance with the requirements of IAS 36 “Impairment of Assets”. This review has led to the conclusion that the carrying amount of the Avis Europe cash-generating unit should be reduced to its value in use. In determining the value in use, the Parent calculated the present value of the estimated future cash flows expected to arise based on Avis Europe’s latest three-year plans, with extrapolation thereafter. The resulting impairment was fully allocated to the value of the Avis licence rights. As a result, a gross impairment charge (presented in other operating expenses) of EUR 223.0 million has been recognised in order to reduce the carrying amount of the Avis licence rights. This impairment charge has led to a decrease of EUR 66.9 million in the deferred tax liability arising on the recognition of the Avis licence rights. The net impairment charge, group share amounts to EUR 84.8 million.

FINANCIAL REPORT

Additions:

68 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 13: OTHER INTANGIBLE ASSETS (continued)

The calculated value in use is sensitive to a number of assumptions which are discussed in turn below. These potential changes in key assumptions fall well within historic variations experienced by the business and are therefore considered reasonably possible. EBIT margin: the long-term EBIT margin is fixed by reference to Avis Europe’s estimated EBIT margin as at 2011. An increase/decrease in the EBIT margin by 50 basis points would result in a decrease/increase in the gross impairment charge on Avis licence rights of EUR 121.4 million (EUR 50.7 million in the net impairment charge, group share). Discount rate: future cash flows are discounted using a post-tax discount rate of 7%. An increase/decrease in the discount rate of 50 basis points would result in a increase/decrease in the gross impairment charge on Avis licence rights of EUR 161.4 million/EUR 181.4 million (EUR 67.4 million/EUR 75.7 million in the net impairment charge, group share). Long-term growth rate: cash flows beyond an initial three year period are extrapolated using a long-term average nominal growth rate of 4.0% comprising a real growth rate of 2.0% and inflationary rate of 2.0%. An increase/decrease in the long-term growth rate of 50 basis points would result in a decrease/increase in the gross impairment charge on Avis licence rights of EUR 24.3 million/EUR 22.9 million (EUR 10.1 million/EUR 9.5 million in the net impairment charge, group share). The nature of the brands with indefinite useful lives is provided in the summary of significant accounting policies in note 2. The increase in brands and customer contracts reflects the Diamond business acquired in the year (see note 12) by the Vehicle Glass segment. Since this year, the brands AUTO GLASS SPECIALISTS® and ELITE AUTO GLASS™, acquired in 2005, as well as the brand DIAMOND TRIUMPH GLASS™ acquired in 2008, are no longer considered to be intangibles with indefinite useful lives, since there is now a limit to the period over which these assets are expected to generate cash inflows. They are now considered as intangibles with finite useful lives and therefore amortised on their remaining useful life on a straight-line basis. The 2008 amortisation amounted to EUR 2.7 million. The carrying value of the brands with a finite useful life at 31 December 2008 amounts EUR 11.5 million (2007: nil), whilst the carrying amount of brands with indefinite useful life amounts to EUR 323.7 million (2007: EUR 334.7 million). The allocation of brands (with indefinite useful lives) to cash-generating units in the Vehicle Glass segment is set out below: EUR million

2008

2007

United Kingdom

67.9

France

61.9

Germany

34.8

Holland

24.2

24.2 18.1

Belgium

18.1

Canada

15.3

United States

89.2

100.2

Spain

9.1

Portugal

2.9

Italy

0.3

323.7

334.7

Carrying amount of brands

The other disclosures required by IAS 36 for intangible assets with indefinite useful lives are provided in note 11. Based on current valuations (see note 11), headroom appears to be sufficient to absorb a normal variation in the underlying assumptions.

ANNUAL REPORT 2008 | Consolidated Financial Statements | 69

NOTE 14: VEHICLES EUR million

2008

Gross amount at 1 January Accumulated depreciation at 1 January

2007

931.2

973.7

-169.9

-191.3 782.4

Carrying amount at 1 January

761.3

Additions

727.4

859.9

Disposals

-520.3

-568.1

Depreciation charge

-182.0

-188.5

-56.4

-62.2

58.5

65.1

Transfer to non-current assets held for sale Transfer from (to) current assets Items acquired through business combinations Discontinued operations (see note 41) Translation differences Carrying amount at 31 December of which: gross amount accumulated depreciation

0.2

-124.9

-7.3

-2.4

781.4

761.3

980.9

931.2

-199.5

-169.9

2008

EUR

87 million

2007

EUR

116 million

The Automobile Distribution’s fleet is rented out in Belgium by s.a. D’Ieteren Lease n.v. (“D’Ieteren Lease”), a wholly-owned subsidiary of the Group. All rentals are operating leases. On average, the rentals are 40 months long (2007: 41 months). The average size of the fleet is as follows: 2008

22.806 vehicles

2007

20.167 vehicles

In 2006 D’Ieteren Lease undertook a securitisation programme of its fleet and lease contracts to achieve a more autonomous and flexible financing structure, its fleet having doubled in 6 years. This securitisation operation, which fits into the Group’s strategy of diversified financing, consists of the issue of bonds to professional investors. That securitisation programme had no impact on the net debt of the Group (this programme being a substitute to other external sources of financing). An initial amount of EUR 229.5 million was raised in April 2006, covering approximately 80% of the carrying amount of the fleet of D’Ieteren Lease. The balance is financed by inter-company loans. The carrying amount of the bonds changes as new lease contracts are concluded and as old ones expire. The reimbursement of the bonds and the payment of interest are covered by customers’ lease payments and the resale of the vehicles. The programme enables the carrying amount of the bonds to follow the evolution of the carrying amount of the fleet until the third anniversary of the initial financing. It then starts to amortise, in line with the maturation of the underlying lease contracts. The securitisation programme does not result in the derecognition of any item from the balance sheet. Other disclosures regarding the securitisation programme are provided in notes 19, 25, 31 and 39. The Car Rental’s fleet is rented out by Avis Europe plc and its subsidiaries in Europe. All rentals are operating leases. On average, the rentals are 5 days long (2007: 5 days). The average size of the fleet (including vehicles held under buy-back agreements and under other operating leases) is as follows: 2008

117.535 vehicles

2007

117.766 vehicles

The vehicles recognised in the balance sheet as non-current items are those that are not held under buy-back agreements. Their value at end of rental life will depend on the market for those vehicles at the time of disposal. Judgement is therefore required in the estimation of disposal value.

FINANCIAL REPORT

Vehicles held under finance leases are included in the above (in the Car Rental segment only) at the following amounts:

70 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 15: OTHER PROPERTY, PLANT AND EQUIPMENT EUR million

Property

Plant and

Assets

equipment

under

Total

construction Gross amount at 1 January 2008 Accumulated depreciation at 1 January 2008 Carrying amount at 1 January 2008

353.3

382.9

18.6

754.8

-140.6

-226.2

-0.9

-367.7

212.7

156.7

17.7

387.1

Additions

15.0

68.7

8.7

92.4

Disposals

-0.4

-4.6

-5.0

-21.1

-56.4

-77.5

Transfer from (to) another caption

8.4

7.5

-19.5

-3.6

Items acquired through business combinations

0.1

7.7

7.8

-1.4

-0.2

-1.6

-6.7

-6.9

-0.4

-14.0

206.6

172.5

6.5

385.6

361.9

432.2

6.5

800.6

-155.3

-259.7

-415.0

Depreciation

Impairment losses (see note 9) Translation differences Carrying amount at 31 December 2008 of which: gross amount accumulated depreciation and impairment losses Gross amount at 1 January 2007 Accumulated depreciation at 1 January 2007 Carrying amount at 1 January 2007

336.1

306.9

14.8

657.8

-130.4

-187.8

-0.1

-318.3 339.5

205.7

119.1

14.7

Additions

15.0

72.4

11.0

98.4

Disposals

-3.4

-13.5

-16.9

-19.1

-55.4

-74.5

5.8

1.8

-7.3

0.3

Items acquired through business combinations

11.6

35.6

47.2

Discontinued operations (see note 41)

-1.8

-0.6

-2.4

Translation differences

-1.1

-2.7

-0.7

-4.5

Depreciation Transfer from (to) another caption

Carrying amount at 31 December 2007

212.7

156.7

17.7

387.1

of which: gross amount

353.3

382.9

18.6

754.8

-140.6

-226.2

-0.9

-367.7

accumulated depreciation

At 31 December 2008, assets under construction include property under construction in the Automobile Distribution segment (EUR 4.3 million) and in the Car Rental segment (EUR 2.2 million). Assets held under finance leases are included in the above at the following amounts: EUR million

Property

Plant and

Assets

equipment

under

Total

construction 31 December 2008

44.8

31 December 2007

35.1

ANNUAL REPORT 2008 | Consolidated Financial Statements | 71

NOTE 16: INVESTMENT PROPERTY EUR million

2008

2007

Gross amount at 1 January

11.3

11.2

Accumulated depreciation at 1 January

-5.2

-4.7

Carrying amount at 1 January

6.1

6.5

Additions

0.3

0.1

-0.5

Depreciation Transfer from (to) another caption

0.9

Carrying amount at 31 December

6.8

6.1

12.5

11.3

-5.7

-5.2

9.1

of which: gross amount accumulated depreciation Fair value

The fair value is supported by market evidence, and is based on a valuation by an independent valuer who holds a recognised and relevant professional qualification, and who has recent experience in the location and category of the investment property held by the Group. The latest valuations were performed in March and December 2005. All items of investment property are located in Belgium and are held by the Automobile Distribution segment. See also notes 5 and 39 for other disclosures on investment property.

Available-for-sale financial assets are those non-derivative financial assets that are designated as available for sale or are not classified as (i) loans and receivables, (ii) held-to-maturity investments or (iii) financial assets held for trading. EUR million

2008

2007

Carrying

Fair

Carrying

Fair

amount

value

amount

value

Sundry

1.0

1.2

Total available-for-sale financial assets

1.0

1.2

Available-for-sale financial assets primarily comprise minority interests in listed companies (measured at fair value) and non listed companies (measured at cost less accumulated impairment losses if any, being an approximation of their fair value), held by the three segments. They are considered as non-current assets, and are not expected to be realised within 12 months. However, some or all of them could be disposed of in the near future, depending on opportunities.

NOTE 18: DERIVATIVE HEDGING INSTRUMENTS

Derivative hedging instruments are derivatives that meet the strict criteria of IAS 39 for application of hedge accounting. They provide economic hedges against risks faced by the Group (see note 38). Derivative hedging instruments are classified in the balance sheet as follows: EUR million Non-current assets Current assets Non-current liabilities Current liabilities Net derivative hedging instruments

2008

2007

4.6

7.7

-51.5

-52.9

-1.8

-0.5

-45.6

-48.8

-43.2

-52.8

Derivative hedging instruments are analysed as follows: Cross currency interest rate swaps (debt derivatives) - see below Interest rate swaps (debt derivatives) Forward foreign exchange contracts (non-debt derivatives) Non-deliverable forward exchange contracts Net derivative hedging instruments

-8.3

4.6

0.2

-0.6

5.7

-45.6

-48.8

FINANCIAL REPORT

NOTE 17: AVAILABLE-FOR-SALE FINANCIAL ASSETS

72 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 18: DERIVATIVE HEDGING INSTRUMENTS (continued) All derivative hedging instruments are recognised in the Car Rental and in the Vehicle Glass segments. In the Car Rental segment, cross currency interest rate swaps of aggregate notional principal amounts of USD 288.0 million (2007: USD 288.0 million) were used to hedge the Avis Europeâ&#x20AC;&#x2122;s USD denominated loan notes. Fair value hedge adjustments of EUR -9.6 million (2007: EUR -8.0 million) arise from the hedging of the principal value of the exposures to euro denominated liabilities. Of these adjustments, nil (2007: nil) relates to hedged items due for settlement within one year and EUR -9.6 million (2007: EUR -8.0 million) relates to hedged items due for settlement after one year. Cash flow hedges of EUR 5.4 million (2007: EUR 9.0 million) arise from the conversion of the regular semi-annual USD denominated interest payments to euro denominated interest payments. Amounts recognised within equity will be released to the income statement when the underlying fixed interest payments occur at various dates between the year end and 2014. There was no ineffectiveness of these hedges recorded at the balance sheet date. In the Car Rental segment, interest rate swaps of aggregate notional principal amounts of EUR 200.0 million (2007: EUR 200.0 million) with average fixed interest payable of 4.03% (2007: 4.03%) were used to hedge variable quarterly interest payments arising under the Senior Floating Rate Notes due 2013 issued by Avis Europe in 2006. The aim of the hedge relationship is to transform the variable interest borrowing into a fixed interest borrowing and result in cash flow hedges of EUR 8.5 million (2007: EUR -4.5 million). Credit risks do not form part of the hedge. There was no material ineffectiveness of these hedges recorded as at the balance sheet date. In the Vehicle Glass segment, non-deliverable forward exchange contracts of nominal amount of EUR 21.5 million equivalent (2007: nil) were used to hedge exchange movements on EUR denominated loans held in Brazil. The net position recognised within equity amounts to EUR 6.3 million (2007: nil). As part of its net investment hedge policy, the Vehicle Glass segment uses currency denominated borrowings to hedge the exposure of a proportion of its non-EUR denominated net assets against changes in value due to changes in foreign exchange rates. There was no ineffectiveness of these hedges recorded at the balance sheet date. The non-current portion of the derivative hedging instruments is expected to be settled after more than 12 months; the current portion within 12 months. The fair values are determined using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on market conditions at the balance sheet date. The fair value of cross currency interest rate swaps, and interest rate swaps is calculated as the present value of future estimated cash flows. The fair value of interest rate caps and collars are valued using option valuation techniques. The fair value of forward exchange contracts is determined using forward exchange market rates at the balance sheet date. The notional principal amounts of the outstanding derivative hedging instruments are as follows: EUR million

2008

2007

Cross currency interest rate swaps (debt derivatives)

206.9

195.6

Interest rate swaps (debt derivatives)

200.0

72.6

13.1

Forward foreign exchange contracts (non-debt derivatives)

ANNUAL REPORT 2008 | Consolidated Financial Statements | 73

NOTE 19: DERIVATIVES HELD FOR TRADING Derivatives held for trading are derivatives that do not meet the strict criteria of IAS 39 for application of hedge accounting. They however provide economic hedges against risks faced by the Group (see note 38). Derivatives held for trading are classified in the balance sheet as follows: EUR million

2008

2007

Non-current assets Debt derivatives Interest rate swaps excluding securitisation swaps Embedded derivatives Subtotal

1.2

0.7

5.6

0.7

6.8

4.1

2.9

Current assets Debt derivatives Interest rate swaps excluding securitisation swaps Interest rate securitisation swaps

(1)

Interest rate caps

7.2

0.7

0.3

1.0

Interest rate floors

0.5

Forward rate agreements

0.1

Forward foreign exchange contracts

8.2

4.3

Forward foreign exchange options

0.2

1.2

20.6

10.2

-0.6

-0.3

-26.0

-10.8

-7.4

-0.8

Subtotal Non-current liabilities Debt derivatives Interest rate swaps excluding securitisation swaps Current liabilities Debt derivatives Interest rate swaps excluding securitisation swaps Interest rate securitisation swaps

(1)

Interest rate caps

-0.5

Forward rate agreements

-3.1

-0.9

-1.5

Forward foreign exchange contracts Non-debt derivatives Forward foreign exchange contracts

-4.2

Fuel hedge instruments

-6.7

-0.3

Subtotal

-47.9

-14.3

NET DERIVATIVES HELD FOR TRADING

-27.2

2.4

(1) Other disclosures regarding the securitisation programme are provided in notes 14, 25, 31 and 39.

The EUR 250.0 million Senior Floating Rate Notes due 2013 issued by Avis Europe in 2006 include a call option permitting Avis Europe to repay the notes with effect from 31 July 2008. Under the option, the notes may be redeemed at the following redemption prices (expressed as a percentage of principal amounts) if repaid during the 12 months period beginning on 31 July 2008: 102%; 31 July 2009: 101%; 31 July 2010 and thereafter: 100%. In accordance with IAS 39, this option is separately recognised from the underlying notes as an embedded derivative. This embedded derivative is classified as non-current asset consistent with the maturity of the borrowing in which it is embedded. In the Vehicle Glass segment, a combination of options, collars and swaps (collectively â&#x20AC;&#x153;fuel hedge instrumentsâ&#x20AC;?) were used to hedge the price in USD of fuel purchases in the United States. The fair value of fuel hedge instruments is determined using market valuations prepared by the respective banks that executed the initial transactions at the balance sheet date based on the present value of the monthly futures forward curve for the RBOB gasoline index for the respective contract period given the volume hedged. See note 18 for details on the other valuation techniques used.

FINANCIAL REPORT

Non-debt derivatives

74 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 19: DERIVATIVES HELD FOR TRADING (continued) The notional principal amounts of the outstanding derivatives held for trading are as follows: EUR million Interest rate swaps excluding securitisation swaps Interest rate securitisation swaps

(1)

Interest rate caps and collars Interest rate floors Forward rate agreements Forward foreign exchange contracts and options

2008

2007

1,389.8

1,036.8

660.0

634.8

202.0

182.0

40.0

63.0

515.0

154.5

40.6

103.1

(1) Other disclosures regarding the securitisation programme are provided in notes 14, 25, 31 and 39.

NOTE 20: LONG-TERM EMPLOYEE BENEFIT ASSETS AND OBLIGATIONS Long-term employee benefits include post-employment employee benefits and other long-term employee benefits. Postemployment employee benefits are analysed below. Other long-term employee benefits are presented among non-current provisions or non-current other payables, and, if material, separately disclosed in the relevant note. Post-employment benefits are limited to retirement benefit schemes. Where applicable, Group entities contribute to the relevant state pension schemes. Certain Group entities operate schemes which provide retirement benefits, including those of the defined benefit type, which are in most cases funded by investments held outside the Group. The disclosures related to defined contribution schemes are provided in note 36. The Group operates defined benefit schemes for qualifying employees in the following countries: Automobile Distribution: Funded and unfunded schemes: Belgium Car Rental: Funded schemes: Austria France Spain United Kingdom Unfunded schemes: Germany Italy Vehicle Glass: Funded schemes: Canada Ireland Holland United Kingdom United States

The valuations used have been based on the most recent actuarial valuations, updated by the scheme actuaries to assess the liabilities of the scheme and the market value of the scheme assets at each of the balance sheet dates.

ANNUAL REPORT 2008 | Consolidated Financial Statements | 75

NOTE 20: LONG-TERM EMPLOYEE BENEFIT ASSETS AND OBLIGATIONS (continued) The main actuarial assumptions are as follows (ranges are provided given the plurality of schemes operated throughout the Group): Funded schemes

Unfunded schemes

2008

2007

2008

2007

Min.

Max.

Min.

Max.

Min.

Max.

Min.

Max.

Inflation rate

2.0%

3.2%

2.0%

3.5%

2.0%

1.8%

2.0%

Discount rate

5.7%

6.5%

5.2%

6.3%

2.0%

6.0%

4.1%

5.5%

Expected return on scheme assets: Equities

6.8%

8.7%

7.0%

9.5%

Bonds

3.8%

6.6%

3.6%

5.7%

2.0%

6.0%

2.3%

9.0%

Rate of salary increases

Other

1.0%

4.7%

1.0%

5.5%

2.0%

2.4%

2.0%

2.9%

Rate of pension increases

2.0%

3.0%

2.0%

3.4%

1.6%

4.2%

1.4%

2.0%

EUR million

2008

2007

Expected return on scheme assets

27.1

25.7

Actual return less expected return on scheme assets Actual return on scheme assets

-104.9

-0.1

-77.8

25.6

2008

2007

The amounts recognised in the balance sheet are summarised as follows: EUR million Long-term employee benefit assets

0.5

1.9

Long-term employee benefit obligations

-106.9

-114.1

Recognised net deficit (-) / surplus (+) in the schemes

-106.4

-112.2

of which: amount expected to be settled within 12 months

-0.8

-105.6

-111.4

amount expected to be settled in more than 12 months

The amounts recognised in the balance sheet are analysed as follows: EUR million

Present value of defined benefit obligations

2008

2007

Funded

Unfunded

schemes

Total

Funded

Unfunded

schemes

Total

-347.3

-38.1

-385.4

-493.6

-39.0

Fair value of scheme assets

279.0

420.4

-532.6 420.4

Net deficit (-) / surplus (+) in the schemes

-68.3

-38.1

-106.4

-73.2

-39.0

-112.2

Funded

Unfunded

Total

schemes

The amounts recognised in the balance sheet for the years 2006 and 2005 were analysed as follows: EUR million

Present value of defined benefit obligations Fair value of scheme assets Net deficit (-) / surplus (+) in the schemes

2006

2005

Funded

Unfunded

Total

schemes

-467.8

-45.9

-513.7

-432.4

-51.7

340.2

295.4

-127.6

-45.9

-173.5

-137.0

-51.7

-188.7

-484.1

FINANCIAL REPORT

The expected rates of return on scheme assets are based on market expectations at the beginning of each year, for returns over the entire life of the related obligation. The expected return on bonds is based on long-term bond yields. The expected return on equities is based on a wide range of qualitative and quantitative market analysis including consideration of market equity risk premiums. The actual return on scheme assets is analysed as follows:

76 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 20: LONG-TERM EMPLOYEE BENEFIT ASSETS AND OBLIGATIONS (continued) The fair value of scheme assets includes the following items: EUR million

2008

2007

Funded

Unfunded

schemes

Equity instruments

152.1

Debt instruments

100.7

0.1

Property Other assets Fair value of scheme assets

Total

Funded

Unfunded

schemes

Total

152.1

250.3

100.7

112.6

0.1

26.1

57.4

279.0

420.4

The fair value of scheme assets did not comprise any property or other assets used by the Group, nor any financial instruments of the Group. The movements in the recognised net deficit are as follows: EUR million

2008

2007

Funded

Unfunded

schemes

-73.2

-39.0

24.8

Expense recognised in the income statement Actuarial gains (+) / losses (-)

Net deficit (-) / surplus (+) at 1 January Contributions paid by the Group Benefits paid by the Group

Items acquired through business combinations (see note 12) Discontinued operations (see note 41) Other benefits paid Translation differences Net deficit (-) / surplus (+) at 31 December

Total

Funded

Unfunded

schemes

Total

-112.2

-127.6

-45.9

-173.5

24.8

39.0

2.5

2.3

-11.1

-3.3

-14.4

-15.5

-2.6

-18.1

-22.7 -

1.4

-21.3

33.7

6.0

39.7

-7.9

1.2

0.4

13.5

0.3

13.8

5.1

-68.3

-38.1

-106.4

-73.2

-39.0

-112.2

Total

Funded

Unfunded

Total

schemes

The amounts recognised in the income statement are as follows: EUR million

2008

2007

Funded

Unfunded

schemes

-11.7

-1.2

-12.9

-14.6

-1.8

-0.1

-0.7

0.8

0.1

-25.9

-2.1

-28.0

-25.9

-2.0

-27.9

Effect of curtailment or settlement

-0.5

0.4

Expected return on scheme assets

27.1

25.7

Expense recognised in the income statement

-11.1

-3.3

-14.4

-15.5

-2.6

-18.1

of which: commercial and administrative expenses (current items)

-10.6

-3.3

-13.9

-15.5

-2.6

-18.1

-0.5

Funded

Unfunded

Total

schemes

Current service cost Past service cost Interest cost

other operating expense (unusual items - see note 9)

-16.4

The amounts recognised through the statement of recognised income and expense are as follows: EUR million

2008

Actual return less expected return on scheme assets Experience gain (+) / loss (-) on liabilities Gain (+) / Loss (-) on change of assumptions

(1)

Actuarial gains (+) / losses (-) (1) Financial and/or demographic assumptions.

2007

Funded

Unfunded

schemes

Total

-104.9

-0.1

0.7

-0.5

0.2

6.2

0.1

-0.1 6.3

81.5

1.9

83.4

27.6

5.9

33.5

-22.7

1.4

-21.3

33.7

6.0

39.7

ANNUAL REPORT 2008 | Consolidated Financial Statements | 77

NOTE 20: LONG-TERM EMPLOYEE BENEFIT ASSETS AND OBLIGATIONS (continued) The best estimate of the contributions expected to be paid to the schemes during the 2009 annual period is EUR 33.9 million. The obligation of defined benefit schemes is calculated on the basis of a set of actuarial assumptions (including among others: mortality, discount rate of future payments, salary increases, personnel turnover, etc.). Should these assumptions change in the future, the obligation may increase. The defined benefit scheme assets are invested in a diversified portfolio, with a return that is likely to experience volatility in the future. Should the return of these assets be insufficient, the deficit might increase.

NOTE 21: DEFERRED TAXES Deferred income tax assets and liabilities are offset when there is a legally enforceable right to set off current assets against current tax liabilities and when the deferred income taxes relate to the same fiscal authority. The movement in deferred tax assets and liabilities during the period and the prior period is as follows: EUR million

Revalua-

Depreciation

Tax losses

Financial

tions

amortisation

Provisions

Dividends

available

instru-

write-downs

for offset

ments

Other

Total

At 1 January 2007 Credited (charged) to income statement Credited (charged) to equity Group changes Exchange differences At 31 December 2007 Credited (charged) to income statement Credited (charged) to equity Exchange differences At 31 December 2008

-211.3

-51.0

5.3

-0.3

2.4

0.9

-17.2

-271.2

6.7

3.3

2.7

0.3

4.5

0.9

2.4

20.8

-0.2

-0.5

10.2

9.7

-0.1

-0.3

-0.4

-205.1

-37.6

7.8

6.9

1.8

-15.1

-241.3

73.1

-0.5

2.3

-1.3

-1.2

-5.0

-0.6

66.8

8.9

0.8

0.7

10.4

1.0

-5.8

-2.1

0.2

-6.7

-131.0

-35.0

10.9

-1.3

3.6

-3.0

-15.0

-170.8

20.8

30.9

29.8

3.4

12.8

97.7

-5.9

2.5

-2.2

1.1

-6.6

-11.1 -9.2

Deferred tax assets (positive amounts) At 1 January 2007 Charged (credited) to income statement Charged (credited) to equity

-10.2

-1.3

2.3

Group changes

-29.5

17.8

13.9

1.3

3.5

Exchange differences

-0.1

-1.4

-1.5

0.2

-2.8

-14.7

39.6

41.5

1.7

10.0

78.1

-3.3

7.4

-1.0

3.3

-18.5

-12.1 15.3

At 31 December 2007 Charged (credited) to income statement Charged (credited) to equity

-1.8

5.8

2.6

8.7

Exchange differences

-0.4

-3.4

0.6

-0.2

3.1

-0.3

-20.2

49.4

41.1

7.4

3.3

81.0

At 31 December 2008 Net deferred tax assets (liabilities) after offsetting recognised in the consolidated balance sheet: 31 December 2007

-205.1

-52.3

47.4

48.4

3.5

-5.1

-163.2

31 December 2008

-131.0

-55.2

60.3

-1.3

44.7

4.4

-11.7

-89.8

The revaluation column mainly includes the deferred tax liability (EUR 120.4 million; 2007: EUR 194.0 million) arising on the recognition of the Avis licence rights. The decrease during the year is explained by the deferred tax impact on the amortisation and on the impairment charge of the Avis licence rights. The net deferred tax balance includes a liability of EUR 4.3 million (2007: EUR 6.7 million) that will be reversed in the following year, due to the amortisation of the Avis licence rights. It also includes net deferred tax assets amounting to EUR 13.9 million (2007: EUR 9.5 million) that are expected to be reversed in the following year. However, given the low predictability of deferred tax movements, this net amount might not be reversed as originally foreseen.

FINANCIAL REPORT

Deferred tax liabilities (negative amounts)

78 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 21: DEFERRED TAXES (continued) At the balance sheet date, the Group has unused tax losses and credits of EUR 438.4 million (2007: EUR 347.5 million) available for offset against future profits, for which no deferred tax asset has been recognised, due to the unpredictability of future profit streams. This includes unused tax losses of EUR 8.9 million (2007: EUR 15.3 million) that will expire in the period 2009-2028 (2007: 2008-2027) and unused tax credits of EUR 54.5 million (2007: nil) that will expire in the period 2009-2015. Other losses may be carried forward indefinitely. Deferred tax has not been recognised in respect of other deductible temporary differences amounting to EUR 25.5 million (2007: EUR 25.3 million) due to the unpredictability of future profit streams. At the balance sheet date the aggregate amount of temporary differences associated with the investments in subsidiaries, branches, associates and interests in joint ventures (being mainly the accumulated positive consolidated reserves of these entities) for which deferred tax liabilities have not been recognised is EUR 656.1 million. No deferred tax liability has been recognised in respect of these differences because the Group is in a position to control the timing of the reversal of the temporary differences and it is probable that such differences will not reverse in the foreseeable future. It should also be noted that the reversal of these temporary differences, for example by way of distribution of dividends by the subsidiaries to the Parent, would generate no (or a marginal) current tax effect. Deferred tax assets include, among other items: - EUR 3.6 million (2007: EUR 8.8 million) of which the utilisation is dependent on future taxable profits in excess of the profit arising from the reversal of existing taxable temporary differences. - EUR 34.1 million (2007: EUR 40.0 million) related to entities that suffered a loss in either the current or preceding period in a tax jurisdiction to which the deferred tax assets relate. The recognition of these deferred tax assets is supported by profit expectations in the foreseeable future. Deferred tax assets are recognised provided that there is a sufficient probability that they will be recovered in the foreseeable future. Recoverability has been conservatively assessed. However, should the conditions for this recovery not be met in the future, the current carrying amount of the deferred tax assets may be reduced.

NOTE 22: OTHER NON-CURRENT RECEIVABLES The other non-current receivables are comprised of guarantee deposits. Their carrying amount approximates their fair value, and they generally generate no interest income. They are expected to be recovered after more than 12 months.

NOTE 23: NON-CURRENT ASSETS CLASSIFIED AS HELD FOR SALE The major classes of assets classified as held for sale are the following ones: EUR million

2008

2007

Automobile

Car

Vehicle

Distribution

Rental

Glass

Vehicles

10.3

Other property, plant and equipment

Non-current assets classified as held for sale

10.3

Group

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

10.3

7.1

0.4

10.3

0.4

7.1

7.5

7.1

In 2007, in the Automobile Distribution segment, non-current assets held for sale comprised buildings previously used for Automobile Distribution activities that were sold in the course of 2008. The gain on disposal (presented in other operating income) amounted to EUR 1.9 million. In the Car Rental segment, non-current assets held for sale comprise ex-rental vehicles where management are committed to the disposal of the vehicles. The disposals are expected to occur in early 2009.

ANNUAL REPORT 2008 | Consolidated Financial Statements | 79

NOTE 24: INVENTORIES EUR million

2008

2007

323.3

292.9

28.6

29.6

Automobile Distribution Vehicles Spare parts and accessories Other Subtotal

0.5

0.4

352.4

322.9

Car Rental Fuel

5.7

6.6

Spare parts and accessories

1.2

1.1

Subtotal

6.9

7.7

Glass and related product

160.6

153.0

Subtotal

160.6

153.0

GROUP

519.9

483.6

84.9

50.7

Vehicle Glass

of which: items carried at fair value less costs to sell

NOTE 25: OTHER FINANCIAL ASSETS The other financial assets are analysed as follows: EUR million

2008

2007

Automobile Distribution - Securitisation cash reserves

36.3

24.4

Car Rental - Finance lease collateral

5.4

Vehicle Glass - Restricted cash related to Safelite acquisition

17.0

17.7

Other financial assets

53.3

47.5

The securitisation (see note 14) cash reserves are pledged by Dâ&#x20AC;&#x2122;Ieteren Lease and are held on its own bank accounts. Other disclosures regarding the securitisation programme are provided in notes 14, 19, 31 and 39. The other financial assets are expected to be recovered within 12 months. They attract interest with reference to EURIBID, LIBID or equivalent. Their carrying amount is equal to their fair value.

NOTE 26: CURRENT TAX ASSETS AND LIABILITIES Current tax assets (liabilities) are largely expected to be recovered (settled) within 12 months.

NOTE 27: TRADE AND OTHER RECEIVABLES Trade and other receivables are analysed as follows: EUR million

Trade receivables - net Vehicle related receivables Receivables from entities accounted for using the equity method Guarantee deposits Other receivables Trade and other receivables

2008

2007

Automobile

Car

Vehicle

Group

Distribution

Rental

Glass

139.1

162.3

169.6

471.0

1,106.5

0.7

0.1

0.8

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

103.8

173.0

171.6

448.4

1,112.1

0.4

0.1

0.5

0.4

12.4

82.8

44.2

139.4

32.5

106.6

39.7

178.8

152.2

1,351.7

213.8

1,717.7

136.7

1,391.8

211.7

1,740.2

FINANCIAL REPORT

The items carried out at fair value less costs to sell are mainly the vehicles sold under buy-back agreements (this kind of agreement being accounted for as operating lease) that are kept on balance sheet until their subsequent resale. The inventories are expected to be recovered within 12 months.

80 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 27: TRADE AND OTHER RECEIVABLES (continued) The trade and other receivables are expected to be recovered within 12 months. Their carrying amount approximates to their fair value, and they generate no interest income. The Group is exposed to credit risk arising from its operating activities. Such risks are mitigated by selecting clients and other business partners on the basis of their credit quality and by avoiding as far as possible concentration on a few large counterparties. Credit quality of large counterparties is assessed systematically and credit limits are put in place prior to taking exposure. Payment terms are on average less than one month except where local practices are otherwise. Receivables from sales involving credit are closely tracked and collected mostly centrally in the Automobile Distribution and Car Rental segments, and at the country level in the Vehicle Glass segment. In the Automobile Distribution segment, concentration on top ten customers is 17% and no customer is above 3%. Certain receivables are also credit insured. In the Car Rental segment, vehicle related receivables include receivables related to vehicles purchased under buy-back agreements, prepaid vehicle operating lease charges, amount due for leasing companies and other vehicle receivables. Credit risk is concentrated with the main European vehicles manufacturers. Concentrations of credit risks with respect to non-vehicle related receivables are limited due to the diversity of the Groupâ&#x20AC;&#x2122;s customers. In the Vehicle Glass segment, there was no significant concentration of credit risk. Balance sheet amounts are stated net of provisions for doubtful debts, and accordingly, the maximum credit risk exposure is the carrying amount of the receivables in the balance sheet. As at 31 December 2008, the provisions for bad and doubtful debt amounted to EUR 41.1 million (2007: EUR 42.6 million). The ageing analysis of trade and other receivables past due but not impaired is as follows: EUR million

2008

2007

Up to three months past due

259.8

202.2

Three to six months past due

15.4

12.0

Over six months past due Total

0.1

0.2

275.3

214.4

As disclosed in note 5, the increase in 2008 of the provisions for bad and doubtful debts amounts to EUR 5.6 million (2007: EUR 7.1 million).

NOTE 28: CASH AND CASH EQUIVALENTS Cash and cash equivalents are analysed below: EUR million

Cash at bank and in hand Short-term deposits Cash and cash equivalents

2008

2007

Automobile

Car

Vehicle

Distribution

Rental

Glass

1.2

23.0

44.6

29.1

1.2

52.1

44.6

Group

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

68.8

1.9

35.0

17.7

29.1

25.9

97.9

1.9

60.9

17.7

80.5

54.6

Cash and cash equivalents are mainly floating rate assets which earn interest at various rates set with reference to the prevailing EURIBID, LIBID or equivalent. Their carrying amount is equal to their fair value. Due to legal restrictions, cash balances held in Brazil, amounting to EUR 5.0 million (2007: EUR 3.7 million), are not available for general use by the Parent or other subsidiaries. Short-term deposits (in the Car Rental segment only) mature within 3 months (2007: 3 months).

ANNUAL REPORT 2008 | Consolidated Financial Statements | 81

NOTE 29: EQUITY

The change in ordinary share capital is set out below: EUR million, except number of shares stated in units

At 1 January 2007 Change At 31 December 2007 Change At 31 December 2008

Number of

Ordinary

ordinary shares

share capital

5,530,262

160.0

5,530,262

160.0

5,530,262

160.0

All ordinary shares issued are fully paid. Ordinary shares have no face value. They are either nominative, bearer or dematerialised shares. Each ordinary share confers one voting right. Treasury shares are held by the Parent and by subsidiaries as set out below:

Treasury shares held by the Parent Treasury shares held by subsidiaries Treasury shares held

2008

2007

Number

Amount

Number

Amount

101,186

19.0

88,073

17.6

101,187

19.0

88,074

17.6

Treasury shares are held to cover the stock option plans set up by the Parent since 1999 (see note 37). On 27 May 2004, the Extraordinary General Meeting of Shareholders authorised the Board of Directors to increase the share capital on one or more occasions, during a renewable period of five years, up to a maximum of EUR 60 million by contributions in cash or in kind or by incorporation of available or non-available reserves or share premium account, with or without creation of new shares, either preference or other shares, with or without voting rights, with or without subscription rights, with the possibility of limiting or withdrawing preferential subscription rights including in favour of one or more specified people. In addition to ordinary shares, there are 500,000 nominative participating shares, which do not represent share capital. The number of participating shares remained unchanged in 2007 and in 2008. Each participating share confers one voting right and gives the right to a dividend equal to one eighth of the dividend of an ordinary share. Nominative shares not fully paid-up may not be transferred except by virtue of a special authorisation from the Board of Directors for each assignment and in favour of an assignee appointed by the Board (art. 7 of the Articles). Participating shares may not be transferred except by the agreement of a majority of members of the Board of Directors, in which case they must be transferred to an assignee appointed by said members (art. 8 of the Articles). The Groupâ&#x20AC;&#x2122;s objectives when managing capital are to safeguard each of its activities ability to continue as a going concern and to maintain an optimal capital structure to reduce the cost of capital. The Group monitors the capital adequacy at the level of each of its activities through a set of ratios relevant to their specific business. In order to maintain or adjust the capital structure, each activity may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or sell assets to reduce debt, taking into account the existence of minority shareholders.

FINANCIAL REPORT

EUR million, except number of shares stated in units

82 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 29: EQUITY (continued) Disclosure of company shareholders (according to “declarations of transparency” dated 31 October 2008)

s.a. de Participations et de Gestion, Brussels

Capital

Participating

Total voting rights

Number

1,032,206

18.66%

1,032,206

17.12%

Reptid Commercial Corporation, Dover, Delaware

202,532

3.66%

202,532

3.36%

Mrs Catheline Périer-D’Ieteren

152,990

2.77%

125,000

25.00%

277,990

4.61%

1,000

0.02%

1,000

0.02%

1,388,728

25.11%

125,000

25.00%

1,513,728

25.10%

1,394,151

25.21%

1,394,151

23.12%

46,619

0.84%

375,000

75.00%

421,619

6.99%

1,000

0.02%

1,000

0.02%

1,441,770

26.07%

375,000

75.00%

1,816,770

30.13%

441,455

7.98%

441,455

7.32%

Equity

Mr Olivier Périer The four abovementioned persons (collectively “SPDG Group”) are associated and act in concert with Cobepa s.a. Nayarit Participations s.c.a., Brussels Mr Roland D’Ieteren Mr Nicolas D’Ieteren The three abovementioned persons (collectively “Nayarit Group”) are associated and act in concert with Cobepa s.a. The persons referred to as SPDG Group and Nayarit Group act in concert. Cobepa s.a., Brussels Cobepa s.a. acts in concert on the one hand with Nayarit Group and on the other hand with SPDG Group.

Changes in equity are set out below: EUR million

Capital and reserves attributable to equity holders Share

Treasury

capital

premium

Share-

Minority

Group's

interest

gains

lative

and

translation

Hedging

Retained

Actuarial

based

value

reserve

earnings

payment

reserve

At 1 January 2007

Total Cumu-

Fair

Taxes

losses

differences

160.0

24.4

-12.9

1.5

0.2

-6.2

660.3

-43.5

11.6

-6.3

789.1

230.1

Treasury shares

-4.6

-1.1

1,019.2 -5.7

Dividend 2006 paid in 2007

-14.6

-13.4

-28.0

Other movements

0.2

-14.0

-13.8

Total recognised income and expense

0.9

2.8

127.7

28.2

-8.0

-4.0

147.6

20.9

168.5 1,140.2

160.0

24.4

-17.5

2.4

0.2

-3.4

773.6

-15.3

3.6

-10.3

917.7

222.5

Treasury shares

At 31 December 2007

-1.5

1.2

-0.3

Dividend 2007 paid in 2008

-16.5

-0.2

-16.7

-13.9 1.0

Puts options treatment - Movement of the period Other movements Total recognised income and expense At 31 December 2008

-0.6

-0.1

2.0

32.2

-18.4

9.6

-28.3

-3.6

-75.9

-79.5

160.0

24.4

-19.0

1.8

0.1

-1.4

789.3

-33.7

13.2

-38.6

896.1

134.7

1,030.8

The Board of Directors proposed the distribution of a gross dividend amounting to EUR 3.00 per share (2007: EUR 3.00 per share), or EUR 16.5 million in aggregate (2007: EUR 16.5 million).

ANNUAL REPORT 2008 | Consolidated Financial Statements | 83

NOTE 30: PROVISIONS Provisions for post-retirement benefit schemes are analysed in note 20. The other provisions, either current or non-current, are analysed below. The major classes of provisions are the following ones: EUR million

2008

2007

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

Non-current provisions Dealer-related

16.5

17.2

Warranty

5.3

Insurance and covers

2.5

20.9

23.4

3.1

18.7

21.8

Other non-current items

17.2

5.9

4.7

133.4

144.0

6.2

3.6

85.3

95.1

30.2

25.6

133.4

189.2

31.8

22.3

85.3

139.4

Insurance and covers

22.1

21.8

Warranty

7.8

Other current items

11.7

9.0

20.7

15.5

12.3

27.8

Subtotal

Subtotal Total provisions

33.8

9.0

42.8

45.1

12.3

57.4

30.2

59.4

142.4

232.0

31.8

67.4

97.6

196.8

The changes in provisions are set out below for the year ended 31 December 2008: EUR million

Dealer-

Warranty

Insurance

Other

and

non-current

current

Total

covers

items

At 1 January 2008

17.2

13.1

43.6

95.1

27.8

Charged in the year

5.1

0.5

25.3

54.9

14.0

99.8

Utilised in the year

-4.9

-6.7

-22.9

-2.7

-13.9

-51.1

Reversed in the year

-6.4

196.8

-0.9

-0.3

-3.0

-2.2

Transferred during the year

1.3

Discontinued operations (see note 41)

-1.3

Translation differences

-1.8

-0.3

-5.0

-7.1

At 31 December 2008

16.5

5.3

45.5

144.0

20.7

232.0

The timing of the outflows being largely uncertain, most of the provisions are considered as a non-current items. Current provisions are expected to be settled within 12 months. The dealer-related provisions arise from the ongoing improvement of the distribution networks. In the Automobile Distribution segment, warranty provisions relate to the cost of services offered to new vehicle customers, like mobility. In the prior period, in the Car Rental segment, the warranty provision relates to the disposed business in Greece (see note 41). In the Car Rental segment, insurance reserves provide for uninsured losses under third party liabilities or claims. Due to the timescales and uncertainties involved in such claims, provision is made based upon the profile of claims experience, allowing for potential claims for a number of years after policy inception. In the Automobile Distribution segment, provisions are set up for incurred material damage (registered or not) at Dâ&#x20AC;&#x2122;Ieteren Lease. Other current and non-current provisions primarily comprise: - Reorganisation and employee termination provisions that are expected to crystallise within the next few years. - Dilapidation and environmental provisions to cover the costs of the remediation of certain properties held under operating leases. - Provisions for vacant properties. - Provision against the future redemption of benefits under customer loyalty programmes. - Provision against legal claims that arise in the normal course of business, that are expected to crystallise in the next couple of years. After taking appropriate legal advice, the outcome of these legal claims should not give rise to any significant loss beyond amounts provided at 31 December 2008. - The provision for a long-term management incentive scheme set up in 2005 in the Vehicle Glass segment. The settlement of this scheme is expected to occur in 2010.

FINANCIAL REPORT

Current provisions

84 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 31: BORROWINGS Borrowings are analysed as follows: EUR million

2008

2007

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

Non-current borrowings Bonds

200.0

Bonds under securitisation programme

199.6

266.1

Obligations under finance leases

25.6

0.7

22.7

23.4

89.6

286.0

243.2

618.8

11.7

150.0

261.7

423.4

Loan notes

555.3

251.4

806.7

549.2

253.4

802.6

Deferred consideration

22.5

30.3

489.2

863.8

520.2

1,873.2

477.8

730.2

537.8

1,745.8

Bank and other loans

Subtotal non-current borrowings Current borrowings Bonds under securitisation programme Obligations under finance leases Bank and other loans

86.4

232.7

16.4

249.1

273.0

9.4

282.4

3.7

31.8

15.3

50.8

32.2

8.8

0.6

41.6

43.9

13.3

57.2

69.7

22.2

91.9

Deferred consideration

0.2

0.3

Inter-segment financing

-70.0

70.0

Subtotal current borrowings

134.0

278.0

31.7

443.7

31.9

304.3

80.0

416.2

TOTAL BORROWINGS

623.2

1,141.8

551.9

2,316.9

509.7

1,034.5

617.8

2,162.0

Commercial paper

The Group issues bonds through its wholly-owned subsidiary D’Ieteren Trading b.v. The bonds outstanding at 31 December are as follows: 2008 Issued

Principal

2007 Maturing

Fixed rate

Issued

(EUR million)

Principal

Maturing

Fixed rate

(EUR million)

July 2004

100.0

2012

5.25%

July 2004

100.0

2012

5.25%

July 2005

100.0

2015

4.25%

July 2005

100.0

2015

4.25%

Total

200.0

The weighted average cost of bonds in 2008 was 4.8% (2007: 4.8%). The Group issues bonds under a securitisation programme, through its wholly-owned subsidiary s.a. D’Ieteren Lease n.v. (“D’Ieteren Lease”). The programme is set out in note 14. The bonds are rated A1. The spread payable over EURIBOR is 65 basis points. The weighted average cost of this programme, including the amortisation of the initial set-up costs over a 3-year period, was 5.5% (2007: 5.2%). The amount of bond recognised as current liabilities represents the part that matures within the year. Pledged accounts related to this securitisation programme are recorded under the heading “other financial assets” (see note 25). Other disclosures regarding the securitisation programme are also provided in notes 19 and 39. Obligations under finance leases are analysed below: EUR million

Within one year Between one and five years More than five years Subtotal

2008

2007

Minimum

Present value

Minimum

lease

of minimum

lease

of minimum

payments

lease payments

payments

lease payments

256.7

249.1

290.4

282.3

27.6

24.5

23.5

21.5

1.9

1.1

2.4

2.0

286.2

274.7

316.3

305.8

Less: future finance charges

-11.5

-10.5

Present value of finance lease obligations

274.7

305.8

Present value

ANNUAL REPORT 2008 | Consolidated Financial Statements | 85

NOTE 31: BORROWINGS (continued) Obligations under finance leases are mainly located in the Car Rental segment, which leases certain of its vehicles (including some vehicles held under buy-back agreements) and some plant and equipment under finance leases. The average lease term is less than one year. For the year ended 31 December 2008 the average effective interest rate was 5.0% (2007: 4.5%) and interest rates are fixed at the contract date. All these finance leases are on a fixed repayment basis and no arrangements have been entered into for contingent rent payments. Finance leases are occasionally used in the Vehicle Glass segment, and not used in the Automobile Distribution segment. The Group’s obligations under finance leases are secured by the lessors having legal title over the leased assets. In the prior year, collateral was held against certain of the leases in the Car Rental segment (see note 25). Bank and other loans mainly represent non syndicated bank loans (in the Automobile Distribution segment) and syndicated arrangements (in the Car Rental and the Vehicle Glass segments), as well as overdrafts. Depending on the currency of the bank borrowings and the segment concerned, the weighted average cost ranged from 3.5% to 6.8% in 2008 (2007: 4.3% to 5.8%). In the Car Rental segment, loan notes represent the following outstanding balances, due by Avis Finance Company plc (“AFC”), an indirect wholly-owned subsidiary of Avis Europe plc: 2008 Currency

Principal

Maturing

(in million)

Principal

Maturing

(in million)

August 2000

USD

48.0

2010

48.0

June 2002

EUR

26.8

2012

26.8

2010 2012

June 2004

USD

240.0

2011,2012,2014

240.0

2011,2012,2014

June 2004

EUR

65.0

2012

65.0

2012

July 2006

EUR

250.0

2013

250.0

2013

The USD loan notes bear interest at an average fixed rate of 6.3% (2007: 6.3%). The euro denominated loan notes issued prior to July 2006 bear interest at an average fixed rate of 5.8% (2007: 5.8%). These loan notes are at fixed rates such that their contractual repricing profile is coterminous with their maturity profile. The EUR 250.0 million Senior Floating Rate Notes bear interest at EURIBOR plus 2.625%. These notes reprice EURIBOR quarterly and include a call option, permitting AFC to repay the notes with effect from 31 July 2008. This option is separately recognised as an embedded derivative at fair value (see note 19). In the Vehicle Glass segment, loan notes represent the following outstanding balances, due by Belron Finance Limited, a whollyowned subsidiary of Belron: 2008 Interest rate

Currency

Principal

2007 Maturing

Principal

Maturing 2014

(in million)

Series A

5.68%

USD

200.0

2014

(in million) 200.0

Series B

5.80%

USD

125.0

2017

125.0

2017

Series C

5.94%

GBP

20.0

2017

20.0

2017

The Group runs two commercial paper programmes in Belgium: - s.a. D’Ieteren Treasury n.v., a wholly-owned subsidiary of the Parent, runs a EUR 300.0 million (2007: EUR 300.0 million) programme guaranteed by the Parent. The weighted average cost over 2008 was 4.6% (2007: 4.1%). Medium term notes can also be drawn from this programme. - AFC runs a programme guaranteed by Avis Europe plc, which provides the Car Rental segment with borrowings of up to EUR 200.0 million (2007: EUR 200.0 million). Amounts drawn under the facility attract interest at a floating rate set by reference to EURIBOR plus a margin which will vary depending upon market conditions at the time of issue. Amounts currently borrowed under these programmes are repayable in less than one year. Deferred consideration represents amounts still due arising on the acquisition of Avis Europe Investment Holdings Limited (a wholly-owned subsidiary of Avis Europe plc) from Avis Inc. in 1997, and payable in annual instalments of GBP 1.9 million including interest. The deferred consideration is denominated in GBP and bears an interest rate of 8.0% fixed for 29 years.

FINANCIAL REPORT

Issued

2007

86 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 31: BORROWINGS (continued)

Non-current borrowings are due for settlement after more than one year, in accordance with the maturity profile set out below: EUR million Between one and five years

2008

2007

1,420.9

1,024.7

After more than five years

452.3

721.1

Non-current borrowings

1,873.2

1,745.8

The exposure of the Groupâ&#x20AC;&#x2122;s borrowings to interest rate changes and the repricing dates (before the effect of the debt derivatives) at the balance sheet date is as follows: EUR million

2008

2007

Less than one year

977.0

1,208.6

Between one and five years

889.0

498.3

After more than five years

450.9

455.1

2,316.9

2,162.0

Borrowings

The interest rate and currency profiles of borrowings are as follows (including the value of the adjustment for hedged borrowings disclosed in note 32): EUR million Currency

2008 Fixed

Floating

rate

EUR

297.3

1,358.9

GBP

43.9

38.3

USD

496.4

57.8

2007 Total

Fixed

Floating

rate

Total

1,656.2

296.0

1,267.4

82.2

59.0

38.9

97.9

554.2

486.2

1,563.4

Other

2.2

49.1

51.3

3.2

49.2

52.4

Total

839.8

1,504.1

2,343.9

844.4

1,355.5

2,199.9

When the effects of debt derivatives are taken into account, the interest rate and currency profiles of borrowings are as follows: EUR million Currency

2008 Fixed

Floating

rate

EUR

1,121.5

676.9

GBP

64.9

66.9

USD

307.8

13.4

2007 Total

Fixed

Floating

rate

Total

1,798.4

1,156.1

478.2

131.8

128.9

111.5

240.4

321.2

248.5

-1.0

247.5

1,634.3

Other

46.5

46.0

92.5

34.2

43.5

77.7

Total

1,540.7

803.2

2,343.9

1,567.7

632.2

2,199.9

The floating rate borrowings bear interest at various rates set with reference to the prevailing EURIBOR or equivalent. The range of interest rates applicable for fixed rate borrowings outstanding is as follows: 2008

2007

Currency

Min.

Max.

Min.

Max.

EUR

3.7%

6.8%

4.3%

6.8%

GBP

5.7%

5.9%

7.4%

USD

4.9%

6.8%

5.7%

9.0%

Other

3.6%

6.1%

5.8%

8.0%

ANNUAL REPORT 2008 | Consolidated Financial Statements | 87

NOTE 31: BORROWINGS (continued) The fair value of current borrowings approximates to their carrying amount. The fair value of non-current borrowings is set out below: 2008

2007

Fair

Carrying

Fair

Carrying

value

amount

value

amount

Bonds

183.4

200.0

195.6

200.0

Bonds under securitisation programme

199.6

266.1

Obligations under finance leases Bank loans, loan notes and other loans

25.7

25.6

22.7

23.4

1,089.1

1,425.5

1,183.9

1,226.0

Deferred consideration Non-current borrowings

22.1

22.5

28.8

30.3

1,519.9

1,873.2

1,697.1

1,745.8

The fair value of the bonds is determined based on their market prices. The fair value of the bonds under securitisation programme is equal to their carrying amount. The fair value of the other borrowings is based on either tradable market values, or where such market values are not readily available is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments. Certain of the borrowings in the Group have covenants attached. In the Vehicle Glass segment, currency denominated borrowings are designated as hedge of net investment in non-EUR denominated net assets. The foreign exchange gain of EUR 37.5 million (2007: EUR 18.6 million) on translation of borrowings to the presentation currency at the balance sheet date is recognised in equity. The fair value of the borrowings at 31 December 2008 was EUR 392.1 million (2007: EUR 518.1 million). The ineffectiveness recognised in the income statement that arises from hedge of net investment in foreign operations amounts to nil.

NOTE 32: NET DEBT Net debt is a non-GAAP measure, i.e. its definition is not addressed by IFRS. The Group does not represent net debt as an alternative to financial measures determined in accordance with IFRS. The Group uses the concept of net debt to reflect its indebtedness. Net debt is based on borrowings less cash, cash equivalents and current asset investments. It excludes the fair value of derivative debt instruments. The hedged borrowings (i.e. those that are accounted for in accordance with the hedge accounting rules of IAS 39) are translated at the contractual foreign exchange rates of the related cross currency swaps. The other borrowings are translated at closing foreign exchange rates. EUR million

31 December 2008

31 December 2007

Automobile

Car

Vehicle

Distribution

Rental

Glass

Non-current borrowings

489.2

863.8

520.2

Current borrowings

134.0

278.0

31.7

27.0

623.2

Adjustment for hedged borrowings Gross debt Less: Cash and cash equivalents

Group

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

1,873.2

477.8

730.2

537.8

1,745.8

443.7

31.9

304.3

80.0

416.2

27.0

37.9

1,168.8

551.9

2,343.9

509.7

1,072.4

617.8

2,199.9 -80.5

-1.2

-52.1

-44.6

-97.9

-1.9

-60.9

-17.7

Less: Current financial assets

-36.3

-24.4

-5.4

-29.8

Net debt

585.7

1,116.7

507.3

2,209.7

483.4

1,006.1

600.1

2,089.6

NOTE 33: PUT OPTIONS GRANTED TO MINORITY SHAREHOLDERS The Group is committed to acquiring the minority shareholdings owned by third parties in Belron, should these third parties wish to exercise their put options. IAS 32 requires that the exercise price of such options granted to minority interest (EUR 312.1 million at 31 December 2008, of which EUR 86.5 million of put options with related call options, exercisable until 2014, and EUR 225.6 million of put options with no related call options, exercisable until 2009) be reflected as a financial liability in the consolidated balance sheet. The difference between the exercise price of the options and the carrying value of the minority interest (EUR 117.3 million at 31 December 2008) is presented as additional goodwill (EUR 194.8 million at 31 December 2008). This goodwill is adjusted at period end to reflect the change in the exercise price of the options and the carrying value of minority interest to which they relate. This treatment reflects the economic substance of the transaction, and has no impact on the result attributable to equity holders of the Parent. The exercise price of the put options takes into account estimates of the future profitability of Belron. Should the underlying estimates change, the value of the put options recognised in the balance sheet (and of the related goodwill) would be impacted (this would however have no impact on the income statement under the accounting treatment currently applied).

FINANCIAL REPORT

EUR million

88 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 34: OTHER NON-CURRENT PAYABLES Other non-current payables are non interest-bearing deferred consideration on acquisitions, payable after more than 12 months. The carrying value of other non-current payables approximates to their fair value.

NOTE 35: TRADE AND OTHER CURRENT PAYABLES Trade and other payables are analysed below: EUR million

2008

2007

Automobile

Car

Vehicle

Distribution

Rental

Glass

Trade payables

63.6

282.4

87.6

Accrued charges and deferred income

44.8

190.1

2.9

5.1

3.1

Non-income taxes

Automobile

Car

Vehicle

Distribution

Rental

Glass

433.6

136.2

384.8

87.6

608.6

237.8

38.9

212.9

7.7

259.5

12.9

21.1

0.3

-2.0

14.3

12.6

12.4

3.1

43.4

63.6

209.3

316.3

48.4

74.6

203.1

326.1

156.9

539.2

325.1

1,021.2

223.8

670.3

315.8

1,209.9

Deferred consideration on acquisitions Other creditors Trade and other payables

Group

Trade and other current payables are expected to be settled within 12 months. The carrying value of trade and other current payables approximates to their fair value.

NOTE 36: EMPLOYEE BENEFIT EXPENSE The employee benefit expense is analysed below: EUR million

2008

2007

Automobile

Car

Vehicle

Distribution

Rental

Glass

Retirement benefit charges under defined contribution schemes

-4.1

-6.9

-12.5

Retirement benefit charges under defined benefit schemes (see note 20)

-1.1

-10.1

-3.2

Total retirement benefit charge Wages, salaries and social security costs Share-based payments: equity-settled

Group

Automobile

Car

Vehicle

Distribution

Rental

Glass

Group

-23.5

-4.1

-5.7

-11.3

-21.1

-14.4

-1.1

-10.2

-6.8

-18.1

-5.2

-17.0

-15.7

-37.9

-5.2

-15.9

-18.1

-39.2

-113.9

-266.3

-770.7

-1,150.9

-115.3

-275.4

-658.0

-1,048.7

-0.7

-0.2

-0.9

-0.7

-0.4

-1.1

Total employee benefit expense

-119.8

-283.5

-786.4

-1,189.7

-121.2

-291.7

-676.1

-1,089.0

of which: current items

-119.8

-283.0

-786.4

-1,189.2

-121.2

-291.7

-676.1

-1,089.0

-0.5

unusual items (defined benefit schemes see notes 9 and 20)

The above expense does not include the amounts charged during the period relating to the long-term management incentive scheme mentioned in note 30. The staff numbers are set out below (average full time equivalents): 2008

2007

Automobile Distribution

1,650

1,601

Car Rental

5,967

6,122

Vehicle Glass

20,833

18,281

Group

28,450

26,004

ANNUAL REPORT 2008 | Consolidated Financial Statements | 89

NOTE 37: SHARE-BASED PAYMENTS There are in the Group two kinds of equity-settled share-based payment schemes: - Since 1999, share option schemes have been granted to officers and managers of the Automobile Distribution segment, in the framework of the Belgian law of 26 March 1999. The underlying share is the ordinary share of s.a. D’Ieteren n.v. - Since 1998, several share option schemes, a performance share plan and long-term incentive plans have been granted to certain categories of employees in the Car Rental segment. The underlying share is the ordinary share of Avis Europe plc. Automobile Distribution segment Options outstanding are as follows: Number of options

Exercise

(in units) 2008

Exercise

price

period

2008

2007

(EUR)

From

12,303

121.0

1/01/2012

5/11/2018

2007

9,773

264.0

1/01/2011

2/12/2017

2006

8,285

8,315

266.0

1/01/2010

27/11/2016

2005

11,660

11,690

209.0

1/01/2009

6/11/2015

2004

8,945

9,035

142.0

1/01/2008

28/11/2014

2003

8,525

8,555

163.4

1/01/2007

16/11/2013

2002

6,000

6,130

116.0

1/01/2006

13/10/2015 25/10/2014

2001

5,965

6,045

133.0

1/01/2005

2000

13,430

13,460

267.0

1/01/2004

25/9/2013

1999

11,335

11,585

375.0

1/01/2003

17/12/2012

Total

96,221

84,588

All outstanding options are covered by treasury shares (see note 29). A reconciliation of the movements in the number of outstanding options during the year is as follows: Number

Weighted average

(in units)

exercise price (EUR)

2008

2007

2008

2007

Outstanding options at the beginning of the period

84,588

86,475

229.0

215.4

Granted during the period

12,303

9,773

121.0

264.0

Forfeited during the period

-480

-1,990

160.5

Exercised during the period

-190

-9,750

131.8

133.0

Other movements during the period Outstanding options at the end of the period

96,221

84,588

199.6

229.0

of which: exercisable at the end of the period

54,200

45,775

221.2

237.1

In 2008, the majority of the options were exercised during the first half of the period. The average share price during the period was EUR 175.3 (2007: EUR 297.5). For share options outstanding at the end of the period, the weighted average remaining contractual life is as follows: Number of years 31 December 2008

6.6

31 December 2007

7.1

IFRS 2 “Share-Based Payment” requires that the fair value of all share options issued after 7 November 2002 is charged to the income statement. The fair value of the options must be assessed on the date of each issue. A simple Cox valuation model was used at each issue date re-assessing the input assumptions on each occasion. The assumptions for the 2008 and 2007 issues were as follows:

FINANCIAL REPORT

Date of grant

90 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 37: SHARE-BASED PAYMENTS (continued) 2008

2007

Number of employees

212

153

Spot share price (EUR)

95.0

238.0

121.0

264.0

Option exercise price (EUR) Vesting period (in years)

3.0

Expected life (in years)

6.8

6.9

Expected volatility (in %) Risk free rate of return (in %) Expected dividend (EUR) Probability of ceasing employment before vesting (in %) Weighted average fair value per option (EUR)

35%

17%

3.45%

4.60%

3.10

2.60

21.2

58.6

Expected volatility and expected dividends were provided by an independent expert. The risk free rate of return is based upon EUR zero-coupon rates with an equivalent term to the options granted. Car Rental segment The share option schemes of the Car Rental segment might have a dilutive impact on the Groupâ&#x20AC;&#x2122;s shareholding in Avis Europe plc. The total number of share options in issue at 31 December 2008 is 34,688,400 (2007: 12,504,500). This represents 3.8% (2007: 1.3%) of Avis Europe plc share capital. These share options can be exercised until 2013 (2007: 2013). Details on these share option schemes are provided in Avis Europeâ&#x20AC;&#x2122;s annual report.

NOTE 38: FINANCIAL RISK MANAGEMENT Treasury policies aim to ensure permanent access to sufficient liquidity, and to monitor and limit interest and currency exchange risks. These are summarised below: Liquidity Risk Each business unit of the Group seeks to ensure that it has sufficient committed funding in place to cover its requirements - as estimated on the basis of its long-term financial projections - in full for at least the next 2 years. Long-term funding is managed at the level of each business unit. This funding is complemented by various sources of uncommitted liquidity (short-term banking facilities, commercial paper). The long-term funding mainly consists of: - In the Car Rental and Vehicle Glass segments: syndicated loan facilities, and private and public bonds; - In the Automobile Distribution segment: public retail bonds, securitisation of leasing activities, bi-lateral bank facilities. Repayment dates are spread as far as possible and funding sources are diversified in order to mitigate refinancing risk (timing, markets) and its associated costs (credit spread risk). Cash pooling schemes are sought and implemented each time when appropriate (in the Automobile Distribution and the Vehicle Glass segments) in order to minimise gross financing needs and costs of liquidity.

ANNUAL REPORT 2008 | Consolidated Financial Statements | 91

NOTE 38: FINANCIAL RISK MANAGEMENT (continued) The following is an analysis of the contractual undiscounted cash flows payable under financial liabilities together with derivative financial instrument assets and liabilities at balance sheet date: EUR million

Due within

Due between

Due after

one year

one and five years

five years

Capital

Interest

Total

Capital

Interest

Capital

Interest

Capital

Interest

At 31 December 2008 Borrowings Bonds Bonds under securitisation programme

9.5

100.0

32.8

100.0

8.5

200.0

50.8

86.4

8.6

198.1

9.9

1.5

286.0

18.5

Obligations under finance leases

249.1

8.9

24.5

2.5

1.1

0.1

274.7

11.5

Other borrowings

108.8

71.4

1,095.0

186.0

323.6

26.2

1,527.4

283.6

Deferred consideration Total Trade and other payables

0.2

1.0

21.5

22.7

444.5

98.4

1,418.6

231.2

447.7

34.8

2,310.8

364.4

1,021.2

-195.9

-18.0

-162.9

-43.6

-73.1

-8.5

-431.9

-70.1

213.9

21.9

212.7

47.4

86.1

8.9

512.7

78.2

1,483.7

102.3

1,468.4

235.0

460.7

35.2

3,412.8

372.5

Derivative financial assets and liabilities Derivative contracts - receipts Derivative contracts - payments Total At 31 December 2007 Bonds

9.5

100.0

38.0

100.0

12.8

200.0

60.3

Bonds under securitisation programme

14.2

253.6

24.6

12.5

0.2

266.1

39.0

Obligations under finance leases

283.1

7.8

21.4

4.7

2.0

0.1

306.5

12.6

Other borrowings

197.6

84.8

580.2

248.7

574.2

59.5

1,352.0

393.0

Deferred consideration Total Trade and other payables

0.3

1.3

29.0

30.6

481.0

116.3

956.5

316.0

717.7

72.6

2,155.2

504.9

1,209.9

0.1

10.6

1.0

1,220.5

1.1

-315.0

-231.5

-89.3

-635.8

322.4

275.7

107.2

705.3

1,698.3

116.4

1,011.3

317.0

735.6

72.6

3,445.2

506.0

Derivative financial assets and liabilities Derivative contracts - receipts Derivative contracts - payments Total

Interest Rate Risk The Group seeks to minimise the impact of adverse interest rates movements on its current financial results, particularly in relation to the next 12 months. To manage its interest rate exposures, the Group primarily uses forward rate agreements, interest rate swaps, caps and floors. Each business unit determines its own minimum hedge percentages, which, for the period up to 12 months, are comprised between 50% and 100%, and thereafter gradually lower over time. The hedge horizon overall is typically 3 years. Hedges, or fixed rate indebtedness, longer than 5 years are unusual. More specifically, the Automobile Distribution segment also seeks to protect the lending margins forthcoming from the long-term (operational) leasing activity (Dâ&#x20AC;&#x2122;Ieteren Lease). In this case, hedging is driven by lease contracts duration (estimated length of contracts, amortisation profiles). A change of 100 basis point in interest rate at the reporting date would have increased/decreased equity and result from continuing operations by the amounts shown below. This analysis assumes that all other variables remain constant. EUR million

Result from continuing operations

Cash flow hedge reserve

1% increase

1% decrease

1% increase

31 December 2008

-5.5

5.8

-6.8

1% decrease 6.8

31 December 2007

-6.9

7.5

-7.3

7.3

FINANCIAL REPORT

Borrowings

92 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 38: FINANCIAL RISK MANAGEMENT (continued) Currency Risk The Groupâ&#x20AC;&#x2122;s objective is to protect its cash flows and investments from the potentially high volatility of the foreign exchange markets by hedging any material net foreign currency exposure. Material means in excess of one million euros. Transaction exposures are limited and generally not material. When material, they are reduced or cancelled as soon as they are identified. Investments outside the Eurozone generate translation exposures. These are minimised mainly through the creating of liabilities (debt) denominated in the same currency as the cash flows generated by the corresponding assets. To complement these natural hedges, the Group uses instruments such as forwards, swaps, plain-vanilla foreign exchange options and, when appropriate, cross currency swaps. The hedging levels are reviewed periodically, in light of the market conditions and each time a material asset is added or removed. A 10 percent strenghtening/weakening of the euro against the following currencies at 31 December would have increased/decreased equity and result from continuing operations by the amounts shown below. This analysis assumes that all other variables remain constant: EUR million

Result from continuing operations

Equity

10% strenghtening

10% weakening

10% strenghtening

10% weakening

EUR/GBP

5.0

-5.1

-9.5

9.6

EUR/USD

-0.4

0.2

3.1

-3.5

EUR/CHF

4.0

-4.0

-2.2

2.2

EUR/GBP

-3.0

3.0

-9.1

8.9

EUR/USD

-1.2

1.3

1.9

-1.2

EUR/CHF

1.8

-1.8

-0.2

0.2

31 December 2008

31 December 2007

Counterparty Risk Exposure limits to financial counterparties in respect of both amount and duration are set in respect of derivatives and cash deposits. Such transactions are effected with a limited number of pre-designated banks on the basis of their publicly available credit ratings, which are checked at least once a year. The required minimum rating is A- (Standard and Poorâ&#x20AC;&#x2122;s). Limits on length of exposure per category of transaction are in place to protect liquidity and mitigate counterparty default risks. The instruments and their documentation must be authorized before entering the contemplated transactions. There is no meaningful price risk other than those mentioned above. Within this framework, considerable autonomy is granted to each of the three businesses.

NOTE 39: CONTINGENCIES AND COMMITMENTS EUR million

2008

2007

Commitments to acquisition of non-current assets

27.7

47.4

46.1

43.8

4.6

4.7

Other important commitments: Commitments given Commitments received

The commitments to acquisition of non-current assets mainly concern the vehicle fleet of the Car Rental segment. The Group is a lessee in a number of operating leases. The related future minimum lease payments under non-cancellable operating leases, per maturity, are as follows: EUR million

2008

2007

Within one year

163.3

164.3

Later than one year and less than five years

302.5

250.1

After five years

146.1

123.9

Total

611.9

538.3

At each year end, the Group also had prepaid various other operating lease commitments in relation to vehicles purchased under buy-back agreements, included in vehicle related receivables in note 27.

ANNUAL REPORT 2008 | Consolidated Financial Statements | 93

NOTE 39: CONTINGENCIES AND COMMITMENTS (continued) The Group also acts as a lessor in a number of operating leases, mainly through its wholly-owned subsidiary s.a. Dâ&#x20AC;&#x2122;Ieteren Lease n.v. The related future minimum lease payments under non-cancellable operating leases, per maturity, are as follows: EUR million

2008 Investment

2007

Vehicles

property

Other

Total

property,

Investment

Vehicles

property

Other

Total

property,

plant and

equipment

Within one year

0.1

89.4

89.5

0.2

81.0

81.2

Later than one year and less than five years

0.5

120.1

120.6

0.6

108.0

108.6

After five years

0.5

0.1

0.6

0.5

Total

1.1

209.6

210.7

1.3

189.0

190.3

The revenue, expenses, rights and obligations arising from leasing arrangements regarding investment property are not considered material to the Group, and accordingly a general description of these leasing arrangements is not disclosed. Under the securitisation programme (see notes 14, 19, 25, 31), Dâ&#x20AC;&#x2122;Ieteren Lease granted a floating charge on its business to the bondholders to secure its obligations. The floating charge was granted for up to the following amounts: - in respect of principal: EUR 324.0 million; - three years of interest calculated at the rate of 5%, or such other rate as may be agreed between the parties.

NOTE 40: RELATED PARTY TRANSACTIONS EUR million

2008

2007

With entities with joint control or significant influence over the Group: Amount of the transactions entered into during the period Outstanding creditor balance at 31 December

0.7

0.6

10.0

With associates: Sales Purchases Trade receivables outstanding at 31 December

9.8

7.5

-0.1

-0.2

0.7

0.4

With joint ventures in which the Group is a venturer: Sales

0.6

0.5

Trade receivables outstanding at 31 December

0.1

With key management personnel: Compensation: Short-term employee benefits

4.0

4.3

Post-employment benefits

0.2

4.2

4.5

Amount of the other transactions entered into during the period

Total compensation

n/a

Outstanding creditor balance at 31 December

n/a

2.7

0.3

0.2

With other related parties: Amount of the transactions entered into during the period Outstanding creditor balance at 31 December

FINANCIAL REPORT

At each year end, the Group also had prepaid various other operating lease commitments in relation to vehicles sold under buyback agreements, included in deferred income in note 35.

94 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 41: DISCONTINUED OPERATIONS In the prior year, Avis Europe disposed of its subsidiary in Greece, Olympic Commercial and Tourist Enterprises SA, which was classified as a discontinued operation. The net consideration of EUR 14.4 million was after deducting a warranty provision of EUR 7.8 million and the net assets at disposal were EUR 23.2 million. Accordingly the total loss on disposal was EUR 8.8 million. The loss on disposal was presented as unusual item, together with a goodwill impairment charge of EUR 7.1 million recorded prior to the disposal. An unusual credit of EUR 1.3 million has been recognised (under the line “Discontinued operations”) in the current period to reflect the final settlement of a warranty provision (see note 9). The results, major classes of assets and liabilities and cash flows of the discontinued operation (in the Car Rental segment) in the prior period were as detailed below: EUR million

31 December 2007 Current

Unusual

(1)

items and

items

Total

re-measurements Sales

(1)

48.7

Operating result

7.9

-15.9

48.7 -8.0

Result before tax

2.4

-15.9

-13.5

Tax expense

1.1

Result after tax from discontinued operations

3.5

-15.9

-12.4

(1) See summary of significant accounting policies in note 2 and unusual items and re-measurements in note 9.

Balance sheet at the date of disposal Goodwill Other intangible assets Vehicles

0.5 0.2 124.9

Other property. plant and equipment

2.4

Inventories

0.2

Current tax assets Vehicles held under buy-back agreements Other trade and receivables Cash and cash equivalents Total assets Long-term employee benefit obligations

0.1 102.0 25.9 2.4 258.6 1.2

Other provisions

0.6

Deferred tax liabilities

8.5

Current borrowings Trade and other payables Total liabilities Net asset

Cash flows associated to discontinued operations

196.7 28.4 235.4 23.2

2007

Net cash from operating activities

0.2

Net cash from investing activities

-17.2

Net cash from financing activities

13.0

Total

-4.0

In the Car Rental segment, in the prior year, the line “Disposal of equity instruments” of the segment cash flow statement (see note 3.4) included the net disposal proceeds at time of sale (EUR 22.2 million) less the cash disposed of (EUR 2.4 million).

ANNUAL REPORT 2008 | Consolidated Financial Statements | 95

NOTE 42: LIST OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES The full list of companies concerned by articles 114 and 165 of the Royal Decree of 30 January 2001 implementing the Company Code will be lodged with the Central Balance Sheet department of the National Bank of Belgium. It is also available on request from the Parent head office (see note 1). The main fully consolidated subsidiaries of the Parent are listed below: Name

Country of incorporation

% of share capital owned

at 31 Dec. 2008

at 31 Dec. 2007 100%

Automobile Distribution s.a. D’Ieteren Lease n.v.

Belgium

100%

s.a. D’Ieteren Sport n.v.

Belgium

75%

s.a. D’Ieteren Services n.v.

Belgium

100%

100% 100%

s.a. D’Ieteren Treasury n.v. D’Ieteren Trading b.v. D’Ieteren Car Rental s.a. Dicobel s.a.

Belgium

100%

The Netherlands

100%

Luxemburg

100%

Belgium

100%

United Kingdom

59.59%

Luxemburg

77.38%

Car Rental Avis Europe plc Belron s.a.

Taking into account the treasury shares held by Avis Europe, the percentages used for the consolidation of Avis Europe are slightly higher than the proportion held in Avis Europe’s share capital shown above: 2008

2007

Average percentage

59.74%

59.72%

Year-end percentage

59.64%

59.84%

Taking into account the impact of the exercise by the Group on 30 March 2007 of a call option of 3.65% of the equity capital of Belron, the average percentage used in 2007 for the consolidation of Belron was different than the year-end percentage: 2008

2007

Average percentage

77.38%

76.94%

Year-end percentage

77.38%

FINANCIAL REPORT

Vehicle Glass

96 |

ANNUAL REPORT 2008 | Consolidated Financial Statements

NOTE 43: EXCHANGE RATES Monthly income statements of foreign operations are translated at the relevant rate of exchange for that month. Except for the balance sheet which is translated at the closing rate, each line item in these consolidated financial statements represents a weighted average rate. The main exchange rates used for the translations were as follows: Number of euros for one unit of foreign currency

2008

2007

AUD

0.50

0.60

BRL

0.30

0.39

CAD

0.59

0.69

GBP

1.05

1.40

USD

0.71

0.69

Closing rate

Average rate

(1)

AUD

0.57

0.61

BRL

0.37

CAD

0.64

0.68

GBP

1.37

1.46

USD

0.68

0.73

(1) Effective average rate for the profit or loss attributable to equity holders.

NOTE 44: SUBSEQUENT EVENTS No significant transaction out of the ordinary course of business occurred between the closing date and the date these consolidated financial statements are authorised for issue.

ANNUAL REPORT 2008 | Consolidated Financial Statements | 97

NOTE 45: AUDITOR’S REPORT Statutory Auditor’s report to the General Meeting of Shareholders of D’Ieteren s.a. on the consolidated financial statements for the year ended December 31, 2008 In accordance with the legal requirements, we report to you on the performance of the mandate of Statutory Auditor which has been entrusted to us. This report contains our opinion on the true and fair view of the consolidated financial statements as well as the required additional statements. Unqualified audit opinion on the consolidated financial statements We have audited the consolidated financial statements for the year ended December 31, 2008, established on the basis of the International Financial Information Standards referential as adopted by the European Union, which show a balance sheet total of EUR 5,365.8 million and of which the profit and loss account closes with a profit for the year attributable to equity holders for an amount of EUR 32.2 million. The financial statements of the foreign daughter companies, which are included in the consolidation, were audited by other auditors; our statement is thereby based on their opinion.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with the legal requirements and the auditing standards applicable in Belgium, as issued by the Institute of Registered Auditors (Institut des Reviseurs d’Entreprises / Instituut der Bedrijfsrevisoren). Those standards require that we plan and perform the audit to obtain reasonable assurance whether the consolidated financial statements are free from material misstatements, whether due to fraud or error. In accordance with the above-mentioned auditing standards, we considered the group’s accounting system, as well as its internal control procedures. We have obtained from management and the company’s officials the explanations and information necessary for executing our audit procedures. We have examined, on test basis, the evidence supporting the amounts included in the consolidated financial statements. We have assessed the appropriateness of accounting policies and consolidation principles, the reasonableness of the significant accounting estimates made by the company, as well as the overall presentation of the consolidated financial statements. We believe that these procedures provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements for the year ended December 31, 2008 give true view of the equity, financial situation, financial performance and cash flows of the consolidated group, in accordance with the referential of International Financial Information Standards as these have been adopted by the European Union. Additional statement The preparation of the consolidated Directors’ report and its content are the responsability of management. Our responsibility is to supplement our report with the following additionnal statement which do not modify our audit opinion on the consolidated financial statements: the consolidated Directors’ report includes the information required by law and is consistent with the consolidated financial statements. We are, however, unable to comment on the description of the principal risks and uncertainties which the consolidated group is facing, and on its situation, its foreseeable evolution or the significant influence of certain facts on its future development. We can nevertheless confirm that the matters disclosed do not present any obvious inconsistencies with the information that we became aware of during the performance of our mandate. Brussels, March 13 th, 2009 SC BDO ATRIO DELVAUX, FRONVILLE, SERVAIS ET ASSOCIES Statutory Auditor Represented by

Jean-Louis SERVAIS Registered Auditor

Gérard DELVAUX Registered Auditor

FINANCIAL REPORT

Management is responsible for the preparation and the fair presentation of these consolidated financial statements. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate accounting policies and making accounting estimates that are reasonable in the circumstances.

98 |

ANNUAL REPORT 2008 | Abridged Statutory Financial Statements

s.a. D’Ieteren n.v. Abridged Statutory s.a. D’Ieteren n.v. Financial Statements 2008 Abridged Statutory Financial Statements 2008

CONTENTS 99

ABRIDGED BALANCE SHEET

100

ABRIDGED INCOME STATEMENT

100

ABRIDGED NOTE

101

SUMMARY OF ACCOUNTING POLICIES

The statutory financial statements of s.a. D’Ieteren n.v. are summarised below in accordance with article 105 of the Company Code. The unabridged version of the statutory financial statements of s.a. D’Ieteren n.v., the related management report and Statutory Auditor’s report shall be deposited at the National Bank of Belgium within the legal deadline and may be obtained free of charge from the internet site www.dieteren.com or on request from: s.a. D’Ieteren n.v. Rue du Mail 50 B-1050 Brussels The Statutory Auditor has issued an unqualified opinion on the statutory financial statements of s.a. D’Ieteren n.v.

ANNUAL REPORT 2008 | Abridged Statutory Financial Statements | 99

Abridged Balance Sheet At 31 December

Abridged Balance Sheet At 31 December EUR million

2008

2007

2,045.1

2,096.7

Fixed assets II.

Intangible assets

2.8

2.6

III.

Tangible assets

96.2

95.5

IV.

Financial assets

1,946.1

1,998.6

442.1

430.0

Current assets V.

Non-current receivables

VI.

Stocks

VII.

Amounts receivable within one year

VIII.

Investments

0.3

0.7

339.2

312.8

86.2

91.0

7.6

18.1

IX.

Cash at bank and in hand

1.1

1.2

Deferred charges and accrued income

7.7

6.2

2,487.2

2,526.7

2008

2007

Capital and reserves

690.4

794.1

I.A.

Issued capital

160.0

II.

Share premium account

IV.

Reserves

Accumulated profits

25.0

36.7

Provisions and deferred taxes

30.9

31.8

1,765.9

1,700.8

1,378.7

1,346.4

336.3

310.4

TOTAL ASSETS

EUR million LIABILITIES

Creditors VIII.

Amounts payable after one year

IX.

Amounts payable within one year

Accrued charges and deferred income

TOTAL LIABILITIES

24.4

481.0

573.0

50.9

44.0

2,487.2

2,526.7

FINANCIAL REPORT

ASSETS

100 |

ANNUAL REPORT 2008 | Abridged Statutory Financial Statements

Abridged Income Statement Abridged Income Statement EUR million

2008

2007

Operating income

2,626.6

2,585.3

II.

Operating charges

2,568.1

2,511.7

III.

Operating profit

IV.

Financial income

58.5

73.6

2.4

230.0

Financial charges

101.2

88.1

VI.

Profit on ordinary activities before income taxes

-40.3

215.5

VII.

Extraordinary income

1.6

VIII.

Extraordinary charges

47.8

186.7

-86.5

28.8

IX.

Profit for the period before taxes

IXbis.

Deferred taxes

Income taxes

XI.

Profit for the period

XII.

Variation of untaxed reserves

XIII.

Profit for the period available for appropriation

(1)

0.7

1.0

-87.2

27.8

0.1

-87.2

27.9

(1) Transfers from untaxed reserves (+) / Transfers to untaxed reserves (-).

Abridged Note Abridged Note

Auditor’s Remuneration The Statutory Auditor is SC BDO ATRIO, DELVAUX, FRONVILLE, SERVAIS ET ASSOCIES, Réviseurs d’entreprises – Bedrijfsrevisoren, (“BDO ATRIO – DFSA”). Auditor’s remuneration, including the fees charged by entities related to the Statutory Auditor as defined by article 134 of the Company Law, is analysed as follows: EUR

2008

2007

160,000

144,000

Audit s.a. D’Ieteren n.v. (charged by BDO ATRIO – DFSA) Non-audit Other assurance services s.a. D’Ieteren n.v. (charged by BDO ATRIO – DFSA) Tax advisory services (charged by SC BDO ATRIO – DFSA, conseils fiscaux – anct Socofidex) TOTAL

3,575

5,678

17,141

15,125

180,716

164,803

ANNUAL REPORT 2008 | Abridged Statutory Financial Statements | 101

Summary of Accounting Policies Summary of Accounting Policies

The capitalised costs for the development of information technology projects (intangible assets) are amortised on a straightline basis over their useful life. The amortisation period cannot be less than 2 years nor higher than 7 years. Tangible Fixed Assets are recognised at their acquisition value; this value does not include borrowing costs. Assets held by virtue of long-term leases (â&#x20AC;&#x153;emphytĂŠoseâ&#x20AC;?), finance leases or similar rights are entered at their capital reconstitution cost. The rates of depreciation for fixed assets depend on the probable economic lifetime for the assets concerned. As from the 1st of January 2003, tangible fixed assets acquired or constructed after this date shall be depreciated pro rata temporis and the ancillary costs shall be depreciated at the same rate as the tangible fixed assets to which they relate.

Buildings

Rate

Method

L/D

Building improvements

10%

L/D

Warehouse and garage

15%

L/D

Network identification equipment

20%

L/D

Furniture

10%

L/D

Office equipment

20%

L/D

Rolling stock

25%

Heating system

10%

L/D

20%-33%

L/D

EDP hardware L: straight line. D: declining balance (at a rate twice as high as the equivalent straight line rate).

Tangible fixed assets are revalued if they represent a definite, long-term capital gain. Depreciation of any revaluation surplus is calculated linearly over the remaining lifetime in terms of the depreciation period of the asset concerned. Financial Fixed Assets are entered either at their acquisition price, after deduction of the uncalled amounts (in the case of shareholdings), or at their nominal value (amounts receivable). They can be revalued, and are written down if they suffer a capital loss or a justifiable long-term loss in value. The ancillary costs are charged to the income statement during the financial year. Amounts Receivable within one year and those receivable after one year are recorded at their nominal value. Write-downs are applied if repayment by the due date is uncertain or compromised in whole or in part, or if the repayment value at the closing date is less than the book value. Stocks of new vehicles are valued at their individual acquisition price. Other categories of stocks are valued at their acquisition price according to the fifo method, the weighted average price or the individual acquisition price. Write-downs are applied as appropriate, according to the selling price or the market value. Treasury Investments and Cash at Bank and in Hand are recorded at their acquisition value. They are written down if their realisation value on the closing date of the financial year is less than their acquisition value. When these treasury investments consist of own shares held for hedging share options, additional write-downs are applied if the exercise price is less than the book value resulting from the above paragraph. Provisions for Liabilities and Charges are subject to individual valuation, taking into account any foreseeable risks. They are written back by the appropriate amount at the end of the financial year if they exceed the current assessment of the risks which they were set aside to cover. Amounts Payable are recorded at their nominal value. Valuation of assets and liabilities in foreign currencies Financial fixed assets are valued in accordance with recommendation 152/4 by the Accounting Standards Commission. Stocks are valued at their historical cost. However, the market value (as defined by the average rate on the closing date of the balance sheet) is applied if this is less than the historical cost. Monetary items and commitments are valued at the official rate on the closing date, or at the contractual rate in the case of specific hedging operations. Only negative differences for each currency are entered in the income statement.

FINANCIAL REPORT

The main depreciation rates are the following:

102 |

ANNUAL REPORT 2008 | MAJOR RISK FACTORS

Major Risk Factors Automobile Distribution D’Ieteren Auto’s activity is primarily based on close relations built during the last sixty years with the Volkswagen group and largely depending on the existence of import agreements between both parties. This close relationship also makes the results of D’Ieteren Auto dependent on the success of the models developed by the Volkswagen group. Furthermore, future developments of the European regulation concerning automobile distribution could potentially influence the competitive environment in a way that is difficult to foresee for the time being. The development of environmental standards or tax regulation on company cars could have a negative influence on volumes and mix of new vehicles sold. D’Ieteren Lease’s fleet represents an important asset of which the value is largely depending on the used vehicle market development.

Car Rental Given its extensive geographic coverage, Avis Europe’s business is subject to various risks inherent to international operations and also risks associated with the demand for its services, which in itself is highly seasonal, including disruption to air travel. The group and its licensees are subject to competition from a wide range of other operators both directly and via intermediaries and brokers, increasing the prevalence and intensity of price competition. Fleet costs, one of the most important elements in operating costs, largely depend on the buying conditions negotiated with car manufacturers and the selling conditions on the used car market and therefore depend on the car industry conditions in general. It is important for the activity to have access to the necessary funds in order to finance the fleet. Avis Europe has agreements with Avis Budget Group, Inc. (ABG) for the use of the licences of the Avis and Budget brands in specified territories and for the provision of computer systems, marketing initiatives and customer referrals. Any adverse changes to the terms of these agreements or any deterioration in ABG or its business or in the relationship with ABG could have an adverse effect on the group’s financial condition and results of its operations. Significant risks would exist to the stability of the group’s business if access to primary insurance and/or reinsurance was constrained, denied or available only at increased costs that could not be passed on in increased prices.

Vehicle Glass Belron operates in the vehicle glass repair and replacement (VGRR) market which is dependent on various factors notably weather conditions, changes in the vehicle park and driving speed. Weather extremes create peaks in demand which need to be managed through flexible operations whilst changes in vehicle technology or traffic speed result in changes in breakage rates and thereby overall market size. The VGRR market is also influenced by insurer and commercial business decisions towards glass coverage and preferred suppliers. Changes in insurance coverage affect motorists’ propensity to act on damage despite the associated safety risk. Belron employs around 21,000 full time equivalents and makes a significant investment in training to insure all its staff are appropriately qualified to fulfill their roles throughout the business. In addition, Belron uses sophisticated information technology and centralised distribution facilities which are key to the business operation and represent key risk points. In addition to its organic operational activities, Belron is also an acquisitive company and accordingly faces the usual risks associated with buying and integrating businesses.

Risks related to ﬁnancial instruments are explained in note 38 of the consolidated ﬁnancial statements.

ANNUAL REPORT 2008 | CORPORATE GOVERNANCE | 103

Corporate Governance

Board of Directors Composition The Board of Directors consists of: > s ix non-executive Directors, appointed on the proposal of the family shareholders; > o ne non-executive independent Director, appointed on the proposal of Cobepa; > t hree non-executive Directors, two of whom are independent, proposed on the basis of their experience; > t he Managing Director (CEO). The Chairman and the Deputy Chairman of the Board are selected among the Directors appointed on the proposal of the family shareholders. Roles and activities Without prejudice to its legal and statutory attributions and those of the General Meeting, the roles of the Board are to: >d etermine the strategy and values of the Company and approve its plans and budgets; >d ecide on major financial operations, acquisitions and divestments; > e nsure that appropriate organisation structures, processes and controls are in place in order to achieve the Company’s

objectives and properly manage its risks; > a ppoint the Directors proposed by the Company for the boards of its main subsidiaries; > a ppoint and revoke the CEO and CFO of s.a. D’Ieteren n.v. as well as the CEO and CFO of D’Ieteren Auto and decide on their remuneration; >m onitor and review performance of executive management; >m aintain effective communication with the Company’s shareholders and other stakeholders. The Board of Directors meets at least six times a year. Additional meetings are held when business needs require. Decisions of the Board of Directors are taken by a majority of votes, the Chairman having a casting vote in case of a tie. In 2008, the Board met 7 times. Directors’ participation to Board meetings was 96.1%. Committees of the Board of Directors At the beginning of 2005, the Board set up two Board Committees: > t he Audit Committee met 3 times in 2008, 2 of which in the presence of the Statutory Auditor, and reported on its activities to the Board of Directors; > t he Nomination and Remuneration Committee met 4 times in 2008 and

Consultation Committee The Chairman and the Deputy Chairman meet monthly with the Managing Director, as the Consultation Committee, to keep in close relation with each other, monitor the Company’s performance, review progress on major projects and prepare the Board of Directors’ meetings. Remuneration of non-executive Directors The Company discloses Board members’ remuneration globally. The Board believes that shareholders and investors are adequately informed by being communicated the total cost of the Board, as a collegial governing body, without details by individual Director. For the year ended 31 December 2008, a total fixed amount of EUR 1,589,630 was paid to the non-executive Directors by the Company and its subsidiaries. No other benefit or remuneration has been paid, and no loans or guarantees have been extended by D’Ieteren to members of the Board. Group executive management The Managing Director of s.a. D’Ieteren n.v. is responsible for the Group executive management. He is assisted by the Corporate management team, in charge, at Group level, of finance, financial communication, investor relations, accounts consolidation, legal and tax matters and management control. The Chief Financial Officer, the Chief Legal Officer and the Group Treasurer constitute the Senior Management at Group level. For the year ended 31 December 2008, the aggregate amount of remuneration of all nature attributed by D’Ieteren and its subsidiaries to the Managing Director of the Group was EUR 1,690,407, of which the variable part represents around 32% (decreased due to an exceptional bonus paid in 2007).This amount includes employer premiums on corporate pension

CORPORATE GOVERNANCE

The Company adheres to the corporate governance principles set out in the Belgian Code of corporate governance and has published since 1 January 2006 its Corporate Governance Charter on its website. The implementation of these principles takes into consideration the unique structure of the Company’s share capital, with family shareholders owning the majority and having ensured the continuity of the Company since 1805. Exceptions to the principles are set out in Section 5 of the Charter published on the Company’s website.

reported on its activities to the Board of Directors.

104 |

ANNUAL REPORT 2008 | CORPORATE GOVERNANCE

Corporate Governance plans amounting to EUR 73,082 and the granting of 637 D’Ieteren stock options for a total amount of EUR 16,817. No loans or guarantees have been extended to him by D’Ieteren. For the year ended 31 December 2008, the aggregate amount of compensation of all nature attributed by D’Ieteren and its subsidiaries to the three members of the Senior Management at Group level was EUR 889,536, of which the variable part represents around 30% (decreased due to an exceptional bonus paid in 2007). This amount includes employer premiums on corporate pension plans amounting to EUR 147,552 and the granting of an aggregate number of 1,911 D’Ieteren stock options for a total amount of EUR 50,451. No loans or guarantees have been extended to them by D’Ieteren. Executive management of the three sectors The activities of the D’Ieteren Group are organised in three sectors. The Automobile Distribution sector - D’Ieteren Auto, an operational department of s.a. D’Ieteren n.v. without separate legal status - is managed by the CEO D’Ieteren Auto, reporting to the Group Managing Director. The CEO D’Ieteren Auto chairs the management committee of D’Ieteren Auto, comprising seven other members with responsibilities for D’Ieteren Car Centers, Finance, Group Service, IT, Marketing, Makes and Human Resources. The Car Rental sector comprises Avis Europe plc and its subsidiaries. At 31 December 2008, Avis Europe plc is governed by a board of directors of nine members: three are appointed on the proposal of s.a. D’Ieteren n.v., three are independent directors, and two are full time executive directors. The current non-executive chairman of the board is a former Avis CEO. D’Ieteren’s Managing Director is executive deputy chairman of the board. The board of directors of Avis Europe plc has three board committees: the audit committee, comprising three independent directors, the nomination

committee and the remuneration committee, each comprising one of the directors proposed by s.a. D’Ieteren n.v.. Listed on the London Stock Exchange, Avis Europe plc is in compliance with the provisions of the Combined Code, with a few exceptions fully disclosed in its annual report. The rights and obligations of the directors appointed on proposal of s.a. D’Ieteren n.v., and of s.a. D’Ieteren n.v. as a shareholder, are set out in the Relationship Agreement entered into at flotation in 1997. The Vehicle Glass sector comprises Belron s.a., in which D’Ieteren and Cobepa own, at 31 December 2008, respectively a 77.38% and 16.35% shareholding, and its subsidiaries. At 31 December 2008, Belron s.a. is governed by a board of directors consisting of eleven members, four of which are appointed on proposal of D’Ieteren, two of which are appointed on proposal of the Cobepa group, one is appointed on proposal of the founding shareholders, two are executive directors and two are independent directors. The Managing Director of D’Ieteren is member of the board and chairs it. The board of directors of Belron s.a. has two board committees: the audit committee and the remuneration committee, each chaired by a director appointed on proposal of D’Ieteren. Dividend policy The Board of Directors intends to maintain its ongoing policy of providing the largest possible self-financing for the development of the Group, while ensuring regular dividend growth, results permitting.

assignments and EUR 17,142 were charged for fiscal advice. Elements that can have an influence in case of a takeover bid on the shares of the Company The Extraordinary General Meeting of 27 May 2004 has renewed the authorization to the Board to increase the share capital in one or several times by a maximum of EUR 60 million. The capital increases to be decided upon in the framework of the authorized capital can be made either in cash or in kind within the limits set up by the Company Code, or by incorporation of available as well as non available reserves or a share premium account, with or without creation of new shares, either preference or other shares, with or without voting rights and with or without subscription rights. The Board of Directors may limit or waive, in the Company’s best interest and in accordance with the conditions determined by the law, the preferential subscription right for the capital increases it decides, including in favour of one or more determined persons. The Board of Directors is also entitled to decide, in the framework of the authorized capital, on the issuance of convertible bonds, subscription rights or financial instruments which may in term give right to Company shares, under the conditions set up by the Company Code, up to a maximum, such that the amount of the capital increases which could result from the exercise of the above mentioned rights and financial instruments does not exceed the limit of the remaining capital authorized as the case may be, without the preferential subscription right of bondholders.

Auditor’s fees The fees charged in 2008 by the Statutory Auditor and linked companies for the work carried out on behalf of Group Companies in connection with the compulsory control of the statutory and consolidated financial statements amounted to EUR 224,120 (excl. VAT). Further fees of EUR 52,978 (excl. VAT) were charged for non-audit missions of which EUR 35,836 for other specific

Without prejudice to the authorization given to the Board of Directors according to the previous paragraph, the Extraordinary General Meeting of 29 May 2008 has explicitly authorized the Board of Directors, for a renewable 3-year period, to proceed - in the event of takeover bids on the Company’s shares and provided the required notification has been made by the CBFA within a 3-year period - to capital increases by contribution in kind

ANNUAL REPORT 2008 | CORPORATE GOVERNANCE | 105

By decision of the same Meeting, the Board of Directors has been authorized to purchase own shares, without prior approval of the Assembly, in order to prevent the Company from suffering a severe and imminent damage, for a renewable 3-year period, starting from the date of publication of the decisions taken to amend the articles of association in the appendixes of the Belgian Official Gazette.

The Board is also authorized, in order to prevent the Company from suffering a severe and imminent damage, to sell own shares on the stock exchange or through a sale offer made under the same conditions to all shareholders in accordance with the law. These authorizations also apply, under the same conditions, to the purchase and sale of the Company’s shares by subsidiaries in accordance with clauses 627, 628 and 631 of the Company Code.

own shares under the legal conditions, notably to cover stock option plans for managers. The rules governing the appointment and replacement of Board members and the amendment of the articles of association are those provided for by the Company Code.

Finally, the General Assembly grants the Board annual authorizations to purchase

Board of Directors (as at 31 December 2008)

Age

End of term

Roland D’Ieteren

Chairman of the Board; Director Avis Europe plc, Belron s.a.

May 2010

Maurice Périer1,2

Deputy Chairman of the Board; Director of companies Director Belron s.a.

May 2011

Jean-Pierre Bizet

Managing Director; Executive Deputy Chairman Avis Europe plc; Chairman of the board Belron s.a.

May 2011

Nicolas D’Ieteren1,2

Managing Partner Enero sprl.

May 2011

Pascal Minne

Managing Director Petercam

May 2010

Olivier Périer

Architect; Founding Partner Urban Platform s.c.r.l.

May 2011

Alain Philippson3

Director Banque Degroof, C.F.E.

May 2009

Gilbert van Marcke de Lummen4

Director of companies; Director Cofinimmo s.a.

May 2011

Christian Varin

Managing Director Cobepa; Director Sapec, Carrières du Hainaut, ISOS, J.F. Hillebrand

May 2010

s.a. de Participations et de Gestion1

Permanent representative: Patrick Peltzer

May 2010

Nayarit Participations s.c.a.

Permanent representative: Etienne Heilporn

May 2010

Composition of the Committees (as at 31 December 2008)

Nominations and Remunerations Committee

Audit Committee

Chairman

Roland D’Ieteren

Pascal Minne

Members

Pascal Minne

Gilbert van Marcke de Lummen

Alain Philippson

Christian Varin

1,2

Auditor SC BDO Atrio, Delvaux, Fronville, Servais et Associés, Réviseurs d’entreprises - Bedrijfsrevisoren, represented by Gérard Delvaux and Jean-Louis Servais 1. Director appointed on the proposal of the family shareholders. - 2. Director descendant of, or related to, the founding family. - 3. Independent Director. - 4. Former Executive.

End of term May 2011

CORPORATE GOVERNANCE

or in cash, as the case may be, without the preferential subscription right of shareholders.

106 |

ANNUAL REPORT 2008 | SHARE INFORMATION

Share Information D’Ieteren share

Indices

Financial year from 1 January to 31 December

D’Ieteren share forms part of the Next 150 and BEL MID indices of NYSE Euronext with respective weighting of 0.51% and 2.71% as at 6 March 2009. Until 31 December 2007, the share also formed part of the Next Prime index wich has been removed by NYSE Euronext. It also forms part of sector indices published by Dow Jones, Eurostoxx and Bloomberg.

Minimum lot

1 share

ISIN code

BE 0003669802

Sicovam code or security code

941039

Reuters code

IETB.BR

Bloomberg code

DIE.BB

FTSE classification

Business Support Services

Dividend Evolution of the share price and traded volumes in 2008 400

Share Price (EUR)

Volumes 90,000

350

80,000 70,000

300

60,000

250

50,000 200 40,000 150

If the allocation of results proposed on note 29 of this Annual Report is approved by the Ordinary General Meeting of 28 May 2009, a gross dividend for the year 2008 of EUR 3.0000 per share will be distributed, i.e.: > a net dividend of EUR 2.2500 in return for coupon n°18, after deduction of the withholding tax of 25%; > a net dividend of EUR 2.5500 in return for the coupon and VVPR strip n°18, after deduction of the withholding tax of 15%.

30,000

100

20,000

10,000

Payment of the dividend will take place as from 4 June 2009 at the head offices and branches of Bank Degroof.

0 12/08

11/08

10/08

09/08

08/08

07/08

06/08

05/08

04/08

03/08

02/08

01/08

Evolution of the share price over 5 years (EUR)

Gross dividend per share (EUR)

Share Price (EUR) 400 350

3.5

300

250

2.5

200

150

1.5

01/09

07/08

01/08

07/07

01/07

07/06

01/06

0 07/05

0 01/05

07/04

1 0.5 01/04

100

Detailed and historic information on the share price and the traded volumes are available on the websites of D’Ieteren (www. dieteren.com) and NYSE Euronext (www.nyseeuronext.com). Avis Europe, a 59.6% subsidiary of D’Ieteren, is listed on the London Stock Exchange in the Transport sector (code AVE.L).

2.31

2.40

2004

2005

3.00

2007

2008

2.64

2006

ANNUAL REPORT 2008 | SHARE INFORMATION | 107

Press and investor relations

31 December 2008

Number

Related voting rights

Ordinary shares1

5,530,262

500,000

Participating shares

500,000

Total

6,030,262

1. Each of the shares and participating shares grants a voting right.

Shareholding structure

Stéphanie Ceuppens Financial Communication s.a. D’Ieteren n.v. Rue du Mail, 50 B – 1050 Brussels Belgium Tel.:+32-2-536.54.39 Fax: +32-2-536.91.39 E-mail: financial.communication@dieteren.be VAT BE 0403.448.140 – Company registration number Brussels Information about the Group (press releases, annual reports, financial calendar, share price, statistical information, social documents…) is available, free of charge, mostly in three languages (French, Dutch, English), on the website: www.dieteren.com, or on request.

30.13% 35.77%

Ce rapport annuel est également disponible en français. Dit jaarverslag is ook beschikbaar in het Nederlands.

1.68% 7.32%

25.1%

31 December 2008 - in voting rights Nayarit Group

30.13%

SPDG Group

25.10%

Cobepa s.a. Own shares Public

7.32% 1.68% 35.77%

Information about the statement of capital can be found in note 29 of this Annual Report.

Financial calendar Last day for the deposit of shares for the Ordinary General Meeting

22 May 2009

Ordinary General Meeting

28 May 2009

Payment of the dividend for the year 2008

4 June 2009

Publication of the results for the first half 2009

28 August 2009

Publication of annual results 2009

February 2010

Forward-looking statements This Annual Report contains forward-looking information that involves risks and uncertainties, including statements about D’Ieteren’s plans, objectives, expectations and intentions. Readers are cautioned that forward-looking statements include known and unknown risks and are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of D’Ieteren. Should one or more of these risks, uncertainties or contingencies materialize, or should any underlying assumptions prove incorrect, actual results could vary materially from those anticipated, expected, estimated or projected. As a result, D’Ieteren does not assume any responsibility for the accuracy of these forward-looking statements.

Share Information

Denominator

108 |

ANNUAL REPORT 2008 | INDEX OF THE CONSOLIDATED DIRECTORS’ REPORT

Index of the Consolidated Directors’ Report Content of the consolidated directors’ report Evolution of the situation, activities and results of the Company Major risk factors and uncertainties Subsequent events

Page(s) of the annual report 2-3, 10-12-13, 24-26-27, 34-36-37 102 96

Circumstances susceptible of having a significant influence on the development of the consolidated group

N/A

Research and development

N/A

Financial risk management

90-91-92

Increase of capital, issue of convertible debentures or subscription rights

N/A

Interim dividend

N/A

Acquisition of own shares Share capital protection

81-82 104

ANNUAL REPORT 2008

D’Ieteren ANNUAL REPORT 2008

Jean-Joseph d’ieteren Wheelmaking Jean-Joseph opens his wheelwright workshop and provides various horse carriage makers in Brussels with wheels as a subcontractor.

Alexandre d’ieteren Horse-carriagemaking Alexandre opens his own factory on the rue Neuve and starts building complete vehicles.

2008

D’Ieteren

1805

www.dieteren.com

Contents 2

Message to Shareholders

Group Activities

Automobile Distribution –

D’Ieteren Auto

20 Short-Term Car Rental –

103 Corporate Governance

Avis Europe plc

30 Vehicle Glass Repair and

Replacement – Belron s.a.

40 Financial Report 102 Major Risk Factors 106 Share Information 108 Index of Management Report