UNITEDSTATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C.20549

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FORM10-K

 ANNUAL REPORT PURSUANT TO SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934

For The Fiscal Year Ended December31,  2005or TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934

For the Transition Period from        to                                

Commissionfile number- 001-32638

TAL International Group,Inc.(Exact name of registrant as specified in thecharter)

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|--------------------------------------------------------------|--|----------------------------------------|--|--|--|--|
| Delaware                                                     |  | 20-1796526                             |
| (Stateor other jurisdiction of incorporation ororganization) |  | (I.R.S. Employer IdentificationNumber) |
| 100Manhattanville Road, Purchase, NewYork                    |  | 10577-2135                             |
| (Address of principalexecutive office)                       |  | (ZipCode)                              |
| (914)251-9000                                                |
| (Registrant's telephonenumber including area code)           |
|                                                              |

Securitiesregistered pursuant to Section 12(b) of the Act: Common Stock, parvalue $0.001 per share

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

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined inRule 405 of the Securities Act. Yes       No

Indicate by check mark if the registrant is notrequired to file reports pursuant to Section 13 or Section 15(d) of theAct. Yes       No 

Indicate by check markwhether the registrant (1) has filed all reports required to be filedby Section 13 or 15(d) of the Securities Exchange Act of 1934 duringthe preceding 12 months (or for such shorter period that the registrantwas required to file such reports), and (2) has been subject to suchfiling requirement for the past 90 days. Yes  No

Indicate by check mark if disclosure ofdelinquent filers pursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of this Form 10-K orany amendment to this Form10-K.   

Indicate by checkmark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of"accelerated filer and large acceleratedfiler" in Rule 12b-2 of the Exchange Act (Checkone):

Large accelerated filer                        Accelerated filer                        Non-accelerated filer

Indicate by check mark whether the registrant is ashell company (as defined in the Exchange Act Rule 12b-2). Yes No 

As of December31,  2005, the last business day of the Registrant’s mostrecently completed fiscal quarter, there were 32,882,208 shares of theRegistrant’s common stock outstanding, and the aggregate marketvalue of such shares held by non-affiliates of the Registrant (basedupon the closing sale price of such shares on the New York StockExchange on December  31,  2005) was approximately$176,921,000. Shares of Registrant’s common stock held by eachexecutive officer and director and by each entity or person that, tothe Registrant’s knowledge, owned 5% or more ofRegistrant’s outstanding common stock as of December31,  2005 have been excluded in that such persons may be deemedto be affiliates of the Registrant. This determination of affiliatestatus is not necessarily a conclusive determination for otherpurposes.

As of March  1,  2006, there were32,882,208 shares of the Registrant’s common stockoutstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement relatingto the registrant's Annual Meeting of Stockholders to be held onMay 22, 2006, are incorporated by reference into Part IIIhereof.

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TAL InternationalGroup, Inc.2005 Annual Report on Form 10-KTable ofContents

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| PARTI                                                                                         |  |                                                                                                             |   |   |        |   | Page |   |
| Item1.                                                                                        |  | Business                                                                                                         |        |   | 3      |   |
| Item1A.                                                                                       |  | Risk Factors                                                                                                     |        |   | 13     |   |
| Item1B.                                                                                       |  | Unresolved StaffComments                                                                                         |        |   | 25     |   |
| Item2.                                                                                        |  | Properties                                                                                                       |        |   | 25     |   |
| Item3.                                                                                        |  | Legal Proceedings                                                                                                |        |   | 26     |   |
| Item4.                                                                                        |  | Submission of Matters to a Vote of SecurityHolders                                                               |        |   | 26     |   |
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| PARTII                                                                                        |  |                                                                                                             |        |   |   |   |
|                                                                                          |  |                                                                                                             |        |   |   |   |
| Item5.                                                                                        |  | Market for Registrant’s Common Equity, RelatedStockholder Matters and Issuer Purchases of EquitySecurities |        |   | 27     |   |
| Item 6.                                                                                       |  | SelectedFinancialData                                                                                            |        |   | 28     |   |
| Item7.                                                                                        |  | Management’s Discussion and Analysis of FinancialCondition and Results of Operations                       |        |   | 30     |   |
| Item7A.                                                                                       |  | Quantitative and Qualitative Disclosures About MarketRisk                                                        |        |   | 45     |   |
| Item 8.                                                                                       |  | Financial Statementsand SupplementaryData                                                                        |        |   | 46     |   |
| Item9.                                                                                        |  | Changes In and Disagreements With Accountants on Accountingand Financial Disclosure                              |        |   | 46     |   |
| Item9A.                                                                                       |  | Controls and Procedures                                                                                          |        |   | 46     |   |
| Item9B.                                                                                       |  | OtherInformation                                                                                                 |        |   | 46     |   |
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| PARTIII                                                                                       |  |                                                                                                             |        |   |   |   |
|                                                                                          |  |                                                                                                             |        |   |   |   |
| Item10.                                                                                       |  | Directors and Executive Officers of theRegistrant                                                                |        |   | 47     |   |
| Item 11.                                                                                      |  | ExecutiveCompensation                                                                                            |        |   | 47     |   |
| Item 12.                                                                                      |  | SecurityOwnership of Certain Beneficial Owners and Management and Related                                        |        |   | 47     |   |
|                                                                                          |  | StockholderMatters                                                                                               |        |   |   |   |
| Item 13.                                                                                      |  | CertainRelationships and RelatedTransactions                                                                     |        |   | 47     |   |
| Item 14.                                                                                      |  | PrincipalAccounting Fees andServices                                                                             |        |   | 47     |   |
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| PARTIV                                                                                        |  |                                                                                                             |        |   |   |   |
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| Item15.                                                                                       |  | Exhibits and Financial StatementSchedules                                                                        |        |   | 48     |   |
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| Signatures                                                                                    |  |                                                                                                             | 54     |   |
|                                                                                          |  |                                                                                                             |        |   |   |   |
| Reportof Independent Registered Public AccountingFirm                                         |  |                                                                                                             | F-2    |   |
| Consolidated BalanceSheets                                                                    |  |                                                                                                             | F-3    |   |
| Consolidated Statements ofOperations                                                          |  |                                                                                                             | F-4    |   |
| ConsolidatedStatements of Stockholders’ Equity (Deficit) and ComprehensiveIncome (Loss) |  |                                                                                                             | F-5    |   |
| ConsolidatedStatements of Cash Flows                                                          |  |                                                                                                             | F-6    |   |
| Notes toConsolidated FinancialStatements                                                      |  |                                                                                                             | F-7    |   |
| Report of IndependentRegistered Public Accounting Firm onSchedule                             |  |                                                                                                             | S-1    |   |
| Schedule II —Valuation and Qualifying Accounts andReserves                              |  |                                                                                                             | S-2    |   |
|                                                                                               |

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CAUTIONARYSTATEMENT FOR PURPOSES OF THE ‘‘SAFEHARBOR’’ PROVISIONS OF THE PRIVATE SECURITIES LITIGATIONREFORM ACT OF 1995

This Annual Report on Form 10-Kcontains certain forward-looking statements, including, withoutlimitation, statements concerning the conditions in our industry, ouroperations, our economic performance and financial condition,including, in particular, statements relating to our business andgrowth strategy and service development efforts. The Private SecuritiesLitigation Reform Act of 1995 provides a ‘‘safeharbor’’ for certain forward-looking statements so longas such information is identified as forward-looking and is accompaniedby meaningful cautionary statements identifying important factors thatcould cause actual results to differ materially from those projected inthe information. When used in this Annual Report on Form 10-K,the words ‘‘may’’,‘‘might’’,‘‘should’’,‘‘estimate’’,‘‘project’’,‘‘plan’’,‘‘anticipate’’,‘‘expect’’,‘‘intend’’,‘‘outlook’’,‘‘believe’’ and other similar expressionsare intended to identify forward-looking statements and information.You are cautioned not to place undue reliance on these forward-lookingstatements, which speak only as of their dates. These forward-lookingstatements are based on estimates and assumptions by our managementthat, although we believe to be reasonable, are inherently uncertainand subject to a number of risks and uncertainties. These risks anduncertainties include, without limitation, those identified under thecaption Item 1A. ‘‘Risk Factors’’ in thisannual report and in our registration statement on Form S-1(File No. 333-126317) filed with the Securities and ExchangeCommission (‘‘SEC’’), as such registrationstatement became effective on October  11,  2005, and allof our other filings filed with the SEC from October  11,2005 through the current date pursuant to the Securities Exchange Actof 1934.

We undertake no obligation to publicly update or reviseany forward-looking statement as a result of new information, futureevents or otherwise, except as otherwise required by law. Reference isalso made to such risks and uncertainties detailed from time to time inour filings with the SEC.

WEBSITE ACCESS TO COMPANY'SREPORTS AND CODE OF ETHICS

Our Internet website address iswww.talinternational.com. Our annual reports on Form 10-K,quarterly reports on Form 10-Q, current reports onForm 8-K, and amendments to those reports filed or furnishedpursuant to Section 13(a) or 15(d) of the Exchange Act areavailable free of charge through our website as soon as reasonablypracticable after they are electronically filed with, or furnished to,the Securities and Exchange Commission. Our Code of Ethics is alsoavailable on our website.

SERVICE MARKS MATTERS

Thefollowing items referred to in this annual report are registered orunregistered service marks in the United States and/or foreignjurisdictions pursuant to applicable intellectual property laws and arethe property of us and our subsidiaries: TALSM,Tradex®, Trader® andGreyslot®.

PART I

ITEM1.    BUSINESS

Our Company

We were formed in 1963 andare one of the world's largest and oldest lessors of intermodalfreight containers. Intermodal freight containers are large,standardized steel boxes used to transport freight by ship, rail ortruck. Because of the handling efficiencies they provide, intermodalfreight containers are the primary means by which many goods andmaterials are shipped internationally.

Our operations include theacquisition, leasing, re-leasing and subsequent sale of multiple typesof intermodal containers, as well as chassis used for thetransportation of containers domestically via rail and roads. As ofDecember  31,  2005, our fleet consisted of approximately613,911 containers and chassis, including approximately 76,830containers under management for third parties, representingapproximately 988,000 twenty-foot equivalent units (TEU). We alsobelieve that we are the world's 

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largest seller of used containers. We have anextensive global presence, offering leasing services through 19 officesin 12 countries and approximately 194 third party container depotfacilities in 42 countries as of December  31,  2005. Ourcustomers are among the world's largest shipping lines andinclude, among others, APL-NOL, CMA-CGM, Hanjin Shipping, Maersk Line,Mediterranean Shipping Company and NYK Line.

We lease threeprincipal types of containers: (1) dry freight containers, which areused for general cargo such as manufactured component parts, consumerstaples, electronics and apparel, (2) refrigerated containers, whichare used for perishable items such as fresh and frozen foods, and (3)special containers, which are used for heavy and oversized cargo suchas marble slabs, building products and machinery. As of December31,  2005, dry, refrigerated and special containers representedapproximately 87%, 6% and 7% of our fleet on aunit basis, respectively. Our chassis leasing business, which were-entered in the fourth quarter of 2005, represented under 1%of our fleet on a unit basis as of December  31,  2005. Foreach of the fiscal years 2005, 2004 and 2003, dry, refrigerated andspecial containers represented approximately 60%, 30% and10% of our leasing revenues, respectively.

We lease ourcontainers on a per diem basis to our customers under three types ofleases: long-term leases, service leases and finance leases. Long-termleases, typically with terms of three to eight years, provide us withstable cash flow and low transaction costs by requiring customers tomaintain specific containers on-hire for the duration of the lease.Service leases command a premium per diem rate in exchange forproviding customers with a greater level of operational flexibility byallowing the pick-up and drop-off of containers during the lease term.Finance leases, which are typically structured as full payout leases,provide for a predictable recurring revenue stream with the lowestdaily cost to the customer because customers are generally required toretain the container for the duration of its useful life. Our leasesrequire lessees to maintain the containers in good operating condition,defend and indemnify us from liabilities relating to thecontainers’ contents and handling and return the containers tospecified drop-off locations. As of December  31,  2005,89% of our containers were on-hire to customers, with 59%of our containers on long-term leases, 26% on service leases orlong-term leases whose fixed terms have expired but for which therelated units remain on-hire and for which we continue to receiverental payments and 4% on finance leases. As of December31,  2005, our long-term leases had an average remaining leaseterm of 31 months. In addition, 8% of our containers wereavailable for lease and 3% were available for sale.

Webelieve that we are the world's largest seller of usedcontainers, having sold over 50,000 used containers in each of the lastfive years on behalf of ourselves and third parties. We manage our owncontainer disposals, act as the disposal agent for a number of ourshipping line customers and buy and sell used containers on anopportunistic basis.

Our total revenues primarily consist ofleasing revenues derived from the lease of our owned containers and, toa lesser extent, fees received for managing containers owned by thirdparties and equipment trading revenue. The most important driver of ourprofitability is the extent to which leasing revenues, which are drivenprimarily by our owned container fleet size, utilization and averagerental rates, exceed our operating costs, which primarily consist ofdepreciation and amortization, interest expense, direct operatingexpenses and administrative expenses. We seek to exceed a targetedreturn on our investment over the life cycle of each container bymanaging container utilization, per diem lease rates, drop-offrestrictions and the used container sale process.

History

TAL International Group, Inc. (‘‘TAL’’or ‘‘the Company’’) was formed onOctober  26,  2004 and commenced operations onNovember  4,  2004 when it acquired all of the outstandingcapital stock of Trans Ocean Ltd. (‘‘TransOcean’’ or ‘‘TOL’’) and TALInternational Container Corporation (‘‘TAL InternationalCorporation’’or "TALI") from TALeasing Holding Co., Inc. (‘‘theAcquisition’’). Prior to the consummation of theAcquisition, Trans Ocean and TAL International Corporation weresubsidiaries of an international insurance and finance company. Priorto the Acquisition, Trans Ocean and TAL International Corporationprovided long-term leases, service leases and finance leases, maritimecontainer management services and subsequent sale of multiple types ofintermodal containers through a worldwide network of offices, thirdparty depots and other facilities.

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Industry Overview

According toDrewry Shipping Consultants Limited, as of December  2005, thecontainer shipping industry was an approximately $185.0  billionindustry, as measured by the annual gross revenues of shipping lines.Containers provide a secure and cost-effective method of transportingraw materials, component parts and finished goods because they can beused in multiple modes of transport. By making it possible to movecargo from a point of origin to a final destination without repeatedunpacking and repacking, containers reduce freight and labor costs. Inaddition, automated handling of containers permits faster loading andunloading of vessels, more efficient utilization of transportationequipment and reduced transit time. The protection provided by sealedcontainers also reduces cargo damage and the loss and theft of goodsduring shipment.

Over the last twenty-five years, containerizedtrade has grown at a rate greater than that of general worldwideeconomic growth. According to Clarkson Research Studies(‘‘Clarkson’’), worldwide containerizedcargo volume grew in every year from 1980 through 2004, attaining acompound annual growth rate (‘‘CAGR’’) of10.0% during that period. Furthermore, Clarkson projected thatloaded container liftings, which is a measure of volume in theindustry, is expected to increase by 10.1% in both 2005 and2006. We believe that this projected growth is due to several factors,including the shift in global manufacturing capacity to lower laborcost areas such as China and India, the continued integration ofdeveloping high growth economies into global trade patterns, thecontinued conversion of cargo from bulk shipping into containers andthe growing liberalization and integration of worldtrade.

According to Containerisation International, containerlessors’ ownership was approximately 9.8  million TEU orapproximately 45.1% of the total worldwide container fleet ofapproximately 21.6  million TEU as of the end of 2005. Thepercentage of owned versus leased containers utilized by shipping lineshas ranged from approximately 45% to 48% over the lastdecade according to Containerisation International. In general, leasingcontainers helps shipping lines improve their overall container fleetefficiency and provides the shipping lines with an alternative sourceof equipment financing. Given the uncertainty and variability of exportvolumes, and the fact that shipping lines have difficulty in accuratelyforecasting their container requirements at a port-by-port level, theavailability of containers for lease significantly reduces a shippingline's need to purchase and maintain larger container inventorybuffers. In addition, the flexibility provided by operating leases alsoallows the shipping lines to adjust their container fleet sizes bothseasonally and over time and helps to balance trade flows. Leasingcontainers also provides shipping lines with an additional source offunding to help them manage a high-growth, asset-intensivebusiness.

Container leasing rates are typically a function of,among other things, new container prices (which are heavily influencedby steel prices), interest rates and the container supply and demandbalance at a particular time and location. Average leasing rates on anentire portfolio of container leases respond more gradually to changesin new container prices, because lease agreements can only be re-pricedupon the expiration of the lease. In addition, the value that lessorsreceive upon resale of containers is closely related to the cost of newcontainers.

Operations

FleetOverview

As of December  31,  2005, we operatedapproximately 988,000 TEU of containers and chassis. Our containerfleet consists of three types of containers: dry containers,refrigerated containers and special containers. The containers that welease are either owned outright by us, leased-in from third-parties, orowned by third-parties and managed by us. The table below summarizesthe composition of our fleet by the type of unit:

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|                |  |        |         |          |  |              |        |         |  |        |        |         |  |        |         |         |  |        |         |         |  |  |
|----------------|--|--------|---------|----------|--|--------------|--------|---------|--|--------|--------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|           |  | Drys   |         | Specials |  | Refrigerated |        | Chassis |  | Total  |
| Owned          |  |   | 474,433 |     |  |         | 27,412 |    |  |   | 34,026 |    |  |   | 1,210   |    |  |   | 537,081 |    |
| Managed        |  |   | 59,180  |     |  |         | 16,025 |    |  |   | 1,625  |    |  |   | — |    |  |   | 76,830  |    |
| Totalfleet     |  |   | 533,613 |     |  |         | 43,437 |    |  |   | 35,651 |    |  |   | 1,210   |    |  |   | 613,911 |    |
| %of Fleetowned |  |   | 88.9    | %   |  |         | 63.1   | %  |  |   | 95.4   | %  |  |   | 100.0   | %  |  |   | 87.5    | %  |
|                |

Weoperate our business through 19 worldwide offices located in 12different countries as of December  31,  2005. Ouroperations include a global sales force, a global container operationsgroup, a container resale group, and a logistics services group. Ourheadquarters are located in Purchase, New York.

OurContainers

Intermodal containers are designed to meet anumber of criteria outlined by the International Standards Organization(ISO). The standard criteria include the size of the container and thegross weight rating of the container. This standardization ensures thatcontainers can be used by the widest possible number of transportersand it facilitates container and vessel sharing by the shipping lines.The standardization of the container is also an important element ofthe container leasing business since we can operate one fleet ofcontainers that can be used by all of our major customers.

Ourcontainer fleet consists of three types ofcontainers:

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | DryContainers.    A dry container isessentially a steel-constructed box with a set of doors on one end. Drycontainers come in lengths of 20', 40' or 45'. Theyare 8' wide, and either 8'6’’ or9'6’’ tall. Dry containers are the least-expensivetype of intermodal container and are used to carry most types offreight. As of December  31,  2005, our fleet includedapproximately 533,613 dry containers, which accounted for 87% ofour container fleet. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                   |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | RefrigeratedContainers.    Refrigerated containersinclude an integrated cooling machine and an insulated container, andthese containers are typically used to carry perishable cargo such asfresh and frozen produce. As of December  31,  2005, ourfleet included approximately 35,651 refrigerated containers, whichaccounted for 6% of our containerfleet. |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | SpecialContainers.    Most of our special containers are open top andflat rack containers. Open top and flat rack containers are generallyused to move heavy or bulky cargos, such as marble slabs, steel coilsor factory components, that cannot be easily loaded on a fork lift intoa standard container. As of December  31,  2005, our fleetincluded approximately 43,437 special containers, which accounted for7% of our container fleet. |

Our Chassis

Achassis is a rectangular, wheeled steel frame, generally231⁄2 or 40 feet in length, built specifically for thepurpose of transporting a container. Longer sized chassis, designedsolely to accommodate domestic containers, can be up to 53 feet inlength. Once mounted, the chassis and container are the functionalequivalent of a trailer. When mounted on a chassis, the container maybe trucked either to its destination or to a railroad terminal forloading onto a rail car. Our chassis are primarily used in the UnitedStates and are seldom used in other countries. As of December31,  2005, our fleet included approximately 1,210 chassis, whichaccounted for under 1% of our total fleet.

OurLeases

Most of our revenues are derived from leasing ourfleet of containers to our core shipping line customers. The vastmajority of our container leases are structured as operating leases,though we also provide customers with finance leases. Regardless oflease type, we seek to exceed our targeted return on our containerinvestments over the life cycle of each container by managing containerutilization, lease rates, drop-off restrictions and the used containersale process.

Our lease products provide numerous operational andfinancial benefits to our shipping line customers. These benefitsinclude:

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|  |              |                                                                                                                                                                                                                                                                                                                                           |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | OperatingFlexibility.    The timing, locationand daily volume of cargo movements for a shipping line are oftenunpredictable. Leasing containers helps the shipping lines manage thisuncertainty and minimize the requirement for large inventory buffers byallowing them to pick-up leased containers on shortnotice. |

|  |              |                                                                                                                                                                                                                        |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Fleet SizeFlexibility.    Container leases allowshipping lines to adjust the size of their fleets as their tradevolumes change due to seasonality, market changes or changes in companystrategies. |

|  |              |                                                                                                                                                                                                                                                                                        |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Alternative Source ofFinancing.    Container leases providean additional source of equipment financing to help shipping linesmanage the high level of investment required to maintain pace with therapid growth of the asset-intensive container shippingindustry. |

Operating Leases. Operating leases arestructured to allow customers flexibility to pick-up containers onshort notice and to drop-off containers prior to the end of theiruseful life. Because of this flexibility, most containers will gothrough several pick-up and drop-off cycles. Our operating leasecontracts specify a per diem rate for each container on-hire, where andwhen such containers can be returned, how the customer will be chargedfor damage and the charge for lost or destroyed containers, among otherthings.

We categorize our operating leases as either long-termleases or service leases. Long-term lease terms typically range fromthree to eight years with an average term of approximately five yearsat lease inception. Our long-term leases require our customers tomaintain all units on-hire for the duration of the lease term, and theyprovide us with predictable recurring cash flow. As of December31,  2005, 59% of our containers were on-hire underlong-term leases. As of December  31,  2005, our long-termleases had an average remaining duration of 31 months, assuming noleases are renewed. However, we believe that many of our customers willrenew leases for containers that are less than sale age at theexpiration of the lease. In addition, our containers typically remainon-hire at the contractual per diem rate for an additional six totwelve months beyond the end of the contractual lease term due to thelogistical requirements of our customers having to return containers tospecific drop-off locations.

Some of our long-term leases giveour customers Early Termination Options(‘‘ETOs’’). If exercised, ETOs allowcustomers to return containers prior to the expiration of the long-termlease. However, if an ETO is exercised, the customer is required to paya penalty per diem rate that is applied retroactively to the beginningof the lease. As a result of this retroactive penalty, ETOs havehistorically rarely been exercised.

Service leases allow ourcustomers to pick-up and drop-off containers during the term of thelease, subject to contractual limitations. Service leases provide thecustomer with a higher level of flexibility than term leases and, as aresult, typically carry a higher per diem rate. The terms of ourservice leases range from twelve months to five years although, becausecontainers can be returned during the term of a service lease and sinceservice leases are generally renewed or modified and extended uponexpiration, lease term does not dictate expected on-hire time for ourcontainers on service leases. As of December  31,  2005,26% of our containers were on-hire under service leases andthese containers have been on-hire for an average of 44months.

Finance Leases. Finance leases provide ourcustomers with an alternative method to finance their containeracquisitions. Finance leases typically have lease terms ranging fromfive to ten years. Finance leases are generally structured for specificquantities of containers (usually new containers), generally requirethe customer to keep the containers on-hire for their remaining usefullife, and provide the customer with a purchase option at the end of thelease term. The daily cost of a finance lease is typically less thanthe daily cost of an operating lease. As of December  31,2005, approximately 4% of our containers were on-hire underfinance leases.

Lease Documentation.    In general, ourlease agreements consist of two basic elements, a master leaseagreement and a lease addendum. Lease addenda contain the businessterms (including daily rate, term duration and drop-off schedule, amongother things) for specific leasing transactions, while master leaseagreements outline the general rights and obligations of the lessor andlessee under all of 

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the lease addenda covered by the master leaseagreement (lease addenda will specify the master lease agreement thatgoverns the lease addenda). For most customers, we have a small numberof master lease agreements (often one) and a large number of leaseaddenda.

Our master lease agreements generally require thelessees to pay rentals, depot charges, taxes and other charges whendue, to maintain the containers in good condition and repair, to returnthe containers in good condition in accordance with the returnconditions set forth in the master lease agreement, to use thecontainers in compliance with all laws, and to pay us for the value ofthe container as determined by us if the container is lost ordestroyed. The default clause gives us certain legal remedies in theevent that the lessee is in breach of the lease.

The master leaseagreements generally contain an exclusion of warranties clause andrequire lessees to defend and indemnify us in most instances fromthird-party claims arising out of the lessee's use, operation,possession or lease of the containers. Lessees are required to maintainall risks physical damage insurance, comprehensive general liabilityinsurance and to indemnify us against loss. We also maintain our ownoff-hire physical damage insurance to cover our containers when theyare not on-hire to lessees and third-party liability insurance for bothon-hire and off-hire containers.

Re-leasing, LogisticsManagement, Depot Management and Used Container Sales.

Webelieve that managing the period after our containers' firstlease is the most important aspect of our business. Successfulmanagement of this period requires disciplined logistics management,extensive re-lease capability, careful cost control and effective salesof used containers.

Re-Leasing. Since our operatingleases allow customers to return containers, we typically are requiredto place containers on several leases during their useful lives.Initial lease transactions for new containers can usually be generatedwith a limited sales and customer service infrastructure becauseinitial leases for new containers typically cover large volumes ofunits and are fairly standardized transactions. Used containers, on theother hand, are typically leased out in small transactions and arestructured to accommodate pick-ups and returns in a variety oflocations. As a result, to maintain high utilization of olderequipment, leasing companies benefit from having a large number ofcustomers and maintaining a high level of operating contact with thesecustomers. In addition, the utilization of older containers is highlyinfluenced by the worldwide supply and demand balance of containers ata particular time.

Logistics Management. Since theAsian financial crisis in the late 1990's, the shipping industryhas been characterized by large regional trade imbalances, with loadedcontainers generally flowing from export-oriented economies in Asia toNorth America and Western Europe. Because of these trade imbalances,shipping lines have an incentive to return leased containers in NorthAmerica and Europe to reduce the cost of empty container backhaul. Forseveral years after the Asian financial crisis, the return of largenumbers of containers to North America and Europe reduced utilizationfor TAL and the rest of the leasing industry and significantlyincreased container positioning costs as leasing companies were forcedto ship empty containers back to high container demand areas inAsia.

In the aftermath of the Asian financial crisis, we embarkedon a program to reduce logistical and utilization risk by increasingthe percentage of our containers on long-term lease or finance leaseand restricting the ability of our customers to return containersoutside of Asian demand locations. From December  31,  2000to December  31,  2005, the portion of our containers onlong-term lease and finance leases increased from 48% to63%, the annual number of dry containers returned in NorthAmerica and Europe from service leases fell by 61%, the numberof idle dry containers available for lease fell by 68% and ourempty container positioning cost fell by 85%.

In additionto restructuring our leases, we increased our operational focus onmoving empty containers as cheaply as possible. To accomplish this, wedeveloped an in-house group of experts, which we call Greyslot, tomanage our empty container positioning program. As part of theirmandate to reposition our empty containers, Greyslot maintains frequentcontact with various shipping lines and vessel owners to identifyavailable vessel space, and our success with managing our ownpositioning program has led to additional revenue opportunities. Forthe last several years Greyslot 

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has acted as a broker of empty vessel spacefor moving additional empty containers for third parties. Ourthird-party customers include leasing companies and shipping lines, andsuch third-party business currently represents a majority of thecontainers moved by Greyslot. While we have made important strides overthe last few years in our logistics management, logistical risk remainsan important element of our business due to competitive pressures,changing trade patterns and other market factors and uncertainies.

Depot Management. As of December  31,2005, we manage our container fleet through approximately 194third-party owned and operated depot facilities located in 42countries. Depot facilities are generally responsible for repairingcontainers when they are returned by lessees and for storing thecontainers while they are off-hire. We have a worldwide operationsgroup that is responsible for managing our depot contracts and theyalso periodically visit the depot facilities to conduct inventory andrepair audits. We also supplement our internal operations group withthe use of independent inspection agents.

We are in constantcommunication with our depot partners through the use of electronicdata interchange, or EDI. Our depots gather and prepare all informationrelated to the activity of our equipment at their facilities andtransmit the information via EDI and the Internet to us. Theinformation we receive from our depots updates our fully integratedcontainer fleet management and tracking system.

Most of the depotagency agreements follow a standard form and generally provide that thedepot will be liable for loss or damage of equipment and, in the eventof loss or damage, will pay us the previously agreed loss value of theapplicable containers. The agreements require the depots to maintaininsurance against container loss or damage and we carry insurance tocover the risk that the depot's insurance provesinsufficient.

Our container repair standards and processes aregenerally managed in accordance with standards and procedures specifiedby the Institute of International Container Lessors, or the IICL. TheIICL establishes and documents the acceptable interchange condition forcontainers and the repair procedures required to return damagedcontainers to the acceptable interchange condition. At the time thatcontainers are returned by lessees, the depot arranges an inspection ofthe containers to assess the repairs required to return the containersto acceptable IICL condition. This inspection process also splits thedamage into two components, customer damage and normal wear and tear.Items typically designated as customer damage include dents in thecontainer and debris left in the container, while items such as rustare typically designated as normal wear and tear.

Our leases arestructured so that the lessee is responsible for the customer damageportion of the repair costs, and customers are billed for damages atthe time the containers are returned. We sometimes offer our customersa container repair service program whereby we, for an additionalpayment by the lessee (in the form of a higher per-diem rate or a flatfee at off-hire), assume financial responsibility for all or a portionof the cost of repairs upon return of the containers (but not of totalloss of containers), up to a pre-negotiated amount.

UsedContainer Sales. Our in-house used container sales group,Trader, has a worldwide team of container specialists that manage thesale process for our used containers. Trader also manages the usedcontainer sale process for a number of our customers and buys and sellsused containers opportunistically. Trader has sold over 50,000 usedcontainers in each of the last five years on behalf of us and thirdparties, and we believe that we are the world's largest seller ofused containers. The sale age of our used containers typically averagebetween 10 and 14 years. Trader generally sells to domestic storagecompanies, freight forwarders (who often use the containers for one-waytrips into less developed countries) and other purchasers of usedcontainers. We believe that our ability to sell containers directly toend users provides us with a higher and more reliable source ofresidual value for our containers than would be available if we, likemany of our competitors, relied primarily on our container depots forcontainer disposals.

The sale prices we receive for our usedcontainers are influenced by many factors, including the level ofdemand for used containers compared to the number of used containersavailable for disposal 

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in a particular location, the cost of newcontainers, and the level of damage on the containers. The gain or lossthat we recognize on the sale of containers is determined by the pricewe receive for our used containers compared to the net book value onthe containers sold. While our total revenue is primarily made up ofleasing revenue, gains or losses on the sale of used containers canhave a significant positive or negative impact on ourprofitability.

Management Services

A portionof our container fleet is managed for third-party owners. Ourmanagement agreements fall into two general categories, (1) stand-alonepools, for which our systems track revenues and operating expensesattributable to specific containers and the container owners receivepayments based on the net revenues of their own containers, and (2)co-mingled pools, in which the container owners receive payments basedupon the average net revenues of similar containers in our fleet. Inboth structures, we receive management fees that are a percentage ofnet revenues. If operating expenses were to exceed revenues, the ownersare obligated to pay the excess or we may deduct the excess, includingour management fee, from future net revenues. We typically receive acommission for selling or disposing containers, though in some cases,we are compensated for sales through a percentage sharing of saleproceeds over an agreed upon floor amount. Typically the terms of themanagement agreements are 10 to 12 years from the acceptance dates ofcontainers under the agreement.

Environmental

We may besubject to environmental liability in connection with our current orhistorical operations that could adversely affect our business andfinancial prospects despite insurance coverage and terms of the leasesand other arrangements for use of the containers that purport to placethe responsibility for environmental liability on the end user. Incertain countries like the United States, the owner of a leasedcontainer may be liable for the costs of environmental damage from thedischarge of the contents of the container even though the owner is notat fault. We have and will seek to maintain off-hire physical damageinsurance to cover our containers when they are not on-hire to lesseesand third-party liability insurance for both on-hire and off-hirecontainers. We also have and will continue to require lessees to obtainall risks physical damage insurance, comprehensive general liabilityinsurance and to provide us with indemnity against loss. Nevertheless,such insurance or indemnities may not fully protect us against damagesarising from environmental damage.

Countries that are signatoriesto the Montreal Protocol on the environment agreed in November1992 to restrict the use of environmentally destructive refrigerants,banning production (but not use) of chlorofluorocarbon compounds(‘‘CFCs’’) beginning in January1996. Since then, the environmental impact of CFCs has becomeincreasingly prominent. On January  1,  2001, it becameillegal for environmentally destructive refrigerants to be handled,other than for disposal, in most of the countries that are members ofthe European Union. CFCs are used in the operation, insulation andmanufacture of refrigerated containers. All of our refrigeratedcontainers purchased since June  1993 use non-CFC refrigerant gasin the operation and insulation of the containers, although a reducedquantity of CFCs are still used in the container manufacturing process.The replacement refrigerant used in our new refrigerated containers mayalso become subject to similar governmental regulations. In the past,we have retrofitted certain refrigerated containers with non-CFCrefrigerants. Less than 3% of our refrigerated containers stilluse CFC refrigerants.

Credit Controls

We diligentlymonitor our customers' performance and our lease exposures on anongoing basis. Our credit management processes are aided by the longpayment experience we have with most of our customers, and our broadnetwork of relationships in the shipping industry that provide currentinformation about our customers' market reputations. Creditcriteria may include, but are not limited to, customer payment history,customer financial position and performance (e.g., net worth, leverage,profitability), trade routes, country of domicile, social and politicalclimate, and the type of, and location of, containers that are to besupplied.

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We have benefited from strong creditperformance over the last several years. Over the last five years, ourwrite offs of customer receivables have averaged 0.20% (20 basispoints) of our average total assets over such period, and we believethat our receivables and days outstanding are low for the containerleasing industry. We attribute this credit performance to severalfactors—some of which are specific to our company, and some ofwhich are attributable to the industry generally.

Industryfactors providing credit protection include the strong growth in thecontainer industry, effective collection tools, our high recovery ratefor containers in default situations and the re-marketability of ourcontainer fleet. The strong growth in the container industry helpsminimize the risk of customer defaults since the core assets of apoorly performing shipping line, its ships and containers, aregenerally needed to meet the demand for world containerized trade. As aresult, poorly performing shipping lines are often acquired by others.In addition, the law in several major port locations is highlyfavorable to creditors and many of our large customers call on portsthat will allow us to arrest, or seize, the customers' ships orbunkers, or repossess our containers if the customer is in defaultunder our container leases. We have historically recoveredapproximately 90% of our containers that were the subject ofdefaulted contracts and we are able to re-market these repossessedcontainers through our worldwide sales infrastructure. However, wetypically incur operating expenses such as repairs and positioning whencontainers are recovered after a customer default.

Companyfactors supporting our strong credit performance include our longprevious history as part of a large finance company, our focus oncollections and our sales compensation structure that does not providecommissions based on container volumes.

Currency

Thevast majority of our revenues and expenses are denominated in U.S.dollars, and we do not engage in currency hedging. However, ouroperations and used container sales in locations outside of the U.S.have some exposure to foreign currency fluctuations, and trade growthand the direction of trade flows can be influenced by large changes inrelative currency values.

Marketing and Customer Service

Our global sales and customer service force is responsible fordeveloping and maintaining relationships with senior operations staffat our shipping line customers, negotiating lease contracts andmaintaining day-to-day coordination with junior level staff at ourcustomers. This close customer communication helps us to negotiatelease contracts that satisfy both our financial return requirements andour customers' operating needs and ensures that we are aware ofour customers' potential equipment shortages and that they areaware of our available container inventories. Many of our sales peoplehave been with us for over twenty years and we believe that the qualityof our customer relationships and the level of communication with ourcustomers represent an important advantage for us.

Customers

We believe that we have strong, long standingrelationships with our largest customers, most of whom we have had arelationship with for over 20 years. We currently have containerson-hire to more than 300 customers, although approximately 72%of our containers are on-hire to our 20 largest customers. Ourcustomers are mainly international shipping lines, but we also leasecontainers to freight forwarding companies and manufacturers. Our fivelargest customers accounted for approximately 45% of our 2005leasing revenues. Our largest customer is APL-NOL, and has been for thelast several years. A default by any of these major customers couldhave a material adverse impact on our business, financial condition andfuture prospects.

Systems and Information Technology

Wehave a proprietary, fully integrated container fleet management system.The system tracks all of our containers individually by containernumber, provides design specifications for the equipment, 

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tracks on-hire and off-hire transactions,matches each on-hire container to a lease contract and each off-hirecontainer to a depot contract, maintains the major terms for each leasecontract, calculates the monthly bill for each customer and tracks andbills for container repairs. Our system is EDI capable, which means itcan receive and process container activity transactionselectronically.

In addition, our system allows our businesspartners to conduct business with us through the Internet. It allowscustomers to check our container inventories, review designspecifications, request clearances for returning containers (the systemwill issue the clearance electronically if the return to the specifiedlocation is currently allowed by the contract covering the container),request bookings for container pick-ups and review and approve repairbills.

Suppliers

We have long relationships with all ofour major suppliers. We purchase most of our containers in China. Thereare two large manufacturers of dry and special containers and threelarge manufacturers of refrigerated containers. Our operations staffreviews the designs for our containers and periodically audits theproduction facilities of our suppliers. In addition, we use our Asianoperations group and third party inspectors to visit factories when ourcontainers are being produced to provide an extra layer of qualitycontrol. Nevertheless, defects in our containers do sometimes occur. Wework with the manufacturers to correct these defects, and ourmanufacturers have generally honored their warranty obligations in suchcases.

Competition

We compete with approximately 10other major container leasing companies, many smaller lessors,manufacturers of container equipment and companies offering financeleases as distinct from operating leases. It is common for the shippinglines that are our customers to utilize several leasing companies tomeet their container needs.

Our competitors compete with us inmany ways, including pricing, lease flexibility, supply reliability andcustomer service. In times of weak demand or excess supply, leasingcompanies often respond by lowering leasing rates and increasing thelogistical flexibility offered in their lease agreements. In addition,new entrants into the leasing business have been attracted by the highrate of containerized trade growth in recent years, and they are oftenaggressive on pricing and lease flexibility.

While we are forcedto compete aggressively on price, we attempt to emphasize our supplyreliability and high level of customer service to our customers. Weinvest heavily on ensuring adequate container availability in highdemand locations, dedicate large portions of our organization tobuilding customer relationships, maintain close day-to-day coordinationwith customers' operating staffs and have developed powerful anduser-friendly systems that allow our customers to transact with usthrough the Internet. We believe that our close customer relationships,experienced staff, reputation for market leadership, scale efficienciesand proprietary systems provide important competitiveadvantages.

Employees 

As of December31,  2005, we employed approximately 191 people, in 19 offices,in 12 countries. We believe that our relations with our employees aregood and we are not a party to any collective bargainingagreements.

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ITEM 1A.    RISK FACTORS

RisksRelated to Our Business and Industry

Containerleasing demand is affected by numerous market factors as well asexternal political and economic events and a decrease in the volume ofworld trade and other operating factors may adversely affect ourcontainer leasing business.

Demand for containers dependslargely on the rate of world trade and economic growth. Cyclicalrecessions can negatively affect lessors' operating resultsbecause during economic downturns or periods of reduced trade, such asthose that occurred in 2001 and 2002, shipping lines tend to leasefewer containers, or lease containers only at reduced rates, and tendto rely more on their own fleets to satisfy a greater percentage oftheir requirements. Thus, a decrease in the volume of world trade mayadversely affect our container utilization and lease rates and lead toreduced revenue, reduced capital investment, increased operatingexpenses (such as storage and positioning) and reduced financialperformance. Such cyclical downturns may occur again in the future. Inthe late 1990's, the economic downturn in Asia, lower prices fornew containers and the consolidation of shipping lines adverselyaffected the container leasing business. These events mayreoccur.

Other general factors affecting demand for leasedcontainers, container utilization and per diem rental rates include theavailable supply and prices of new and used containers, including themarket acceptance of new container types and overbuying by competitorsand customers, changes in the operating efficiency of customers,economic conditions and competitive pressures in the shipping industry,including fluctuations in ship charter and freight rates and expansion,containership fleet overcapacity or undercapacity, consolidation orwithdrawal of individual customers in that industry, shifting trendsand patterns of cargo traffic, Acts of God such as droughts, storms, orother natural disasters, flu or other pandemics that result in economicdisruptions that may disrupt or interfere with trade. The availabilityand terms of equipment financing, fluctuations in interest rates andforeign currency values, import/export tariffs and restrictions,customs procedures, foreign exchange controls and other governmentalregulations and political or economic factors that are inherentlyunpredictable and may be beyond our control. Any of the aforementionedexternal factors may have a material adverse affect on our business.For example, in 2005 the inventory of new containers held at containerfactories by leasing companies and shipping lines increasedsubstantially despite continued growth in the volume of world trade. Webelieve that this container inventory build-up was mainly caused by ourcustomers achieving improved container operating efficiency in 2005 dueto an unexpected reduction in port and rail congestion relative to thesignificant congestion problems that were experienced in 2004. Thebuild-up of container inventories in Asia by our customers reduced ourvolume of leasing transactions in 2005 and caused our containerutilization to decline slightly since December  31,  2004.Additionally, as a result of a recent market build-up of inventories ofnew equipment, we reduced our container orders for the third and fourthquarters of 2005.

Equipment prices and lease rates maydecrease.

Lease rates depend on the type and length of thelease, the type and age of the equipment, competition (as more fullydiscussed herein), and other factors more fully discussed herein.Container lease rates also move with the fluctuations in prices for newcontainers. Because steel is the major component used in theconstruction of new containers, the price for new containers, as wellas prevailing container lease rates, are both highly correlated withthe price of steel. For example, container prices and market leasingrates increased by over 40% from the middle of 2003 to themiddle of 2005 primarily due to an increase in the price of steel inChina, while during the second half of 2005 container prices and marketleasing rates decreased significantly primarily due to reductions inthe cost of steel in China. In addition, new container prices and leaserates declined in the late 1990’s, because of, among otherfactors, a drop in worldwide steel prices and a shift in containermanufacturing from Taiwan and Korea to areas with lower labor costs inmainland China.

In addition, leasing rates can be negativelyimpacted by the entrance of new leasing companies, overproduction ofnew containers by factories and over-buying by shipping lines andleasing 

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competitors. For example, during 2001 andagain in the second quarter of 2005, overproduction of new containers,coupled with a build-up of container inventories in Asia by leasingcompanies and shipping lines, led to decreasing utilization rates andmore aggressive lease pricing from some of our competitors. In theevent that the container shipping industry were to be characterized byover-capacity in the future, or if available supply of containers wereto increase significantly as a result of, among other factors, newcompanies entering the business of leasing and selling containers, bothutilization and lease rates can be expected to decrease, therebyadversely affecting the revenues generated by our container leasingbusiness.

Sustained Asian economic instability could reducedemand for leasing.

A number of the shipping lines to whichwe lease containers are entities domiciled in Asian countries. Inaddition, many of our customers are substantially dependent uponshipments of goods exported from Asia. From time to time, there havebeen economic disruptions, financial turmoil and political instabilityin this region. If these events were to occur in the future, they wouldadversely affect these customers and lead to a reduced demand forleasing of our containers or otherwise adversely affectus.

Our customers may decide to lease fewercontainers.

We, like other suppliers of leased containers,are dependent upon decisions by shipping lines to lease rather than buytheir equipment. Should shipping lines decide to buy a largerpercentage of the containers they operate, our utilization rate woulddecrease, resulting in decreased leasing revenue, increased storagecosts and increased positioning costs. Most of the factors affectingthe decisions of our customers are outside our control.

Weface extensive competition in the container leasingindustry.

We may be unable to compete favorably in thehighly competitive container leasing and sales business. We competewith approximately 10 other major leasing companies, many smallerlessors, manufacturers of container equipment, companies offeringfinance leases as distinct from operating leases, promoters ofcontainer ownership and leasing as a tax shelter investment, shippinglines, which sometimes lease their excess container stocks, andsuppliers of alternative types of equipment for freight transport. Someof these competitors may have greater financial resources and access tocapital than we do. Additionally, some of these competitors may havelarge, underutilized inventories of containers, which could lead tosignificant downward pressure on lease rates andmargins.

Competition among container leasing companies dependsupon many factors, including, among others, lease rates, lease terms(including lease duration, drop-off restrictions and repairprovisions), customer service, and the location, availability, qualityand individual characteristics of equipment. New entrants into theleasing business have been attracted by the high rate of containerizedtrade growth in recent years, and new entrants have generally been lessdisciplined than we are in pricing and structuring leases. As a result,the entry of new market participants together with the already highlycompetitive nature of our industry, may undermine our ability tomaintain a high level of container utilization or achieve our growthplans.

The age of our container fleet may become acompetitive disadvantage.

As of December  31,2005, the average age of the containers in our fleet was 8.8 years. Webelieve that the average age of some of our competitors’container fleets is lower than the average age of our fleet, andcustomers generally have a preference for younger containers.Historically, we have been successful marketing our older equipment bypositioning older containers to areas where demand is very strong,offering incentives for customers to extend containers on lease, andproviding greater drop-off location flexibility for containersapproaching sale age. However, our marketing strategies for oldercontainers may not continue to be successful, particularly if demandfor containers in general becomes weaker.

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Lessee defaults may adverselyaffect our financial condition and results of operations and cash flowby decreasing revenues and increasing storage, positioning, collectionand recovery expenses.

Our containers are leased to numerouscustomers. Rent and other compensation, as well as indemnification fordamage to or loss of containers, is payable under the leases and otherarrangements by the end users. Inherent in the nature of the leases andother arrangements for use of the containers is the risk that once thelease is consummated, we may not receive, or may experience delay inrealizing, all of the compensation and other amounts to be paid inrespect of the containers. A delay or diminution in amounts receivedunder the leases and other arrangements could adversely affect ourbusiness and financial prospects and our ability to make payments onour debt.

The cash flow from the containers, principally leaserentals, management fees, proceeds from the sale of owned containersand commissions earned on container agency and brokerage activities, isaffected significantly by the ability to collect payments under leasesand other arrangements for the use of the containers and the ability toreplace cash flows from terminating leases by re-leasing or sellingcontainers on favorable terms. All of these factors are subject toexternal economic conditions and the performance by lessees and serviceproviders that will not fully be within our control.

When lesseesor sublessees of containers default, we may fail to recover all of ourcontainers, and the containers we do recover may be returned inlocations where we will not be able to efficiently re-lease or sellthem. We may have to reposition these containers to other places wherewe can re-lease or sell them, which could be expensive depending on thelocations and distances involved. As a result, we may lose lease ormanagement revenues and incur additional operating expenses inrepossessing and storing the equipment. We do not currently maintaininsurance to cover such defaults. While in recent years defaults bylessees, as measured by our historical experience and reflected on ourfinancial statements as an allowance for doubtful accounts, have notbeen material as a percentage of our assets, future defaults maynevertheless be material and any such future defaults could have amaterial adverse effect on our business condition and financialprospects.

We are dependent upon continued demand from ourlarge customers.

Our largest customers account for asignificant portion of our revenues. Our five largest customersrepresented approximately 45% of our revenues for our 2005fiscal year, with our single largest customer representingapproximately 18% during such period. Furthermore, severalconsolidating acquisitions were announced in 2005 which will increasethe concentration of our customer base. The loss, default orsignificant reduction of orders from any of our large customers, andespecially our single largest customer, could have a material adverseeffect on our business, financial condition and futureprospects.

Gains and losses associated with container salesmay fluctuate and adversely affect our operatingresults.

Although our revenue primarily depends uponequipment leasing, our profitability is also affected by the residualvalues of our containers upon the expiration of their leases because,in the ordinary course of our business, we sell certain containers whensuch containers are returned to us. The volatility of the residualvalues of such containers may be significant. These values, which canvary substantially, depend upon, among other factors, worldwide steelprices, applicable maintenance standards, refurbishment needs,comparable new equipment costs, used equipment availability, inflationrates, market conditions, materials and labor costs and equipmentobsolescence. Most of these factors are outside of our control.Operating leases, which represent the predominant form of leases in ourportfolio, are subject to greater residual value risk than financeleases.

Containers are typically sold if it is in our bestinterest to do so after taking into consideration the book value,remaining useful life, repair condition, suitability for leasing orother uses and the prevailing local sales price for containers. Asthese considerations vary, gains or losses on sale of equipment willalso fluctuate and may be significant if we sell large quantities ofcontainers.

In 2005, we recognized a gain of $9.7 million fromthe sale of used containers compared to a loss of $3.2  millionin 2004. In 2005, selling prices for used containers were supported bystrong demand 

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for used containers, a reduced availabilityof used containers in North America and Europe following the successfulclearing of excess container inventories by us and other leasingcompanies from 2002 to 2004, and high prices for new containers. Whileused container prices remained strong in the fourth quarter of 2005, weexpect that they may come under pressure in 2006 if new containerprices remain at their current level.

Changes in marketprice, availability or transportation costs of containers in Chinacould adversely affect our ability to maintain our supply ofcontainers.

China is currently the largest containerproducing nation in the world, and we currently purchase substantiallyall of our dry and special containers from two manufacturers based inChina and substantially all of our refrigerated containers from threemanufacturers based in China. In the event that it were to become moreexpensive for us to procure containers in China or to transport thesecontainers at a low cost from China to the locations where they areneeded by our customers, because of further consolidation amongcontainer suppliers, increased tariffs imposed by the United States orother governments or for any other reason, we would have to seekalternative sources of supply. We may not be able to make alternativearrangements quickly enough to meet our equipment needs, and thealternative arrangements may increase our costs.

Ourbusiness strategies entail risk and we may not be able to realize ourplans with regard to these strategies.

As discussed herein,in order to grow our business, we expect to employ various strategies,including consummating strategic acquisitions and investing in ourcontainer fleet. Unanticipated issues may arise in the implementationof these contemplated strategies, which could impair our ability toexpand our business as expected. Forexample:

|  |              |                                                                                                                          |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------|
|  | •  | favorable conditions in thecontainer leasing market, including the rate of world trade andeconomic growth, coulddecline; |

|  |              |                                                                                                                                           |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | equipment prices and containerlease rates could decline as a result of a variety of factors,including a decline in worldwide steelprices; |

|  |              |                                                                                                                 |
|--|--------------|-----------------------------------------------------------------------------------------------------------------|
|  | •  | the financial condition of ourthird party container depot operators and other business partners maydeteriorate; |

|  |              |                                                                                                           |
|--|--------------|-----------------------------------------------------------------------------------------------------------|
|  | •  | our customers could decideto buy rather than lease a larger percentage of the containers theyoperate; and |

|  |              |                                                                                                                         |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------|
|  | •  | we may not be able toexecute strategic acquisitions or to integrate such acquired assetssuccessfully into our business. |

Any of the above riskscould adversely affect our financial position and results ofoperations. Furthermore, the execution of our plans could result in ourhaving greater losses than we have historically experienced and couldhave a material adverse effect on our business.

If we areunable to meet future capital requirements, our business may beadversely affected.

We periodically make capitalinvestments to, among other things, maintain and expand our containerfleet. As we maintain and grow our business, we may have to incursignificant capital expenditures. We believe that we will be able tofund these expenditures through cash flow from operations andborrowings under our senior secured credit facility and our assetsecuritization facility. However, future borrowings may not beavailable under such facilities and we may not be able to refinancesuch facilities on commercially reasonable terms or at all.Additionally, we may not have, and may not be able to obtain, adequatefunds to make all necessary capital expenditures when required, and theamount of future capital expenditures may materially exceed ouranticipated or current expenditures. If we are unable to make necessarycapital expenditures, our profitability could suffer.

We mayincur costs associated with relocation of leasedequipment.

When lessees return equipment to locations wheresupply exceeds demand, we routinely reposition containers to higherdemand areas. Positioning expenses vary depending on geographic

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location, distance, freight rates and otherfactors, and may not be fully covered by drop-off charges collectedfrom the last lessees of the equipment or pick-up charges paid by thenew lessees. In addition, demand may not be as great as anticipatedafter positioning has occurred, which may result in equipment remainingidle. Although we currently seek to limit the number of containers thatcan be returned and impose surcharges on containers returned to areaswhere demand for such containers is not expected to be strong, futuremarket conditions may not enable us to continue such practices. Inaddition, we cannot assure you that we have accurately anticipatedwhich port locations will be characterized by weak or strong demand inthe future, and our current contracts will not provide much protectionagainst positioning costs if ports that we expect to be strong demandports turn out to be surplus container ports at the time leasesexpire.

Manufacturers of our equipment may be unwilling orunable to honor manufacturer warranties covering defects in ourequipment.

We obtain warranties from the manufacturers ofour equipment. When defects in the containers occur, we work with themanufacturers to identify and rectify the problem. For example, we,along with some of our competitors and one of our lessees, currentlyhave identified cracks in rails in certain containers manufactured intwo factories in China in 2003 and 2004. To date, the manufacturer hasagreed to be responsible for the repair of the containers, even thoughthe cause of the problem has not yet been identified. However, there isno assurance that the manufacturer will continue to honor its warrantyobligations or that manufacturers will be willing or able to honor suchwarranty obligations in the future. If defects are discovered incontainers that are not covered by manufacturer warranties we could berequired to expend significant amounts of money to repair thecontainers and/or the useful life of the containers could be shortenedand the value of the containers reduced.

We rely onour information technology systems to conduct our business. If thesesystems fail to adequately perform these functions, or if we experiencean interruption in their operation, our business and financial resultscould be adversely affected.

The efficient operation of ourbusiness is highly dependent on two of our information technologysystems: our equipment tracking system and our‘‘Tradex’’ customer interface system. Forexample, these systems allow customers to place pick-up and drop-offorders on the Internet, view current inventory and check contractualterms in effect with respect to any given container lease agreement. Wecorrespondingly rely on such information systems to track transactions,such as repairs and changes to book value, and movements associatedwith each of our owned or managed containers. We use the informationprovided by these systems in our day-to-day business decisions in orderto effectively manage our lease portfolio and improve customer service.The failure of these systems to perform as we anticipate could disruptour business and results of operation and cause our relationships withour customers to suffer. In addition, our information technologysystems are vulnerable to damage or interruption from circumstancesbeyond our control, including fire, natural disasters, power loss andcomputer systems failures and viruses. Any such interruption could havea material adverse effect on our business.

A number of keypersonnel are critical to the success of our business.

Mostof our senior executives and other management-level employees have beenwith us for over ten years and have significant industry experience. Werely on this knowledge and experience in our strategic planning and inour day-to-day business operations. Our success depends in large partupon our ability to retain our senior management, the loss of one ormore of whom could have a material adverse effect on our business. Oursuccess also depends on our ability to retain our experienced salesforce and technical personnel as well as recruiting new skilled sales,marketing and technical personnel. Competition for these persons in ourindustry is intense and we may not be able to successfully recruit,train or retain qualified personnel. If we fail to retain and recruitthe necessary personnel, our business and our ability to obtain newcustomers and provide acceptable levels of customer service couldsuffer.

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The international nature of thecontainer industry exposes us to numerous risks.

Ourability to enforce the end users' obligations under the leasesand other arrangements for use of the containers will be subject toapplicable law in the jurisdiction in which enforcement is sought. Asthe containers are predominantly located on international waterways, itis not possible to predict, with any degree of certainty, thejurisdictions in which enforcement proceedings may be commenced. Forexample, repossession from defaulting lessees may be difficult and moreexpensive in jurisdictions whose laws do not confer the same securityinterests and rights to creditors and lessors as those in the UnitedStates and in jurisdictions where recovery of equipment from thedefaulting lessee is more cumbersome. As a result, the relative successand expedience of enforcement proceedings with respect to thecontainers in various jurisdictions also cannot be predicted.

Weare also subject to risks inherent in conducting business acrossnational boundaries, any one of which could adversely impact ourbusiness. These risks include, but are not limitedto:

|  |              |                                      |
|--|--------------|--------------------------------------|
|  | •  | regional or local economicdownturns; |

|  |              |                                              |
|--|--------------|----------------------------------------------|
|  | •  | changes in governmentalpolicy or regulation; |

|  |              |                                                                 |
|--|--------------|-----------------------------------------------------------------|
|  | •  | restrictions onthe transfer of funds into or out of thecountry; |

|  |              |                                     |
|--|--------------|-------------------------------------|
|  | •  | import and export duties andquotas; |

|  |              |                                          |
|--|--------------|------------------------------------------|
|  | •  | domestic and foreign customs andtariffs; |

|  |              |                         |
|--|--------------|-------------------------|
|  | •  | internationalincidents; |

|  |              |                    |
|--|--------------|--------------------|
|  | •  | militaryoutbreaks; |

|  |              |                        |
|--|--------------|------------------------|
|  | •  | governmentinstability; |

|  |              |                                   |
|--|--------------|-----------------------------------|
|  | •  | nationalization of foreignassets; |

|  |              |                          |
|--|--------------|--------------------------|
|  | •  | governmentprotectionism; |

|  |              |                                                                                    |
|--|--------------|------------------------------------------------------------------------------------|
|  | •  | compliance with exportcontrols, including those of the U.S. Department ofCommerce; |

|  |              |                                                                                                            |
|--|--------------|------------------------------------------------------------------------------------------------------------|
|  | •  | compliance with importprocedures and controls, including those of the U.S. Department ofHomeland Security; |

|  |              |                                                           |
|--|--------------|-----------------------------------------------------------|
|  | •  | potentially negativeconsequences from changes in taxlaws; |

|  |              |                       |
|--|--------------|-----------------------|
|  | •  | higher interestrates; |

|  |              |                                                                                             |
|--|--------------|---------------------------------------------------------------------------------------------|
|  | •  | requirements relating towithholding taxes on remittances and other payments bysubsidiaries; |

|  |              |                                         |
|--|--------------|-----------------------------------------|
|  | •  | labor or other disruptionsat key ports; |

|  |              |                                                              |
|--|--------------|--------------------------------------------------------------|
|  | •  | difficulty in staffing andmanaging widespread operations;and |

|  |              |                                                                                                                              |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------|
|  | •  | restrictions on our ability to ownor operate subsidiaries, make investments or acquire new businesses inthese jurisdictions. |

Any one or more of these factors couldimpair our current or future international operations and, as a result,harm our overall business.

As a U.S. corporation, weare subject to the Foreign Corrupt Practices Act, and a determinationthat we violated this act may affect our business and operationsadversely.

As a U.S. corporation, we are subject to theregulations imposed by the Foreign Corrupt Practices Act (FCPA), whichgenerally prohibits U.S. companies and their intermediaries from makingimproper payments to foreign officials for the purpose of obtaining orkeeping business. Any determination that we have violated the FCPAcould have a material adverse effect on us.

The lack of aninternational title registry for containers increases the risk ofownership disputes.

Pursuant to the terms of theAcquisition, the seller represented and warranted to us that TransOcean and TAL International Corporation had good and marketable titleto the containers they 

18

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purported to own and valid leaseholdinterests in containers they purported to lease. However, there is nointernationally recognized system of recordation or filing to evidenceTrans Ocean's and TAL International Corporation's title tothe containers. The lack of a title recordation system with respect tothe containers could result in disputes with creditors of prior ownersof Trans Ocean and TAL International Corporation or the containersowned or leased-in from time to time, or creditors of the endusers.

We may incur costs associated with new securityregulations.

We may be subject to regulations promulgatedin various countries, including the United States, seeking to protectthe integrity of international commerce and prevent the use ofcontainers for international terrorism or other illicit activities. Forexample, the Container Safety Initiative, the Customs-Trade PartnershipAgainst Terrorism and Operation Safe Commerce are among the programsadministered by the U.S. Department of Homeland Security that aredesigned to enhance security for cargo moving throughout theinternational transportation system by identifying existingvulnerabilities in the supply chain and developing improved methods forensuring the security of containerized cargo entering and leaving theUnited States. Moreover, the International Convention for SafeContainers, 1972 (CSC), as amended, adopted by the InternationalMaritime Organization, applies to new and existing containers and seeksto maintain a high level of safety of human life in the transport andhandling of containers by providing uniform international safetyregulations. As these regulations develop and change, we may incurincreased compliance costs due to the acquisition of new, compliantcontainers and/or the adaptation of existing containers to meet any newrequirements imposed by such regulations. Additionally, certaincompanies are currently developing or may in the future developproducts designed to enhance the security of containers transported ininternational commerce. Regardless of the existence of current orfuture government regulations mandating the safety standards ofintermodal shipping containers, our competitors may adopt such productsor our customers may require that we adopt such products in the conductof our container leasing business. In responding to such marketpressures, we may incur increased costs, which could have a materialadverse effect on our financial condition and results ofoperations.

Terrorist attacks could negatively impact ouroperations and our profitability and may expose us toliability.

Terrorist attacks may negatively affect ouroperations. Such attacks have contributed to economic instability inthe United States and elsewhere, and further acts of terrorism,violence or war could similarly affect world trade and the industriesin which we and our customers operate. In addition, terrorist attacksor hostilities may directly impact ports our containers come in and outof, depots, our physical facilities or those of our suppliers orcustomers and could impact our sales and our supply chain. A severedisruption to the worldwide ports system and flow of goods could resultin a reduction in the level of international trade and lower demand forour containers. The consequences of any terrorist attacks orhostilities are unpredictable, and we may not be able to foresee eventsthat could have an adverse effect on our operations.

It is alsopossible that one of our containers could be involved in a terroristattack. Although our lease agreements require our lessees to indemnifyus against all damages arising out of the use of our containers, and wecarry insurance to potentially offset any costs in the event that ourcustomer indemnifications prove to be insufficient, we may not be fullyprotected from liability arising from a terrorist attack which utilizesone of our containers.

Environmental liability may adverselyaffect our business and financial situation.

We are subjectto federal, state, local and foreign laws and regulations relating tothe protection of the environment, including those governing thedischarge of pollutants to air and water, the management and disposalof hazardous substances and wastes and the cleanup of contaminatedsites. We could incur substantial costs, including cleanup costs, finesand third-party claims for property damage and personal injury, as aresult of violations of or liabilities under environmental laws and

19

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regulations in connection with our currentor historical operations. Under some environmental laws in the UnitedStates and certain other countries, the owner of a leased container maybe liable for environmental damage, cleanup or other costs in the eventof a spill or discharge of material from a container without regard tothe owner's fault. While we maintain certain insurance relatingto both on-hire and off-hire containers and require lessees to obtainsimilar insurance and to provide us with indemnity against certainlosses, such insurance and indemnities may not cover or be sufficientto protect us against losses arising from environmental damage. Underthe terms of the stock purchase agreement in respect of theAcquisition, the seller is obligated to indemnify us for certainenvironmental liabilities relating to the operation of the businessprior to our acquisition. This indemnification, however, may not besufficient to reimburse us for all losses relating to environmentalliabilities.

Many countries, including the United States,restrict, prohibit or otherwise regulate the use of chlorofluorocarboncompounds (‘‘CFCs’’) due to their ozonedepleting and global warming effects. CFCs have historically been usedin the manufacture and operation of older refrigerated containers,including some containers purchased in the past by Trans Ocean and TALInternational Corporation, which we acquired in the Acquisition andwhich are currently used in approximately 3% of our refrigeratedcontainers. Regulation of CFCs or other refrigerants may becomestricter in the future. Market pressure or government regulation ofrefrigerants and synthetic insulation materials may requirerefrigerated containers using non-conforming substances to beretrofitted with non-CFC refrigerants at substantial cost to us. Thereplacement refrigerant used in our new refrigerated containers alsomay become subject to similar market pressures or governmentalregulation. In addition, refrigerated containers that are notretrofitted may command lower prices in the market for used containersonce we retire these containers from our fleet.

Certainliens may arise on our containers.

Depot operators,repairmen and transporters may come into possession of the containersfrom time to time and have sums due to them from the lessees orsublessees of the containers. In the event of nonpayment of thosecharges by the lessees or sublessees, we may be delayed in, or entirelybarred from, repossessing the containers, or be required to makepayments or incur expenses to discharge such liens on thecontainers.

Fluctuations in foreign exchange rates couldreduce our profitability. 

The majority of our revenues andcosts are billed in U.S. dollars. Most of our non-U.S. transactions areindividually of small amounts and in various denominations and thus arenot suitable for cost-effective hedging. In addition, almost all of ourcontainer purchases are paid for in U.S. dollars.

Our operationsand used container sales in locations outside of the U.S. have someexposure to foreign currency fluctuations, and trade growth and thedirection of trade flows can be influenced by large changes in relativecurrency values. Adverse or large exchange rate fluctuations maynegatively affect our results of operations and financialcondition.

In 2005, the government of China implemented a planto change the currency peg for the Chinese Yuan Renimbi to a basket ofcurrencies rather than just the U. S. Dollar. In addition, thegovernment of China announced an intention to allow the value of theYuan Renimbi to appeciate about 3% versus the U. S. Dollar.Since the amount of our revenues and expenses denominated in YuanRenimbi is quite small relative to our overall revenue and expenses, weexpect that the direct effects to us of the announced devaluation willbe limited.

Increases in the cost of or the lack ofavailability of insurance could increase our risk exposure and reduceour profitability.

Our lessees and depots are required tomaintain all risks physical damage insurance, comprehensive generalliability insurance and to indemnify us against loss. We also maintainour own contingent liability insurance and off-hire physical damageinsurance. Nevertheless, lessees and depots 

20

----

insurance or indemnities and our insurancemay not fully protect us. The cost of such insurance may increase orbecome prohibitively expensive for us and our customers and suchinsurance may not continue to be available.

We also maintaindirector and officer liability insurance. The Sarbanes-Oxley Act of2002 and new regulations of the New York Stock Exchange may make itmore difficult and more expensive for us to obtain director and officerliability insurance, and we may be required to incur substantial coststo maintain increased levels of coverage or it may not continue to beavailable.

Other Risks Related to ourBusiness

We are a ‘‘controlledcompany’’ within the meaning established by the New YorkStock Exchange and, as a result, qualify for, and intend to rely on,exemptions from certain corporate governancerequirements.

The Resolute Fund, L.P., its affiliated fundsand the other parties to a shareholders agreement among the investorswho acquired our company in November  2004, as well as managementand certain of our other shareholders, as a group, control a majorityof our outstanding common stock, and, as a result, we are considered a‘‘controlled company’’ within the meaningof the corporate governance standards of the New York Stock Exchange.Under these rules, a ‘‘controlled company’’is exempt from complying with certain corporate governancerequirements, including (1) the requirement that a majority of theboard of directors consist of independent directors, (2) therequirement that we have a nominating/corporate governance committeethat is composed entirely of independent directors and (3) therequirement that we have a compensation committee that is composedentirely of independent directors. As a result, our board of directorsdoes not consist of a majority of independent directors nor does ourboard of directors have compensation and nominating/corporategovernance committees consisting entirely of independent directors.Accordingly, investors do not have the same protections afforded tostockholders of companies that are subject to all of the corporategovernance requirements of the New York Stock Exchange.

Ourstrategy to selectively pursue complementary acquisitions may presentunforeseen integration obstacles or costs.

We mayselectively pursue complementary acquisitions and joint ventures.Acquisitions involve a number of risks and present financial,managerial and operational challenges,including:

|  |              |                                                                           |
|--|--------------|---------------------------------------------------------------------------|
|  | •  | potential disruption of ourongoing business and distraction ofmanagement; |

|  |              |                                                                         |
|--|--------------|-------------------------------------------------------------------------|
|  | •  | difficulty with integrationof personnel and financial and othersystems; |

|  |              |                                                              |
|--|--------------|--------------------------------------------------------------|
|  | •  | hiring additional managementand other critical personnel;and |

|  |              |                                                                             |
|--|--------------|-----------------------------------------------------------------------------|
|  | •  | increasing the scope, geographicdiversity and complexity of our operations. |

In addition, we mayencounter unforeseen obstacles or costs in the integration of acquiredbusinesses. Also, the presence of one or more material liabilities ofan acquired company that are unknown to us at the time of acquisitionmay have a material adverse effect on our business. Our acquisition andjoint venture strategy may not be successfully received by customers,and we may not realize any anticipated benefits from acquisitions orjoint ventures.

We have a substantial amount of debtoutstanding on a consolidated basis and have significant debt serviceobligations which could adversely affect our financial condition or ourability to fulfill our obligations and make it more difficult for us tofund our operations.

We have a significant amount of debtoutstanding on a consolidated basis. As of December  31,2005, we have outstanding indebtedness of $858.0  million underour asset securitization facility and our senior secured creditfacility. In addition, we have a capital lease obligation in the amountof $14.6  million. Our interest and debt expense for the fiscalyear ended December  31,  2005 was $72.4  million. Asof December  31,  2005, the percentage of our total debt tototal assets was 67%.

21

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Our substantial debt could have importantconsequences for investors, including thefollowing:

|  |              |                                                                                                                                                                                                            |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | require us to dedicate asubstantial portion of our cash flow from operations to make paymentson our debt, thereby reducing funds available for operations, futurebusiness opportunities and otherpurposes; |

|  |              |                                                                                                                    |
|--|--------------|--------------------------------------------------------------------------------------------------------------------|
|  | •  | limit our flexibility inplanning for, or reacting to, changes in our business and the industryin which we operate; |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--|--------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | make it moredifficult for us to satisfy our obligations with respect to our debtobligations, and any failure to comply with such obligations, includingfinancial and other restrictive covenants, could result in an event ofdefault under the agreements governing such indebtedness, which couldlead to, among other things, an acceleration of our indebtedness orforeclosure on the assets securing our indebtedness and which couldhave a material adverse effect on our business orprospects; |

|  |              |                                                                                                                                                                    |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | limit our ability to borrowadditional funds, or to sell assets to raise funds, if needed, forworking capital, capital expenditures, acquisitions or otherpurposes; |

|  |              |                                                                   |
|--|--------------|-------------------------------------------------------------------|
|  | •  | make it more difficult for usto pay dividends on our commonstock; |

|  |              |                                                                                                                        |
|--|--------------|------------------------------------------------------------------------------------------------------------------------|
|  | •  | increase our vulnerability togeneral adverse economic and industry conditions, including changes ininterest rates; and |

|  |              |                                                                                        |
|--|--------------|----------------------------------------------------------------------------------------|
|  | •  | place us at acompetitive disadvantage compared to our competitors which have lessdebt. |

We may not generate sufficient revenues to service andrepay our debt and have sufficient funds left over to achieve orsustain profitability in our operations, meet our working capital andcapital expenditure needs or compete successfully in ourmarkets.

Despite our substantial leverage, we and oursubsidiaries will be able to incur additional indebtedness. This couldfurther exacerbate the risks described above.

We and oursubsidiaries may be able to incur substantial additional indebtednessin the future. Although our senior secured credit facility and ourasset securitization facility contain restrictions on the incurrence ofadditional indebtedness, such restrictions are subject to a number ofqualifications and exceptions, and, under certain circumstances,indebtedness incurred in compliance with such restrictions could besubstantial. To the extent that new indebtedness is added to our andour subsidiaries' current debt levels, the risks described abovewould increase.

We will require a significant amount of cashto service and repay our outstanding indebtedness and our ability togenerate cash depends on many factors beyond ourcontrol.

Our ability to make payments on and repay ourindebtedness and to fund planned capital expenditures will depend onour ability to generate cash in the future.

We cannot assureinvestors that:

|  |              |                                                                                                                                                          |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | our business willgenerate sufficient cash flow from operations to service and repay ourdebt and to fund working capital and planned capitalexpenditures; |

|  |              |                                                                                                                                           |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | future borrowings will beavailable under our current or future credit facilities in an amountsufficient to enable us to repay our debt;or |

|  |              |                                                                                         |
|--|--------------|-----------------------------------------------------------------------------------------|
|  | •  | we will be able to refinance any ofour debt on commercially reasonable terms or at all. |

Financial,business, economic and other factors, many of which we cannot control,will affect our ability to generate cash in the future and to makethese payments.

If we cannot generate sufficient cash from ouroperations to meet our debt service and repayment obligations, we mayneed to reduce or delay capital expenditures, the development of ourbusiness generally and any acquisitions. In addition, we may need torefinance our debt, obtain additional financing or sell assets, whichwe may not be able to do on commercially reasonable terms or atall.

22

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Our senior secured creditfacility and asset securitization facility impose significant operatingand financial restrictions, which may prevent us from pursuing certainbusiness opportunities and taking certain actions.

Oursenior secured credit facility and asset securitization facilityimpose, and the terms of any future indebtedness may impose,significant operating, financial and other restrictions on us and oursubsidiaries. These restrictions will limit or prohibit, among otherthings, our ability to:

|  |              |                               |
|--|--------------|-------------------------------|
|  | •  | incur additionalindebtedness; |

|  |              |                                                    |
|--|--------------|----------------------------------------------------|
|  | •  | pay dividends on or redeemor repurchase our stock; |

|  |              |                                                |
|--|--------------|------------------------------------------------|
|  | •  | issue capitalstock of us and our subsidiaries; |

|  |              |                            |
|--|--------------|----------------------------|
|  | •  | makeloans and investments; |

|  |              |              |
|--|--------------|--------------|
|  | •  | createliens; |

|  |              |                                                           |
|--|--------------|-----------------------------------------------------------|
|  | •  | sell certain assets or merge withor into other companies; |

|  |              |                                                                 |
|--|--------------|-----------------------------------------------------------------|
|  | •  | enter intocertain transactions with stockholders andaffiliates; |

|  |              |                                                                              |
|--|--------------|------------------------------------------------------------------------------|
|  | •  | restrict dividends,distributions or other payments from our subsidiaries;and |

|  |              |                                                  |
|--|--------------|--------------------------------------------------|
|  | •  | otherwise conduct necessarycorporate activities. |

These restrictions could adversely affectour ability to finance our future operations or capital needs andpursue available business opportunities. A breach of any of theserestrictions could result in a default in respect of the relatedindebtedness. If a default occurs, the relevant lenders could elect todeclare the indebtedness, together with accrued interest and fees, tobe immediately due and payable and proceed against any collateralsecuring that indebtedness, which will constitute substantially all ofour material container assets.

The price of our common stockmay be highly volatile and may decline regardless of our operatingperformance.

The trading price of our common shares islikely to be subject to wide fluctuations. Factors affecting thetrading price of our common shares mayinclude:

|  |              |                                     |
|--|--------------|-------------------------------------|
|  | •  | variations in our financialresults; |

|  |              |                                                                                                           |
|--|--------------|-----------------------------------------------------------------------------------------------------------|
|  | •  | changes in financial estimatesor investment recommendations by securities analysts following ourbusiness; |

|  |              |                                                                                                                                       |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | the public's response toour press releases, our other public announcements and our filings withthe Securities and ExchangeCommission; |

|  |              |                                                                                     |
|--|--------------|-------------------------------------------------------------------------------------|
|  | •  | changes in accountingstandards, policies, guidance or interpretations orprinciples; |

|  |              |                                                                                            |
|--|--------------|--------------------------------------------------------------------------------------------|
|  | •  | future sales of common stockby us and our directors, officers and significantstockholders; |

|  |              |                                                                                                |
|--|--------------|------------------------------------------------------------------------------------------------|
|  | •  | announcements oftechnological innovations or enhanced or new products by us or ourcompetitors; |

|  |              |                                                                                          |
|--|--------------|------------------------------------------------------------------------------------------|
|  | •  | our failure to achieveoperating results consistent with securities analysts'projections; |

|  |              |                                                                                                      |
|--|--------------|------------------------------------------------------------------------------------------------------|
|  | •  | the operating and stockprice performance of other companies that investors may deem comparableto us; |

|  |              |                                           |
|--|--------------|-------------------------------------------|
|  | •  | recruitment or departure of keypersonnel; |

|  |              |                                                             |
|--|--------------|-------------------------------------------------------------|
|  | •  | our failure to timely addresschanging customer preferences; |

|  |              |                                       |
|--|--------------|---------------------------------------|
|  | •  | broadmarket and industry factors; and |

|  |              |                                                                                                                |
|--|--------------|----------------------------------------------------------------------------------------------------------------|
|  | •  | otherevents or factors, including those resulting from war, incidents ofterrorism or responses to such events. |

23

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In addition, if the market for comparablecompany stocks or the stock market in general experiences loss ofinvestor confidence, the trading price of our common shares coulddecline for reasons unrelated to our business or financial results. Thetrading price of our common shares might also decline in reaction toevents that affect other companies in our industry even if these eventsdo not directly affect us.

We do not expect to pay anydividends in the foreseeable future.

We do not anticipatepaying any cash dividends to holders of our common stock in theforeseeable future. In addition, our senior secured credit facility andasset securitization facility include restrictions on our ability topay cash dividends. Agreements governing future indebtedness willlikely contain similar restrictions on our ability to pay cashdividends. Consequently, investors must rely on sales of their commonstock after price appreciation, which may never occur, as the only wayto realize any future gains on their investment.

We areuncertain of our ability to obtain additional financing for our futurecapital needs.

We believe that cash from operations andexisting cash, together with available borrowings under our seniorsecured credit facility and asset securitization facility will besufficient to meet our working capital, capital expenditure and expenserequirements for at least the next twelve months. However, we may needto raise additional funds in order to fund our business, expand oursales activities, develop new or enhance existing products and/orrespond to competitive pressures. Additional financing may not beavailable on terms favorable to us, or at all.

If securitiesanalysts do not publish research or reports about our business or ifthey downgrade our stock, the price of our stock coulddecline.

The trading market for our common shares relies inpart on the research and reports that industry or financial analystspublish about us or our business. We do not control these analysts.Furthermore, if one or more of the analysts who do cover us downgradesour stock, the price of our stock could decline. If one or more ofthese analysts ceases coverage of our company, we could lose visibilityin the market, which in turn could cause our stock price todecline.

Implementation of required public companycorporate governance and financial reporting practices and policiesincreases our costs significantly and require our management to devotesubstantial time to comply therewith and we may be unable to providethe required financial information in a timely and reliablemanner.

As a newly public company, we incur significantlegal, accounting and other expenses that we did not incur as a privatecompany. The Sarbanes-Oxley Act of 2002, as well as new rulessubsequently implemented by the Securities and Exchange Commission andthe New York Stock Exchange, have imposed various new requirements onpublic companies, including changes in corporate governance practices.Our management and other personnel need to devote a substantial amountof time to these new requirements. Moreover, these rules andregulations increase our legal and financial compliance costs and makesome activities more time-consuming and costly. For example, these newrules and regulations make it more difficult and more expensive for usto obtain director and officer liability insurance, and we may berequired to incur substantial costs to maintain increased levels ofcoverage.

In addition, the Sarbanes-Oxley Act of 2002 requires,among other things, that we maintain effective internal controls forfinancial reporting and disclosure controls and procedures. Inparticular, commencing in fiscal 2006, we must perform system andprocess evaluation and testing of our internal controls over financialreporting to allow management and our independent registered publicaccounting firm to report on the effectiveness of our internal controlsover financial reporting. Our management may not be able to timely andeffectively implement controls and procedures that adequately respondto these increased regulatory and reporting requirements. While wecurrently have an internal audit function, we will need to hireadditional accounting and financial staff with appropriate publiccompany experience and technical accounting knowledge. Moreover, if weare not 

24

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able to comply with the requirements ofSection 404 of the Sarbanes-Oxley Act of 2002 in a timely manner, or ifwe or our independent registered public accounting firm identifydeficiencies in our internal controls over financial reporting that aredeemed to be material weaknesses, we could suffer a loss of investorconfidence in the reliability of our financial statements, the marketprice of our stock could decline and we could be subject to sanctionsor investigations by the New York Stock Exchange, the Securities andExchange Commission or other regulatory authorities. Any failure by usto timely implement these required public company corporate governanceand financial reporting practices and policies could materially andadversely impact our financial condition and results of operation andthe price of our common stock.

Adverse changes in businessconditions could negatively impact our income tax provision or cashpayments.

Our deferred tax liability balance includes adeferred tax asset for U.S. federal and various states resulting fromnet operating loss carryforwards. A reduction to our future earnings,which will lower taxable income, may require us to record a tax chargeagainst earnings, in the form of a valuation allowance, if it isdetermined it is more-likely-than-not that some or all of the losscarryforwards will not be realized.

In addition, under certainconditions, if our future investment in new containers and chassis issignificantly less than estimated, we may fail to benefit from futureaccelerated depreciation for income tax purposes, resulting in taxableincome being greater than our reported book income. If this occurs wecould become a cash taxpayer sooner than we currentlyproject.

ITEM 1B.    UNRESOLVED STAFF COMMENTS

NotApplicable.

ITEM 2.    PROPERTIES

OfficeLocations.    As of December  31,  2005, ouremployees are located in 19 offices in 12 different countries. We haveseven offices in the U.S. including our headquarters in Purchase, NewYork. We have 12 offices outside the U.S. We lease all of our officespace. In addition, we have agents dedicated to our business in SouthKorea.

The following table summarizes the facilities we leased asof December  31,  2005:

OfficeLocation—U.S.Properties                

Purchase,NY (Headquarters)Cranford, NJHouston, TXDanville,CASan Francisco, CAMiami, FLKansas City,MO

Office Location—InternationalProperties

Barking, UnitedKingdomAntwerp, BelgiumHong KongSydney,AustraliaSingaporeMilan, ItalyTokyo, JapanHamburg,GermanyShanghai, ChinaVienna, AustriaMumbai,IndiaTaipei, Taiwan

25

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ITEM 3.    LEGALPROCEEDINGS

From time to time we are a party to litigationmatters arising in connection with the normal course of our business.While we cannot predict the outcome of these matters, in the opinion ofour management, any liability arising from these matters will not havea material adverse effect on our business. Nevertheless, unexpectedadverse future events, such as an unforeseen development in ourexisting proceedings, a significant increase in the number of new casesor changes in our current insurance arrangements could result inliabilities that have a material adverse impact on ourbusiness.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS

On October  5,  2005, uponunanimous written consent, our stockholders authorized thefollowing:

|  |              |                                                                                    |
|--|--------------|------------------------------------------------------------------------------------|
|  | •  | our common stock to be spliton a 101.5052 to 1 basis immediately prior to the IPO, |

|  |              |                                                                                                                                                                                                                          |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | the conversion of our then outstandingSeries A 12.0% Cumulative Senior Preferred Stock into shares ofour common stock at a conversion price equal to the price to the public(initial offering price) of our commonstock, |

|  |              |                                                                                                                                                 |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | the amendment and restatement ofour Certificate of Incorporation to increase the number of authorizedshares of our common stock to 100,000,000, |

|  |              |                                                                                                                                                   |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | to require that our directors be electedannually at the annual meeting of stockholders to serve until the nextannual meeting of the stockholders, |

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | toprovide for the indemnification of our directors and officers (and suchother employees or agents as the Board of Directors may authorize fromtime to time) to the fullest extent permitted by law againstthreatened, pending or completed actions, suits or proceedings, whethercivil or criminal, relating to their service as a director or officerand all liability loss and expenses (including attorneys fees,judgments, fines and amounts paid in settlement thereof), provided suchdirector or officer acted in good faith and in a manner he or shereasonably believed to be in, or not opposed to, our bestinterests. |

|  |              |                                                                                                                                                                                                                                                                                                                                    |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | the amendment andrestatement of our By-Laws in anticipation of the completion of ourinitial public offering to be consistent with our amended and restatedCertificate of Incorporation, to increase the number of authorizeddirectors to fifteen and to be make other revisions required as aresult of our initial publicoffering, |

|  |              |                                                                                                                                                                                                                                                          |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | the establishment of the 2005Management Omnibus Incentive Plan for up to 2,500,000 shares of ourcommon stock, to be available to grant incentive stock options, nonqualified stock options, stock appreciation rights, restricted stockand other awards. |

26

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PARTII

|               |                                                                                                                   |
|---------------|-------------------------------------------------------------------------------------------------------------------|
| ITEM 5.  | MARKET FOR REGISTRANT’SCOMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OFEQUITY SECURITIES |

Our common stock has been traded on the NewYork Stock Exchange under the symbol‘‘TAL’’ since October  2005. Prior tothat time, there was no public market for our common stock.

OnMarch  1,  2006, the closing price of the common stock was$21.55, as reported on the New York Stock Exchange. On that date, therewere approximately 36 holders of record of the common stock andapproximately 493 beneficial holders, based on information obtainedfrom the Company’s transfer agent.

As reported onthe New York Stock Exchange, the high and low sales prices for ourcommon stock during our fiscal quarter ending December31,  2005 were $20.89 per share and $17.05 per share,respectively.

Initial Public Offering

On October17,  2005, we sold 11.5  million shares of our common stockat a price of $18.00 per share in an initial public offering(‘‘IPO’’) which generated net proceeds ofapproximately $189.2  million, after deducting underwriterdiscounts and other offering expenses. We used the net proceeds of thisoffering, together with additional borrowings under an assetsecuritization facility and an amended and restated senior securedcredit facility and available cash, to repay the entire outstandingprincipal and accrued cash interest due on our then outstanding seniorunsecured credit agreement which was approximately $288.0million on October  17,  2005. Related to the IPO, thefollowing activities also occurred:

|  |          |                                                                                                                                                                                                                                                           |
|--|----------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 1)  | Ourstockholders approved a 101.5052-for-1 stock split which becameeffective prior to the consummation of the IPO. All share and per shareinformation in the accompanying financial statements have beenretroactively restated to reflect this stocksplit. |

|  |          |                                                                                                                                                                                                                                                                                                                                                                                                      |
|--|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 2)  | All 201,205 then outstanding shares ofour Series A 12.0% cumulative senior preferred stock wereconverted into 11,178,035 shares of our common stock on October17,  2005, based on the IPO price of $18.00 per common share. Asa result of the IPO, the stock split and the preferred stockconversion, we had 32,882,208 shares of common stock issued andoutstanding as of the completion of theIPO. |

|  |          |                                                                                                                                                                                                                                                                                                       |
|--|----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 3)  | Previously issued options granted to ourvarious employees to purchase 454,612 shares of our common stock becamefully vested on October  17,  2005, and as a result, theunamortized balance of unearned compensation of approximately$3.4  million was recognized as compensation expense at thatdate. |

|  |          |                                                                                                                                                                                                            |
|--|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 4)  | Options were granted to variousemployees to purchase 612,195 shares our common stock which becameeffective as of the IPO date, with an exercise price equal to the IPOprice of our common stock of $18.00. |

|  |          |                                                                                                                 |
|--|----------|-----------------------------------------------------------------------------------------------------------------|
|  | 5)  | Management consulting agreements between us andcertain of our stockholders were terminated on October17,  2005. |

|  |          |                                                                                                                                                                |
|--|----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 6)  | We paid the aggregateoutstanding accrued dividends on our then outstanding Series A12.0% cumulative senior preferred stock of $23.6  millionin November  2005. |

On October  21,  2005, theunderwriters, in connection with our IPO, exercised theirover-allotment option in part to purchase 1.0  million additionalshares of common stock from certain of our stockholders. We did notreceive any proceeds from the sale of the shares pursuant to theover-allotment option. The underwriters waived their rights withrespect to the remaining 725,000 shares of common stock covered by theover-allotment option.

Dividends

We have never paid cashdividends on our common stock, and did not repurchase any of our sharesduring fiscal 2005. Any future declaration and payment of dividendswill be subject to the 

27

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discretion of our Board of Directors, will besubject to applicable law, and will depend on our results ofoperations, earnings, financial condition, contractual limitations,cash requirements, future prospects, and other factors deemed relevantby the Board of Directors. The Board of Directors has no currentintention of paying any cash dividends on our common stock. Inaddition, certain provisions of our senior secured credit facility andasset securitization facility restrict our ability to pay dividends ormake other distributions on our common stock.

Share RepurchaseProgram

On March 13, 2006, our Board of Directors authorized astock buyback program for the repurchase of up to 1,500,000 shares ofour common stock. Stock repurchases under this program may be madethrough open market and privately negotiated transactions at times andin such amounts as a committee of our Board of Directors deemsappropriate. The timing and actual number of shares repurchased willdepend on a variety of factors including price, corporate andregulatory requirements, restrictions regarding a repurchase programincluded in our credit facilities and other market conditions. Thestock repurchase program does not have an expiration date and may belimited or terminated by the Board of Directors at any time withoutprior notice.

Unregistered Sales of Equity Securities

Thefollowing sets forth information regarding unregistered securities soldby us in 2005.

In April  2005, we sold 53,667 shares of ourcommon stock and 1,205 shares of our Series A 12.0% cumulativesenior preferred stock for an aggregate offering price of $1,205,529 tocertain of our managers and other employees.

In connection withour initial public offering, in October  2005, all 201,205 thenoutstanding shares of our Series A 12.0% cumulative seniorpreferred stock were converted into 11,178,035 shares of our commonstock. We received no proceeds from this conversion.

In 2005, wegranted options to purchase (i) 53,667 shares of common stock under our2004 Management Stock Plan which have an exercise price ofapproximately $0.01 per share and (ii) 612,195 shares of common stockunder our 2005 Management Omnibus Incentive Plan which have an exerciseprice equal to our initial public offering price of $18.00 per share.No shares of common stock have been issued upon exercise of any ofthese options. All options were granted under Rule 701 promulgatedunder the Securities Act or, in the case of employees who are officersor directors of us or are accredited investors, Section 4(2) of theSecurities Act.

There were no underwriters employed in connectionwith any of the transactions set forth above. The recipients ofsecurities in each such transactions represented their intention toacquire the securities for investment only and not with a view to anydistribution thereof. Appropriate legends were affixed to the sharecertificates and other instruments issued in such transactions. Allrecipients were given the opportunity to ask questions and receiveanswers from our representatives concerning our business and financialaffairs. Each of the recipients that were employees of TAL had accessto such information through their employment withTAL.

Securities Authorized for Issuance Under EquityCompensation Plans

Our Equity Compensation Plan Informationtable is incorporated by reference to our Proxy Statement, which willbe filed with the Securities and Exchange Commission no later than 120days after the close of the Company’s fiscal year endedDecember  31,  2005.

|              |                         |
|--------------|-------------------------|
| ITEM6.  | SELECTED FINANCIAL DATA |

The followingtable sets forth certain selected historical financial, operating andother data of TAL International Group, Inc. (the‘‘Successor’’) and Trans Ocean and certainoperations of TAL International Container Corporation on a combinedbasis (collectively, the ‘‘Predecessor’’).The summary historical consolidated statement of operations data,balance sheet data and other financial 

28

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data for the fiscal year endedDecember  31,  2005 and for the two months endedDecember  31,  2004 were derived from the Successor'saudited consolidated financial statements and related notes appearingelsewhere in this Form 10-K. The summary historical combinedconsolidated statement of operations data, balance sheet data and otherfinancial data for the ten months ended October 31, 2004 and for theyears ended December  31,  2003 (appearing elsewhere inthis Form 10-K), 2002 and 2001 were derived from thePredecessor’s audited combined consolidated financial statementsand related notes. The historical results are not necessarilyindicative of the results to be expected in any futureperiod.

All actual common share and per share data have beenadjusted to retroactively reflect the 101.5052-to-1 stock split thatoccurred on October  5,2005.

|                                                                            |  |                                                |            |                              |  |                             |            |                        |  |        |         |        |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|----------------------------------------------------------------------------|--|------------------------------------------------|------------|------------------------------|--|-----------------------------|------------|------------------------|--|--------|---------|--------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                                                       |  | Successor                                      |            | Predecessor                  |
|                                                                       |  | YearEnded December 31,                         |            | Two Months Ended December31, |  | Ten Months Ended October31, |            | Year Ended December31, |
|                                                                       |  | 2005                                           |            | 2004                         |  | 2004                        |            | 2003                   |  | 2002   |         | 2001   |
|                                                                       |  | (dollarsin thousands other than per sharedata) |
| Statement of OperationsData:                                               |  |                                           |       |                         |  |                        |       |                   |  |   |    |   |  |   |    |    |  |   |    |    |  |   |    |    |
| Leasingrevenues                                                            |  | $                                              | 285,406    |                         |  | $                           | 48,365     |                   |  | $      | 242,963 |   |  | $      | 301,352 |    |  | $      | 303,786 |    |  | $      | 326,421 |    |
| Equipmenttradingrevenue                                                    |  |                                           | 24,244     |                         |  |                        | 1,713      |                   |  |   | 9,641   |   |  |   | 15,235  |    |  |   | 15,893  |    |  |   | 33,356  |    |
| Managementfeeincome                                                        |  |                                           | 6,482      |                         |  |                        | 1,071      |                   |  |   | 6,046   |   |  |   | 6,612   |    |  |   | 5,927   |    |  |   | 7,228   |    |
| Otherrevenues                                                              |  |                                           | 2,383      |                         |  |                        | 313        |                   |  |   | 2,858   |   |  |   | 2,823   |    |  |   | 2,395   |    |  |   | 3,176   |    |
| Totalrevenues                                                              |  |                                           | 318,515    |                         |  |                        | 51,462     |                   |  |   | 261,508 |   |  |   | 326,022 |    |  |   | 328,001 |    |  |   | 370,181 |    |
| Equipmenttradingexpenses                                                   |  |                                           | 19,227     |                         |  |                        | 1,361      |                   |  |   | 7,044   |   |  |   | 12,822  |    |  |   | 12,937  |    |  |   | 27,459  |    |
| Directoperatingexpenses                                                    |  |                                           | 26,907     |                         |  |                        | 4,372      |                   |  |   | 23,043  |   |  |   | 37,268  |    |  |   | 53,595  |    |  |   | 77,065  |    |
| Administrativeexpenses                                                     |  |                                           | 40,671     |                         |  |                        | 6,419      |                   |  |   | 29,014  |   |  |   | 38,404  |    |  |   | 33,383  |    |  |   | 41,040  |    |
| Depreciationandamortization                                                |  |                                           | 115,138    |                         |  |                        | 19,769     |                   |  |   | 119,449 |   |  |   | 134,985 |    |  |   | 150,256 |    |  |   | 160,014 |    |
| Equipmentrentalexpense                                                     |  |                                           | 299        |                         |  |                        | 1,140      |                   |  |   | 4,342   |   |  |   | 36,264  |    |  |   | 37,307  |    |  |   | 36,849  |    |
| Provision(reversal) for doubtful accounts                                  |  |                                           | 559        |                         |  |                        | 225        |                   |  |   | 300     |   |  |   | (33     | )  |  |   | (322    | )  |  |   | (1,785  | )  |
| Net(gain) loss on sale of leasingequipment                                 |  |                                           | (9,665     | )                       |  |                        | (126       | )                 |  |   | 3,325   |   |  |   | 35,940  |    |  |   | 55,782  |    |  |   | 18,443  |    |
| Write-offof deferred financingcosts                                        |  |                                           | 43,503     |                         |  |                        | —    |                   |  |   | — |   |  |   | — |    |  |   | — |    |  |   | — |    |
| Interestand debtexpense                                                    |  |                                           | 72,379     |                         |  |                        | 13,185     |                   |  |   | 22,181  |   |  |   | 23,756  |    |  |   | 25,063  |    |  |   | 40,178  |    |
| Unrealized(gain) on interest rateswaps                                     |  |                                           | (12,499    | )                       |  |                        | (2,432     | )                 |  |   | — |   |  |   | — |    |  |   | — |    |  |   | — |    |
| Managementfees and other Parent Companycharges                             |  |                                           | 4,878      |                         |  |                        | —    |                   |  |   | 28,360  |   |  |   | — |    |  |   | 3,563   |    |  |   | — |    |
| Totalexpenses                                                              |  |                                           | 301,397    |                         |  |                        | 43,913     |                   |  |   | 237,058 |   |  |   | 319,406 |    |  |   | 371,564 |    |  |   | 399,263 |    |
| Income(loss) before income taxes and cumulative effect of accountingchange |  |                                           | 17,118     |                         |  |                        | 7,549      |                   |  |   | 24,450  |   |  |   | 6,616   |    |  |   | (43,563 | )  |  |   | (29,082 | )  |
| Incometax expense(benefit)                                                 |  |                                           | 7,446      |                         |  |                        | 2,680      |                   |  |   | 8,926   |   |  |   | 740     |    |  |   | (15,783 | )  |  |   | (10,135 | )  |
| Income(loss) before cumulative effect of accountingchange                  |  |                                           | 9,672      |                         |  |                        | 4,869      |                   |  |   | 15,524  |   |  |   | 5,876   |    |  |   | (27,780 | )  |  |   | (18,947 | )  |
| Cumulativeeffect of accountingchange                                       |  |                                           | —    |                         |  |                        | —    |                   |  |   | — |   |  |   | — |    |  |   | (35,377 | )  |  |   | — |    |
| Netincome(loss)                                                            |  |                                           | 9,672      |                         |  |                        | 4,869      |                   |  | $      | 15,524  |   |  | $      | 5,876   |    |  | $      | (63,157 | )  |  | $      | (18,947 | )  |
| Preferredstock dividends and accretion to redemptionvalue                  |  |                                           | (19,868    | )                       |  |                        | (8,410     | )                 |  |   |    |   |  |   |    |    |  |   |    |    |  |   |    |    |
| Netloss applicable to commonstockholders                                   |  | $                                              | (10,196    | )                       |  | $                           | (3,541     | )                 |  |   |    |   |  |   |    |    |  |   |    |    |  |   |    |    |
| LossPer ShareData:                                                         |  |                                           |       |                         |  |                        |       |                   |  |   |    |   |  |   |    |    |  |   |    |    |  |   |    |    |
| Basicloss per share applicable to commonstockholders                       |  | $                                              | (0.68      | )                       |  | $                           | (0.35      | )                 |  |   |    |   |  |   |    |    |  |   |    |    |  |   |    |    |
| Dilutedloss per share applicable to commonstockholders                     |  | $                                              | (0.68      | )                       |  | $                           | (0.35      | )                 |  |   |    |   |  |   |    |    |  |   |    |    |  |   |    |    |
| Weightedaverage number of common sharesoutstanding:                        |  |                                           |       |                         |  |                        |       |                   |  |   |    |   |  |   |    |    |  |   |    |    |  |   |    |    |
| Basic                                                                      |  |                                           | 14,912,242 |                         |  |                        | 10,150,506 |                   |  |   |    |   |  |   |    |    |  |   |    |    |  |   |    |    |
| Diluted                                                                    |  |                                           | 14,912,242 |                         |  |                        | 10,150,506 |                   |  |   |    |   |  |   |    |    |  |   |    |    |  |   |    |    |
|                                                                            |

29

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|                                                                  |  |                        |           |                              |  |                             |           |                        |  |        |           |         |  |        |           |         |  |        |           |         |  |        |           |         |  |  |
|------------------------------------------------------------------|--|------------------------|-----------|------------------------------|--|-----------------------------|-----------|------------------------|--|--------|-----------|---------|--|--------|-----------|---------|--|--------|-----------|---------|--|--------|-----------|---------|--|--|
|                                                             |  | Successor              |           | Predecessor                  |
|                                                             |  | YearEnded December 31, |           | Two Months Ended December31, |  | Ten Months Ended October31, |           | Year Ended December31, |
|                                                             |  | 2005                   |           | 2004                         |  | 2004                        |           | 2003                   |  | 2002   |           | 2001    |
|                                                             |  | (dollarsin thousands)  |
| Balance Sheet Data (endofperiod):                                |  |                   |      |                         |  |                        |      |                   |  |   |      |    |  |   |      |    |  |   |      |    |  |   |      |    |
| Cashand cashequivalents                                          |  | $                      | 27,259    |                         |  | $                           | 16,424    |                   |  |   |      |    |  | $      | 2,167     |    |  | $      | 426       |    |  | $      | 1,939     |    |
| Accountsreceivable,net                                           |  |                   | 31,738    |                         |  |                        | 35,014    |                   |  |   |      |    |  |   | 37,593    |    |  |   | 44,955    |    |  |   | 63,365    |    |
| Leasingequipment,net                                             |  |                   | 1,036,363 |                         |  |                        | 1,103,423 |                   |  |   |      |    |  |   | 977,022   |    |  |   | 1,093,233 |    |  |   | 1,274,168 |    |
| Totalassets                                                      |  |                   | 1,299,536 |                         |  |                        | 1,319,639 |                   |  |   |      |    |  |   | 1,052,996 |    |  |   | 1,178,289 |    |  |   | 1,399,609 |    |
| Totaldebt                                                        |  |                   | 872,627   |                         |  |                        | 1,072,000 |                   |  |   |      |    |  |   | 614,242   |    |  |   | 667,574   |    |  |   | 752,725   |    |
| Redeemablepreferredstock                                         |  |                   | —   |                         |  |                        | 203,738   |                   |  |   |      |    |  |   | —   |    |  |   | —   |    |  |   | —   |    |
| Redeemablecommonstock                                            |  |                   | —   |                         |  |                        | 3         |                   |  |   |      |    |  |   | —   |    |  |   | —   |    |  |   | —   |    |
| Stockholders’equity (deficit)/ owners’ netinvestment |  |                   | 379,967   |                         |  |                        | (3,427    | )                 |  |   |      |    |  |   | 100,998   |    |  |   | 111,522   |    |  |   | 173,829   |    |
| OtherFinancialData:                                              |  |                   |      |                         |  |                        |      |                   |  |   |      |    |  |   |      |    |  |   |      |    |  |   |      |    |
| Capitalexpenditures                                              |  | $                      | 145,539   |                         |  | $                           | 29,775    |                   |  | $      | 255,733   |    |  | $      | 100,070   |    |  | $      | 77,645    |    |  | $      | 76,023    |    |
| Containersalesproceeds                                           |  |                   | 93,213    |                         |  |                        | 10,111    |                   |  |   | 50,741    |    |  |   | 46,771    |    |  |   | 34,486    |    |  |   | 33,148    |    |
| SelectedFleetData(1):                                            |  |                   |      |                         |  |                        |      |                   |  |   |      |    |  |   |      |    |  |   |      |    |  |   |      |    |
| Drycontainerunits(2)                                             |  |                   | 523,533   |                         |  |                        | 538,390   |                   |  |   | 540,428   |    |  |   | 548,401   |    |  |   | 581,885   |    |  |   | 605,309   |    |
| Refrigeratedcontainerunits(2)                                    |  |                   | 35,631    |                         |  |                        | 35,851    |                   |  |   | 35,706    |    |  |   | 35,830    |    |  |   | 35,840    |    |  |   | 37,346    |    |
| Specialcontainerunits(2)                                         |  |                   | 43,414    |                         |  |                        | 46,797    |                   |  |   | 47,363    |    |  |   | 52,903    |    |  |   | 56,356    |    |  |   | 58,677    |    |
| Trader(2)                                                        |  |                   | 10,123    |                         |  |                        | 5,531     |                   |  |   | 5,199     |    |  |   | —   |    |  |   | —   |    |  |   | —   |    |
| Chassis                                                          |  |                   | 1,210     |                         |  |                        | —   |                   |  |   | —   |    |  |   | —   |    |  |   | —   |    |  |   | —   |    |
| Totalcontainerunits/chassis(2)                                   |  |                   | 613,911   |                         |  |                        | 626,569   |                   |  |   | 628,696   |    |  |   | 637,134   |    |  |   | 674,081   |    |  |   | 701,332   |    |
| Totalcontainers/chassis inTEU(2)                                 |  |                   | 988,295   |                         |  |                        | 1,002,391 |                   |  |   | 1,002,469 |    |  |   | 1,001,368 |    |  |   | 1,053,183 |    |  |   | 1,082,100 |    |
| Averageutilization%                                              |  |                   | 90.7      | %                       |  |                        | 92.8      | %                 |  |   | 92.5      | %  |  |   | 87.2      | %  |  |   | 79.4      | %  |  |   | 74.2      | %  |
|                                                                  |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                  |
|-----|----------------------------------------------------------------------------------------------------------------------------------|
| (1) | Includesour operating fleet (which is comprised of our owned and managed fleet)plus certain other units including financeleases. |

|     |                                                                                                                                                                 |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Calculated as of the endof the relevant period. Trader data for the years ended December 31,2003, 2002 and 2001 are included in other equipment typespresented. |

|               |                                                                                     |
|---------------|-------------------------------------------------------------------------------------|
| ITEM 7:  | MANAGEMENT'SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS |

The statements in this discussionregarding industry outlook, our expectations regarding our futureperformance, liquidity and capital resources and other non-historicalstatements are subject to numerous risks and uncertainties, including,but not limited to, the risks and uncertainties described under‘‘Risk Factors’’ and‘‘Forward-Looking Statements’’ as discussedeslewhere in this Form 10-K. Our actual results may differ materiallyfrom those contained in or implied by any forward-lookingstatements.

Our Company

We are one of the world'slargest and oldest lessors of intermodal freight containers. Intermodalfreight containers are large, standardized steel boxes used totransport freight by ship, rail or truck. Because of the handlingefficiencies they provide, intermodal freight containers are theprimary means by which many goods and materials are shippedinternationally.

Our operations include the acquisition, leasing,re-leasing and subsequent sale of multiple types of intermodalcontainers, as well as chassis used for the transportation ofcontainers domestically via rail and roads. As of December31,  2005, our fleet consisted of 613,911 containers and chassis,including 

30

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76,830 containers under management for thirdparties, representing approximately 988,000 twenty-foot equivalentunits (TEU). We have an extensive global presence, offering leasingservices through 19 offices in 12 countries and approximately 194 thirdparty container depot facilities in 42 countries as of December31,  2005. Our customers are among the world's largestshipping lines and include, among others, APL-NOL, CMA-CGM, HanjinShipping, Maersk Line, Mediterranean Shipping Company and NYKLine.

We lease three principal types of containers: (1) dryfreight containers, which are used for general cargo such asmanufactured component parts, consumer staples, electronics andapparel, (2) refrigerated containers, which are used for perishableitems such as fresh and frozen foods, and (3) special containers, whichare used for heavy and oversized cargo such as marble slabs, buildingproducts and machinery. We also manage our own container disposals, actas the disposal agent for a number of our shipping line customers, andbuy and sell used containers through our Trader group. As ofDecember  31,  2005, dry, refrigerated, special containersand Trader represented approximately 85%, 6%, 7%and 2% of our fleet on a unit basis, respectively. Our chassisequipment, which was purchased in the fourth quarter of 2005,represented under 1% of our fleet on a unit basis as ofDecember  31,  2005.

The following tables provide thecomposition of our equipment fleet as of the dates indicated below (inboth units andTEU’s):

|              |  |                        |         |                   |  |                  |         |        |  |         |         |        |  |        |         |         |  |        |         |        |  |        |         |        |  |        |         |        |  |        |         |        |  |        |         |        |  |  |
|--------------|--|------------------------|---------|-------------------|--|------------------|---------|--------|--|---------|---------|--------|--|--------|---------|---------|--|--------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|         |  | EquipmentFleet inUnits |
|         |  | December31, 2005       |         | December 31, 2004 |  | December 31,2003 |
|         |  | Owned                  |         | Managed           |  | Total            |         | Owned  |  | Managed |         | Total  |  | Owned  |         | Managed |  | Total  |
| Dry          |  |                   | 464,353 |              |  |             | 59,180  |   |  |    | 523,533 |   |  |   | 478,171 |    |  |   | 60,219  |   |  |   | 538,390 |   |  |   | 482,980 |   |  |   | 65,421  |   |  |   | 548,401 |   |
| Refrigerated |  |                   | 34,006  |              |  |             | 1,625   |   |  |    | 35,631  |   |  |   | 34,154  |    |  |   | 1,697   |   |  |   | 35,851  |   |  |   | 34,113  |   |  |   | 1,717   |   |  |   | 35,830  |   |
| Special      |  |                   | 27,389  |              |  |             | 16,025  |   |  |    | 43,414  |   |  |   | 29,145  |    |  |   | 17,652  |   |  |   | 46,797  |   |  |   | 33,126  |   |  |   | 19,777  |   |  |   | 52,903  |   |
| Chassis      |  |                   | 1,210   |              |  |             | — |   |  |    | 1,210   |   |  |   | — |    |  |   | — |   |  |   | — |   |  |   | — |   |  |   | — |   |  |   | — |   |
| Subtotal     |  |                   | 526,958 |              |  |             | 76,830  |   |  |    | 603,788 |   |  |   | 541,470 |    |  |   | 79,568  |   |  |   | 621,038 |   |  |   | 550,219 |   |  |   | 86,915  |   |  |   | 637,134 |   |
| Trader(1)    |  |                   | 10,123  |              |  |             | — |   |  |    | 10,123  |   |  |   | 5,531   |    |  |   | — |   |  |   | 5,531   |   |  |   | — |   |  |   | — |   |  |   | — |   |
| Total        |  |                   | 537,081 |              |  |             | 76,830  |   |  |    | 613,911 |   |  |   | 547,001 |    |  |   | 79,568  |   |  |   | 626,569 |   |  |   | 550,219 |   |  |   | 86,915  |   |  |   | 637,134 |   |
|              |

|              |  |                              |         |                   |  |                  |         |        |  |         |         |        |  |        |         |         |  |        |         |        |  |        |           |        |  |        |         |        |  |        |         |        |  |        |           |        |  |  |
|--------------|--|------------------------------|---------|-------------------|--|------------------|---------|--------|--|---------|---------|--------|--|--------|---------|---------|--|--------|---------|--------|--|--------|-----------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--------|-----------|--------|--|--|
|         |  | EquipmentFleet inTEU’s |
|         |  | December31, 2005             |         | December 31, 2004 |  | December 31,2003 |
|         |  | Owned                        |         | Managed           |  | Total            |         | Owned  |  | Managed |         | Total  |  | Owned  |         | Managed |  | Total  |
| Dry          |  |                         | 737,802 |              |  |             | 100,759 |   |  |    | 838,561 |   |  |   | 757,690 |    |  |   | 101,511 |   |  |   | 859,201   |   |  |   | 748,298 |   |  |   | 109,557 |   |  |   | 857,855   |   |
| Refrigerated |  |                         | 60,674  |              |  |             | 2,394   |   |  |    | 63,068  |   |  |   | 59,787  |    |  |   | 2,521   |   |  |   | 62,308    |   |  |   | 59,007  |   |  |   | 2,548   |   |  |   | 61,555    |   |
| Special      |  |                         | 42,249  |              |  |             | 26,179  |   |  |    | 68,428  |   |  |   | 44,796  |    |  |   | 28,586  |   |  |   | 73,382    |   |  |   | 50,480  |   |  |   | 31,478  |   |  |   | 81,958    |   |
| Chassis      |  |                         | 2,270   |              |  |             | — |   |  |    | 2,270   |   |  |   | — |    |  |   | — |   |  |   | —   |   |  |   | — |   |  |   | — |   |  |   | —   |   |
| Subtotal     |  |                         | 842,995 |              |  |             | 129,332 |   |  |    | 972,327 |   |  |   | 862,273 |    |  |   | 132,618 |   |  |   | 994,891   |   |  |   | 857,785 |   |  |   | 143,583 |   |  |   | 1,001,368 |   |
| Trader(1)    |  |                         | 15,968  |              |  |             | — |   |  |    | 15,968  |   |  |   | 7,500   |    |  |   | — |   |  |   | 7,500     |   |  |   | — |   |  |   | — |   |  |   | —   |   |
| Total        |  |                         | 858,963 |              |  |             | 129,332 |   |  |    | 988,295 |   |  |   | 869,773 |    |  |   | 132,618 |   |  |   | 1,002,391 |   |  |   | 857,785 |   |  |   | 143,583 |   |  |   | 1,001,368 |   |
|              |

|  |
|--|
|  |  |
|  |

|     |                                                                                                 |
|-----|-------------------------------------------------------------------------------------------------|
| (1) | Traderdata for the year ended December 31, 2003 are included in otherequipment types presented. |

We lease our containers on a perdiem basis to our customers under three types of leases: long-termleases, service leases and finance leases. Long-term leases, typicallywith terms of three to eight years, provide us with stable cash flowand low transaction costs by requiring customers to maintain specificcontainers on-hire for the duration of the lease. Service leasescommand a premium per diem rate in exchange for providing customerswith a greater level of operational flexibility by allowing the pick-upand drop-off of containers during the lease term. Finance leases, whichare typically structured as full payout leases, provide for apredictable recurring revenue stream with the lowest daily cost to thecustomer because customers are generally required to retain thecontainer for the duration of its useful life. As of December31,  2005, approximately 89% of our containers were

31

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on-hire to customers, with approximately59% of our containers on long-term leases, approximately26% on service leases or long-term leases whose fixed terms haveexpired but for which the related units remain on-hire and for which wecontinue to receive rental payments, and approximately 4% onfinance leases. In addition, approximately 8% of our containerswere available for lease and approximately 3% were available forsale.

The following table provides a summary of our leaseportfolio, based on units in the fleet as of the dates indicatedbelow:

|                                  |  |                  |       |                   |  |                  |       |         |  |        |         |         |  |  |
|----------------------------------|--|------------------|-------|-------------------|--|------------------|-------|---------|--|--------|---------|---------|--|--|
| LeasePortfolio                   |  | December 31,2005 |       | December 31, 2004 |  | December 31,2003 |
| Financelease                     |  |             | 4.6   | %            |  |             | 1.2   | %  |  |   | — | %  |
| Long-termlease                   |  |             | 59.0  |              |  |             | 64.4  |    |  |   | 61.0    |    |
| Servicelease                     |  |             | 25.6  |              |  |             | 28.3  |    |  |   | 28.9    |    |
| Totalleased                      |  |             | 89.2  |              |  |             | 93.9  |    |  |   | 89.9    |    |
| Existingunits available forlease |  |             | 5.1   |              |  |             | 2.9   |    |  |   | 5.6     |    |
| New unitsavailable forlease      |  |             | 2.6   |              |  |             | 1.5   |    |  |   | 0.7     |    |
| Availableforsale                 |  |             | 3.1   |              |  |             | 1.7   |    |  |   | 3.8     |    |
| Totalportfolio                   |  |             | 100.0 | %            |  |             | 100.0 | %  |  |   | 100.0   | %  |
|                                  |

OperatingPerformance

Our profitability is primarily determined by theextent to which our leasing and other revenues exceed our ownership,operating and administrative expenses. Our profitability is alsoimpacted by the gain or loss that we realize on the sale of our usedcontainers.

Operating conditions in 2005 were generallyfavorable. Growth in world containerized trade has created strongdemand for containers for the last several years, and this, combinedwith the high percentage of our containers on long-term lease hasresulted in high utilization for our container fleet. In addition,prices for new containers were high for most of 2004 and 2005, leadingto increased market leasing rates and increasing leasing average ratesfor our dry container product line. Strong demand for used containersin North America and Europe and high prices for new containers alsoallowed us to achieve high average sale prices for our usedcontainers.

However, while overall conditions remain favorable,our fleet size and utilization were negatively impacted in the secondhalf of 2005 by a build up of excess inventory of new containers inChina. In 2005, many leasing companies and shipping lines placed largecontainer orders in the first half of the year due to expectations forcontinued strong growth in world trade. While growth in overallcontainer liftings is estimated by Clarkson to have been over10% in 2005, it is our understanding that most shipping linesachieved an unexpected improvement in operating efficiency in 2005which allowed them to accomodate much of their volume growth withminimal increases in the size of their operated container fleets. Webelieve that this improved efficiency was mainly a result of areduction in the congestion that slowed operations at North Americanand European ports and caused rail delays in 2004. The combination oflarge orders in the first half of 2005 and the improvement in ourcustomers’ operating efficiency resulted in a substantialbuild-up of new container inventories by mid year. We estimate that atthe peak of the build-up during the summer of 2005, there were over800,000 TEU of new containers available at container factories inChina.

The following table sets forth our average containerfleet utilization for the years ended December 31, 2005, 2004 and2003:

|                    |  |        |      |         |  |        |      |         |  |        |      |         |  |  |
|--------------------|--|--------|------|---------|--|--------|------|---------|--|--------|------|---------|--|--|
|               |  | 2005   |      | 2004    |  | 2003   |
| AverageUtilization |  |   | 90.7 | %  |  |   | 92.8 | %  |  |   | 87.2 | %  |
|                    |

Averageutilization is computed by dividing our total units currently on leaseby the total units in our container fleet (which includes leased units,available for lease units and available for saleunits).

In response to the oversupply of new containers,we reduced our level of container orders in the second half of 2005,and we believe that many leasing companies and shipping lines reducedtheir 

32

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second half orders as well. As a result, weestimate that approximately 450,000 TEU of new containers are currentlyavailable at container factories (relative to a typical level in therange of 300,000 TEU). Clarkson projects that containerized tradegrowth will remain about 10% in 2006 and shipping lines areexpected to increase their vessel capacity this year by 12% to14%. In general, we expect that the growth rate of the operatedcontainer fleets of our customers will increase in 2006.

Ouraverage container lease rates were relatively stable in 2005. Averagelease rates for our dry container product line increased byapproximately 3% in 2005 compared to 2004, while our averagerates for our special and refrigerated container product linesdecreased slightly during the year. Market leasing rates, on the otherhand, were highly volatile in 2005, particularly for dry containers,due to high volatility of container prices during the year. Drycontainer prices and market leasing rates increased by over 40%from the middle of 2003 to the middle of 2005 mainly due to increasesin the cost of steel in China. However, steel prices in China and newcontainer prices began a steady downward trend in the third quarter of2005, and by the end of the year dry container prices and market leaserates seemed to stabilize at levels similar to those we experiencedfrom 1999-2003.

The sale market for used containers wasexceptionally strong in 2005, and we recognized a gain on the sale ofleasing equipment of $9.7  million compared to a loss of$3.2  million in 2004. Selling prices for used containers weresupported by strong demand for used containers, a reduced availabilityof used containers in North America and Europe following the successfulclearing of excess container inventories by us and other leasingcompanies from 2002 to 2004, and high prices for new containers. Whileused container prices remained strong in the fourth quarter of 2005, weexpect that they may come under pressure in 2006 if new containerprices remain at their current level.

In 2005, our operatingcosts continued to benefit from the high percentage of our containerson long-term leases, our focus on lease contract logistics and our highutilization. Our credit costs continued to be low due to the generalfinancial health of our customer base and our focus on creditmanagement and collections.

We made significant progress in 2005in improving our capital structure. We raised $189.2  million inan initial public offering (‘‘IPO’’) ofcommon stock on October  17,  2005, and we used the netproceeds together with increased borrowings under our secured debtfacilities and available cash to repay all of our outstanding unsecureddebt and all of our accrued preferred dividends. In addition, all ofour outstanding preferred stock was converted to common stock at theoffering price and no preferred stock remains outstanding. Our interestexpense in 2005 mainly reflects our debt and interest rate levels priorto the IPO. In connection with the IPO and the replacement of existingcredit facilities with our asset securitization facility, we wrote off$43.5  million of deferred financing costs in 2005. Thesedeferred fees were initially capitalized at the time of the Acquisitionin 2004.

Initial Public Offering and RelatedTransactions

The IPO and the related transactions have resultedin the following:

|  |          |                                                                                                                                                                                  |
|--|----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 1)  | The number of outstandingcommon shares increased from 10,204,173 on a split-adjusted basis to32,882,208 upon completion of the IPO. No new shares have been issuedsince the IPO. |

|  |          |                                                                                                                |
|--|----------|----------------------------------------------------------------------------------------------------------------|
|  | 2)  | The total amount of outstandingdebt decreased from $1,057  million to $897  million uponcompletion of the IPO. |

|  |          |                                                                                                                                                                   |
|--|----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 3)  | Our average effectiveinterest rate decreased from 7.3% the day immediately prior tothe IPO to 5.4% the day immediately after the IPO and therelated transactions. |

|  |          |                                                                                                                            |
|--|----------|----------------------------------------------------------------------------------------------------------------------------|
|  | 4)  | Management agreementswith certain affiliates and the associated management fees wereterminated upon completion of the IPO. |

Basis ofPresentation

TAL International Group, Inc.(‘‘TAL,’’ the‘‘Company,’’ or‘‘Successor’’) was formed on October26,  2004 and commenced operations on November  4,2004 with the completion of the 

33

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acquisition transaction described below. Theagreements affecting this acquisition provided for an effective date ofOctober  31,  2004, at which date the risks and rewards ofownership of the business were transferred to TAL. TAL consists of theconsolidated accounts of Trans Ocean Ltd.(‘‘TOL’’) and TAL International ContainerCorporation, (‘‘TALI’’) formerly known asTransamerica Leasing Inc. and their subsidiaries.

TransamericaMaritime Container (the ‘‘Predecessor’’)consisted of the maritime container operations of Transamerica FinanceCorporation (‘‘TFC,’’ the‘‘Parent’’ or ‘‘ParentCompany’’). The combined consolidated financialstatements of the Predecessor have been derived from the accountingrecords of TOL and TALI and certain of their subsidiaries. Materialintercompany and inter-division balances have been eliminated incombination and consolidation. TOL and TALI were wholly owned indirectsubsidiaries of TFC, which is an indirect subsidiary of AEGON N. V. Theresults for the combined year ended December  31,  2004combine the results of the Predecessor for the ten months endedOctober  31,  2004 with the results of the Successor forthe two months ended December  31, 2004 by mathematical additionand do not comply with generally accepted accounting principles. Suchdata is being presented for analysis purposes only.

EffectiveOctober  31,  2004, TAL acquired all of the outstandingcapital stock of TOL and TALI for approximately $1.2  billion incash, including $275.0  million of financing provided by theseller. This acquisition of TOL and TALI is referred to as the‘‘Acquisition.’’ The Acquisition wasaccounted for using the purchase method of accounting, and,accordingly, the consideration paid has been allocated based on theestimated fair values of the assets acquired and liabilities assumed. The financial statements for periods prior to November1,  2004 have been prepared using the Predecessor’shistorical basis in the assets and liabilities presented as of thedates specified therein and the historical results of operations forsuch periods on a combined basis.

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Results of Operations

Thefollowing table summarizes our results of operations for the threeyears ended December  31,  2005, 2004 and 2003 in dollarsin thousands and as a percentage of total revenues.

|                                                |  |                       |         |             |  |             |       |         |  |         |         |         |  |        |         |         |  |        |         |         |  |        |         |         |  |  |
|------------------------------------------------|--|-----------------------|---------|-------------|--|-------------|-------|---------|--|---------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                                           |  | Successor             |         | Combined(1) |  | Predecessor |
|                                           |  | YearEnded December31, |
|                                           |  | 2005                  |         | 2004        |  | 2003        |
|                                           |  | Dollars               |         | Percent     |  | Dollars     |       | Percent |  | Dollars |         | Percent |
| Leasingrevenues                                |  | $                     | 285,406 |        |  |        | 89.6  | %  |  | $       | 291,328 |    |  |   | 93.1    | %  |  | $      | 301,352 |    |  |   | 92.4    | %  |
| Equipmenttradingrevenue                        |  |                  | 24,244  |        |  |        | 7.6   |    |  |    | 11,354  |    |  |   | 3.6     |    |  |   | 15,235  |    |  |   | 4.7     |    |
| Managementfeeincome                            |  |                  | 6,482   |        |  |        | 2.0   |    |  |    | 7,117   |    |  |   | 2.3     |    |  |   | 6,612   |    |  |   | 2.0     |    |
| Otherrevenues                                  |  |                  | 2,383   |        |  |        | 0.8   |    |  |    | 3,171   |    |  |   | 1.0     |    |  |   | 2,823   |    |  |   | 0.9     |    |
| Totalrevenues                                  |  |                  | 318,515 |        |  |        | 100.0 |    |  |    | 312,970 |    |  |   | 100.0   |    |  |   | 326,022 |    |  |   | 100.0   |    |
| Equipmenttradingexpenses                       |  |                  | 19,227  |        |  |        | 6.0   |    |  |    | 8,405   |    |  |   | 2.7     |    |  |   | 12,822  |    |  |   | 3.9     |    |
| Directoperatingexpenses                        |  |                  | 26,907  |        |  |        | 8.4   |    |  |    | 27,415  |    |  |   | 8.8     |    |  |   | 37,268  |    |  |   | 11.4    |    |
| Administrativeexpenses                         |  |                  | 40,671  |        |  |        | 12.8  |    |  |    | 35,433  |    |  |   | 11.3    |    |  |   | 38,404  |    |  |   | 11.8    |    |
| Depreciationandamortization                    |  |                  | 115,138 |        |  |        | 36.1  |    |  |    | 139,218 |    |  |   | 44.5    |    |  |   | 134,985 |    |  |   | 41.4    |    |
| Equipmentrentalexpense                         |  |                  | 299     |        |  |        | 0.1   |    |  |    | 5,482   |    |  |   | 1.8     |    |  |   | 36,264  |    |  |   | 11.1    |    |
| Provision(reversal) for doubtfulaccounts       |  |                  | 559     |        |  |        | 0.2   |    |  |    | 525     |    |  |   | 0.2     |    |  |   | (33     | )  |  |   | — |    |
| Net(gain) loss on sale of leasingequipment     |  |                  | (9,665  | )      |  |        | (3.0  | )  |  |    | 3,199   |    |  |   | 0.9     |    |  |   | 35,940  |    |  |   | 11.1    |    |
| Write-offof deferred financingcosts            |  |                  | 43,503  |        |  |        | 13.7  |    |  |    | — |    |  |   | — |    |  |   | — |    |  |   | — |    |
| Interestand debtexpense                        |  |                  | 72,379  |        |  |        | 22.7  |    |  |    | 35,366  |    |  |   | 11.3    |    |  |   | 23,756  |    |  |   | 7.3     |    |
| Unrealized(gain) on interest rateswaps         |  |                  | (12,499 | )      |  |        | (3.9  | )  |  |    | (2,432  | )  |  |   | (0.8    | )  |  |   | — |    |  |   | — |    |
| Managementfees and other Parent Companycharges |  |                  | 4,878   |        |  |        | 1.5   |    |  |    | 28,360  |    |  |   | 9.1     |    |  |   | — |    |  |   | — |    |
| Totalexpenses                                  |  |                  | 301,397 |        |  |        | 94.6  |    |  |    | 280,971 |    |  |   | 89.8    |    |  |   | 319,406 |    |  |   | 98.0    |    |
| Incomebefore incometaxes                       |  |                  | 17,118  |        |  |        | 5.4   |    |  |    | 31,999  |    |  |   | 10.2    |    |  |   | 6,616   |    |  |   | 2.0     |    |
| Incometax expense                              |  |                  | 7,446   |        |  |        | 2.4   |    |  |    | 11,606  |    |  |   | 3.7     |    |  |   | 740     |    |  |   | 0.2     |    |
| Netincome                                      |  | $                     | 9,672   |        |  |        | 3.0   | %  |  | $       | 20,393  |    |  |   | 6.5     | %  |  | $      | 5,876   |    |  |   | 1.8     | %  |
|                                                |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                                                                                                                           |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Theresults for the combined year ended December  31,  2004combine the results of the Predecessor for the ten months endedOctober  31,  2004 with the results of the Successor forthe two months ended December  31,  2004 by mathematicaladdition and do not comply with generally accepted accountingprinciples. Such data is being presented for analysis purposesonly. |

Comparison of Year Ended December  31,2005 to Year Ended December  31,  2004(Combined)

Leasing Revenues. The principalcomponents of our leasing revenues are presented in the followingtable. Per diem revenue represents revenue earned under operating leasecontracts; finance lease revenue represents interest income earnedunder finance lease contracts; and fee and ancillary lease revenuerepresent fees billed for the pick up and drop off of containers incertain geographic locations and billings of certain reimbursableoperating costs such as repair and handling expenses.

|                               |  |                        |         |          |  |        |         |        |  |  |
|-------------------------------|--|------------------------|---------|----------|--|--------|---------|--------|--|--|
|                          |  | Successor              |         | Combined |
|                          |  | YearEnded December 31, |
|                          |  | 2005                   |         | 2004     |
| Leasingrevenues:              |  |                   |    |     |  |   |    |   |
| Per diemrevenue               |  | $                      | 249,787 |     |  | $      | 265,081 |   |
| Financelease revenue          |  |                   | 5,387   |     |  |   | 393     |   |
| Feeand ancillary leaserevenue |  |                   | 30,232  |     |  |   | 25,854  |   |
| Totalleasingrevenues          |  | $                      | 285,406 |     |  | $      | 291,328 |   |
|                               |

Totalleasing revenues were $285.4  million for the year endedDecember  31,  2005, compared to $291.3  million forthe year ended December  31,  2004, a decrease of$5.9  million, or 2.0%. The 

35

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decrease primarily resulted from a decreasein equipment utilization partially offset by an increase in per diemrates, an increase in finance lease revenue due to additional financelease activity, and an increase in fee and ancillary lease revenuerelated to higher reimbursable operating costs.

EquipmentTrading Revenues. Equipment trading revenues were$24.2  million for the year ended December  31,2005, compared to $11.4  million for the year endedDecember  31,  2004, an increase of $12.8  million,resulting from more units sold and higher selling prices for unitssold.

Equipment trading expenses. Equipmenttrading expenses were $19.2  million for the year endedDecember  31,  2005, compared to $8.4  million forthe year ended December  31,  2004, an increase of$10.8  million, resulting from more units sold and the highercost basis of equipment sold.

Direct operatingexpenses. Direct operating expenses were $26.9million for the year ended December  31,  2005, compared to$27.4  million for the year ended December  31,2004, a decrease of $0.5  million or 1.8%. During the yearended December  31,  2005, positioning costs decreased by$1.4  million resulting from fewer units moved, and repairsdecreased by $2.9  million due to a decrease in the number ofunits repaired. These decreases were partially offset by an increase instorage costs of $1.3  million due to lower containerutilization, and a net increase of $2.5  million in otheroperating expenses primarily due to the non-recurrance of a $2.7million reversal in 2004 associated with the recovery of containers onlease from non-performing customers which were previously provided forunder our allowance policy.

Administrativeexpenses. Administrative expenses were $40.7  millionfor the year ended December  31,  2005, compared to$35.4  million for the year ended December  31,2004, an increase of $5.3  million or 15.0%. This increasewas mainly due to a stock compensation charge of $3.9  millionassociated with stock options issued to certain members of managementthat fully vested upon completion of the IPO. Other increases of$1.4  million were primarily due to higher professional fees andother administrative expenses related to being a publiccompany.

Depreciation andamortization. Depreciation and amortization was$115.1  million for the year ended December  31,2005, compared to $139.2  million for the year endedDecember  31,  2004, a decrease of $24.1  million or17.3%. The decrease was primarily due to purchase accounting.Under purchase accounting each unit was assigned a fair value at thedate of the Acquisition. The net book value assigned to the fleet underpurchase accounting was $1,101.2  million, as compared to the netbook value of the acquired fleet of $1,057.8  million, anincrease of $43.4  million or 4.1%. However, theallocation of values to the specific units had the effect of increasingvalues of the younger containers, while decreasing values of the oldercontainers. Since the younger containers have a longer remainingdepreciable life, this shift in value resulted in lower overalldepreciation.

Equipment rental expense. Equipmentrental expense was $0.3  million for the year endedDecember  31,  2005, compared to $5.5  million forthe year ended December  31,  2004, a decrease of$5.2  million. The decrease was primarily due to the purchase ofcertain equipment in the first quarter of 2005 that was previouslyleased-in under operating leases.

Net (gain) loss on sale ofleasing equipment. Gain on sale of equipment was$9.7  million for the year ended December  31,  2005,compared to a loss of $3.2  million for the year endedDecember  31,  2004, an increase of $12.9  million.The increase was primarily due to increased selling prices for our usedcontainers, as well as a higher number of unitssold.

Write-off of deferred financingcosts. Write-off of deferred financing costs was$43.5  million for the year ended December  31,2005, compared to zero for the year ended December  31,2004. As a result of refinancing our senior secured credit facility onAugust  1,  2005, we wrote off $24.3  million ofunamortized financing costs that were previously deferred. Inconnection with the repayment of the senior unsecured credit agreementin October  2005, we wrote off $19.2  million ofunamortized financing costs that were previously deferred.

Interest and debt expense. Interest and debt expensewas $72.4  million for the year ended December  31,2005, compared to $35.4  million for the year endedDecember  31,  2004, an increase of $37.0  million.The increase was primarily due to changes in our capital structureresulting from the Acquisition, which increased our debt level andeffective interest rate for the period prior to ourIPO.

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Unrealized (gain) on interest rateswaps. Unrealized (gain) on interest rate swaps was$12.5  million for the year ended December  31,2005, compared to $2.4  million for the year endedDecember  31,  2004. We entered into interest rate swapagreements on December  14,  2004 to fix thefloating interest rate on a portion of our senior secured creditfacility. The interest rate swaps were accounted for on amark-to-market basis until their designation as cash flow hedges atNovember 1,  2005. Fair value was approximately $13.9million at December  31,  2005, as compared to $2.4million at December  31,  2004, with the increase in fairvalue due to an increase in interest rates.

Management feesand other Parent Company charges. Management fees and otherParent Company charges were $4.9  million for the year endedDecember  31,  2005, compared to $28.4  million forthe year ended December  31,  2004. Management fees of$4.9  million for the year ended Decemberr 31, 2005 were payablepursuant to certain management agreements which terminated upon thecompletion of the IPO in October  2005. Other Parent Companycharges of $28.4  million for the year ended December31,  2004 primarily consisted of long-term incentive andtermination payments that were triggered by the sale of TOL and TALIand their sister divisions in 2004.

Income taxexpense. Income tax expense was $7.4  million for theyear ended December  31,  2005, compared to $11.6million for the year ended December  31,  2004, and theeffective tax rates for the periods were 43.5% and 36.3%respectively. The state tax rate was reduced from 3% to1% in 2005 as a result of a favorable change in New York Statetax law. The remaining difference in the change in our effective taxrate is primarily attributable to certain stock based compensation thatis not deductible for income tax purposes. In conjunction with theAcquisition, both the seller and the purchaser elected to have theprovisions of Internal Revenue Code Section 338(h)(10) apply to thesale, resulting in the transaction being treated as a taxable assetsale for U.S. federal income tax purposes. As a result of thiselection, the tax basis of our assets was adjusted to fair market valuefor U.S. federal income tax purposes, resulting in tax depreciationallowances over periods ranging from 5 to 7 years as well as theelimination of the net deferred U.S. federal income tax liabilitybalance that existed immediately prior to the sale.

We do notexpect to pay any significant U.S. federal income taxes for theforeseeable future, although we will be recording income tax expense,due to the following:

|  |          |                                                                                                                                                              |
|--|----------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 1)  | The Section 338(h)(10)election associated with the Acquisition, and the availability ofaccelerated U.S. tax depreciation to the existing container fleet,and |

|  |          |                                                                                            |
|--|----------|--------------------------------------------------------------------------------------------|
|  | 2)  | The availability of accelerated U.S. taxdepreciation on our future purchases ofcontainers. |

Comparison of Year EndedDecember  31,  2004 (Combined) to Year EndedDecember  31,  2003

LeasingRevenues. The principal components of our leasing revenuesare presented in the following table. Per diem revenue representsrevenue earned under operating lease contracts; finance lease revenuerepresents interest income earned under finance lease contracts; andfee and ancillary lease revenue represent fees billed for the pick upand drop off of containers in certain geographic locations and billingof certain reimbursable operating costs such as repair and handlingexpenses.

|                               |  |                       |         |             |  |        |         |        |  |  |
|-------------------------------|--|-----------------------|---------|-------------|--|--------|---------|--------|--|--|
|                          |  | Combined              |         | Predecessor |
|                          |  | YearEnded December31, |
|                          |  | 2004                  |         | 2003        |
| Leasingrevenues:              |  |                  |    |        |  |   |    |   |
| Per diemrevenue               |  | $                     | 265,081 |        |  | $      | 269,184 |   |
| Financeleaserevenue           |  |                  | 393     |        |  |   | — |   |
| Fee andancillary leaserevenue |  |                  | 25,854  |        |  |   | 32,168  |   |
| Totalleasingrevenues          |  | $                     | 291,328 |        |  | $      | 301,352 |   |
|                               |

Leasingrevenues were $291.3  million for 2004 compared to $301.4million for 2003, a decrease of $10.1  million or 3.4% dueto a reduction in the size of our container fleet, lower per diem rateson special and refrigerated containers and lower fee and ancillarylease revenue due to a decrease in the number of container drop-offs.These decreases were partially offset by increases in leasing revenuesdue to higher utilization on all types of containers.

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Equipment TradingRevenues. Equipment trading revenues were $11.4million for the year ended December  31,  2004, compared to$15.2  million for the year ended December  31,2003, a decrease of $3.8  million due to fewer resale unitssold.

Equipment trading expenses.    Equipment tradingexpenses were $8.4  million for 2004 compared to $12.8million for 2003, a decrease of $4.4  million or 34.4%.The decrease was due to selling fewer units to third partycustomers.

Direct operating expenses. Directoperating expenses were $27.4  million for 2004 compared to$37.3  million for 2003, a decrease of $9.9  million or26.5%. This decrease resulted mainly from lower storage,positioning and repair expenses primarily related to increasedutilization of our containers.

Administrativeexpenses. Administrative expenses were $35.4  millionfor 2004 compared to $38.4  million for 2003, a decrease of$3.0  million or 7.8%. The decrease was primarily due to adecrease in allocated costs in 2004 from our formerparent.

Depreciation andamortization. Depreciation and amortization was$139.2  million for 2004 compared to $135.0  million for2003, an increase of $4.2  million or 3.1%. Depreciationincreased by $14.9  million due to the purchase of 67,251containers for a purchase price of $150.7  million that we hadformerly leased-in on an operating lease. This increase was partiallyoffset by a decrease in the overall size of ourfleet.

Equipment rental expense. Equipment rentalexpense was $5.5  million for 2004 compared to $36.3million for 2003, a decrease of $30.8  million or 84.8%.On January  2,  2004, we elected to exercise a purchaseoption for 67,251 containers leased-in on an operating lease for anaggregate purchase price of $150.7  million. The purchase ofthese leased-in containers reduced equipment rental expense by$30.2  million.

Net loss (gain) on sale of leasingequipment. Loss on sale of leasing equipment was$3.2  million for 2004 compared to a loss of $35.9  millionfor 2003, a decrease of $32.7  million or 91.1%. Theimprovement was primarily the result of higher sale prices achieved in2004. Sale prices have improved steadily since the middle of 2003 dueto the industry’s successful reduction of previously largeinventories of used containers in Europe and North America, strongcontainer demand and an increase in new containerprices.

Interest and debt expense. Interest anddebt expense was $35.4  million for 2004 compared to $23.8million for 2003, an increase of $11.6  million or 48.7%.This increase was primarily attributable to the increase in debt andinterest rates associated with the Acquisition on November4,  2004. The purchase for $150.7  million of the 67,251units of containers, previously leased-in on an operating lease, alsocontributed to the increase in interest and debt expense due to higherdebt incurred to fund the purchase.

Unrealized (gain) oninterest rate swaps. Unrealized gain on interest rate swapswas $2.4  million for 2004 compared to zero for 2003. We enteredinto interest rate swap agreements on December  14,  2004to fix the floating interest rate on a portion of our senior securedcredit facility. The interest rate swaps were accounted for on amark-to-market basis and their fair value was approximately $2.4million at December  31,  2004.

Management feesand other Parent Company charges.    Management fees and otherParent Company charges were $28.4  million for 2004 compared tozero for 2003. Other Parent Company charges for the year endedDecember  31,  2004 primarily consisted of lomg-termincentive and termination payments that were triggered by the sale ofTOL and TALI and their sister divisions in 2004.

Income taxexpense. Income tax expense was $11.6  million for2004 compared to $0.7  million in 2003. Our effective tax ratewas 36.3% for 2004 compared to 11.2% for 2003. Theincrease was principally due to a one-time cumulative state tax benefitof $1.6  million realized in the first quarter of 2003 resultingfrom a reduction in state tax rate.

Liquidity and CapitalResources

Our principal sources of liquidity are cash flowsgenerated from operations and borrowings under our senior securedcredit facility and our asset securitization facility. Our cash flowswill be used to 

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finance capital expenditures, provideworking capital and meet debt service requirements. We believe thatcash on hand and cash from operations, together with availableborrowings under our senior secured credit facility and our assetsecuritization facility will be sufficient to meet our liquidityrequirements for at least the next twelve months. However, our futureoperating performance and ability to extend or refinance ourindebtedness will be dependent on future economic conditions andfinancial, business and other factors that are beyond ourcontrol.

Historically, our primary funding source had been cashprovided by operations and cash from the sale of our owned usedcontainers. Prior to the Acquisition, we had the ability to borrow fromour former parent. As a result of the Acquisition, however, our capitalstructure changed, and we are now dependent on third parties forfinancing.

In connection with the financing of the Acquisition,we entered into an $875.0  million senior secured credit facilityand made initial borrowings of $805.0  million thereunder. Atthat time we also entered into a $275.0  million senior unsecuredcredit agreement with an affiliate of our former parent and madeinitial borrowings of $275.0  million thereunder. In addition,certain of our equity investors made preferred and common equityinvestments in us totaling $200.1  million.

EffectiveAugust  1,  2005, we entered into an asset securitizationfacility, which provides for advances from time to time up to a maximumaggregate principal amount of $875.0  million. We used theproceeds of our initial borrowings of $705.0  million under thisfacility to repay a portion of the outstanding principal amount of the$875.0  million senior secured credit facility that we enteredinto in connection with the Acquisition. In connection with our assetsecuritization facility and the application of our initial borrowingsthereunder, effective August  1,  2005, we amended andrestated the $875.0  million senior secured credit facility thatwe entered into in connection with the Acquisition to, among otherthings, reduce the maximum aggregate commitment amount thereunder to$175.0  million.

On October  17,  2005, wecompleted an initial public offering of our common stock that generatednet proceeds of $189.2  million. We used the net proceeds of thisoffering, together with additional borrowings under the assetsecuritization facility and the amended and restated senior securedcredit facility, to repay the entire outstanding balance on our seniorunsecured debt of $275.0  million and the accrued interest ofapproximately $13.0 million then due. In addition, all of ouroutstanding preferred stock was converted to common stock at theoffering price and no preferred stock remainsoutstanding.

Accordingly, as of December 31, 2005, our debtstructure consisted of an $875.0 million asset securitization facilityand a $175.0 million senior secured credit facility. As of December 31,2005, we had outstanding borrowings under our asset securitizationfacility of $710.0 million. Based on the applicable advance rate of85%, our total borrowing capacity under our asset securitizationfacility was $710.7 million. As of December 31,2005, we had outstandingborrowings under our senior secured credit facility of $148.0 million.Based on the applicable advance rate of 82%, our total borrowingcapacity under our senior secured credit facility was $163.2million.

We plan to issue up to $675.0 million of asset backednotes in 2006 under an Asset Backed Security("ABS") program designed to reduce ourborrowing costs and enhance financing resources for our equipmentfleet. The proceeds from the issuance will be used to repay outstandingborrowings under our current securitization facility. All debt to beissued under the ABS program will be collateralized by the assets ofthe SPE consisting of revenue earning containers we use in our leasingbusiness, restricted cash and certain receivables related to revenueearning equipment. These notes will be issued by the SPE and will beincluded in "Debt" in our consolidatedbalance sheet. Under this ABS program, a committed revolving facility(the "Warehouse") will also be arranged toprovide up to $300.0 million of borrowing availability to supportfuture fleet expansion.

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Cash Flow

The following tablesets forth certain cash flow information for the three years endedDecember  31,  2005, 2004 and 2003 (dollars inthousands):

|                                                                   |  |                            |          |                             |  |                            |            |         |  |        |         |         |  |  |
|-------------------------------------------------------------------|--|----------------------------|----------|-----------------------------|--|----------------------------|------------|---------|--|--------|---------|---------|--|--|
|                                                              |  | Successor                  |          | Combined(1)                 |  | Predecessor                |
|                                                              |  | YearEnded December 31,2005 |          | Year Ended December31, 2004 |  | Year Ended December31,2003 |
| Net cash provided by operatingactivities                          |  | $                          | 146,185  |                        |  | $                          | 127,237    |    |  | $      | 118,418 |    |
| Netcash used in investingactivities:                              |  |                       |     |                        |  |                       |       |    |  |   |    |    |
| Cashpaid for acquisition, net of cashacquired                     |  | $                          | —  |                        |  | $                          | (1,209,242 | )  |  | $      | — |    |
| Purchasesof leasingequipment                                      |  |                       | (145,539 | )                      |  |                       | (286,657   | )  |  |   | (94,822 | )  |
| Investmentin financeleases                                        |  |                       | (44,493  | )                      |  |                       | (4,301     | )  |  |   | — |    |
| Proceedsfrom disposition ofequipment                              |  |                       | 93,213   |                        |  |                       | 60,852     |    |  |   | 46,771  |    |
| Cashcollected on finance lease receivables, net of unearnedincome |  |                       | 8,737    |                        |  |                       | 3,272      |    |  |   | 1,293   |    |
| Other                                                             |  |                       | (67      | )                      |  |                       | —    |    |  |   | — |    |
| Netcash used in investingactivities                               |  | $                          | (88,149  | )                      |  | $                          | (1,436,076 | )  |  | $      | (46,758 | )  |
| Netcash (used in)/provided by financingactivities                 |  | $                          | (47,201  | )                      |  | $                          | 1,334,435  |    |  | $      | (69,919 | )  |
|                                                                   |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                                                                                                                           |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Theresults for the combined year ended December  31,  2004combine the results of the Predecessor for the ten months endedOctober  31,  2004 with the results of the Successor forthe two months ended December  31,  2004 by mathematicaladdition and do not comply with generally accepted accountingprinciples. Such data is being presented for analysis purposesonly. |

Operating Activities

Net cash providedby operating activities increased by $19.0  million to$146.2  million in the year ended December  31,2005, compared to $127.2  million in the year endedDecember  31,  2004. In the year ended December31,  2004 there were cash uses of $30.9  million in respectof U.S. Federal income taxes, while in the year ended December31,  2005 we had no U.S. Federal income tax liability. Prior tothe Acquisition, the Predecessor had a tax sharing agreement with itsformer parent, that required the Predecessor to accrue and settleincome tax obligations as if it filed separate returns with theapplicable taxing authorities.

Net cash provided by operatingactivities increased $8.8  million to $127.2  million forthe twelve months ended December  31,  2004 compared to$118.4  million for the twelve months ended December  31,2003. The increase in net cash provided by operating activities wasprimarily the result of increased net income in fiscal 2004 over fiscal2003.

Investing Activities

Net cash used ininvesting activities decreased by $1,348.0  million to$88.1  million for the year ended December  31,2005, as compared to $1,436.1  million in the year endedDecember  31,  2004. Cash paid to consumate theAcquisition, net of cash acquired, was $1,209.2  million for theyear ended December  31,  2004. Capital expenditures were$190.0  million, including investments in finance leases of$44.5  million, for the year ended December  31,2005, compared to $291.0  million, including investment infinance leases of $4.3  million, for the year endedDecember  31,  2004. On January  2, 2004, we electedto exercise a purchase option for 67,251 units for $150.7million that we had formerly leased-in on an operating lease. Excludingthis purchase of existing containers in 2004, capital expendituresincreased in 2005 primarily due to an increase in the level ofprocurement and an increase in new container prices. Sales proceedsfrom the disposal of equipment increased $32.3  million to$93.2  million for the year ended December  31,2005, compared to $60.9  million for the year endedDecember  31,  2004. The increase was due to highercontainer sales prices and an 

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increase in units sold. We sell our usedcontainers when they have reached substantially the end of theirleaseable life. Our sale proceeds from our used containers provideadditional funds with which to purchase new containers to replenish ourleasing fleet. Net cash provided from finance receivables increased by$5.4  million to $8.7  million for the year endedDecember  31,  2005, compared to $3.3  million forthe year ended December  31,  2004 mainly due to additionalinvestment made in finance leases.

Net cash used in investingactivities increased by $1,389.3  million to $1,436.1million for the twelve months ended December  31,  2004compared to $46.8  million for the twelve months endedDecember  31,  2003. Cash paid to consummate theAcquisition, net of cash acquired was $1,209.2  million for thetwelve months ended December  31,  2004. Capitalexpenditures were $291.0  million for the twelve months endedDecember  31,  2004 compared to $94.8  million forthe twelve months ended December  31,  2003. This increasewas the result of an increase in the level of procurement as well as anincrease in new container prices. In addition, on January2,  2004, we elected to exercise our purchase option contained inan operating lease and purchased 67,251 containers for $150.7million. Sales proceeds from the disposal of equipment were$60.9  million for the twelve months ended December31,  2004 compared to $46.8  million for the twelve monthsended December  31,  2003. This increase was a result ofincreased container sale prices as a result of increased marketdemands.

Financing Activities

Prior to theAcquisition, our primary source of financing was our former parent,which resulted in borrowings or repayments and capital transactionswith our former parent. Since the Acquisition, our principal source offinancing has been borrowings under our asset securitization facilityand our senior secured credit facility.

Net cash used infinancing activities was $47.2  million for the year endedDecember  31,  2005, compared to net cash provided byfinancing activities of $1,334.4  million for the year endedDecember  31,  2004. Prior to the Acquisition, net cashprovided by our former parent was $115.4 million. In order to financethe Acquisition, we made initial borrowings of $805.0  millionunder our senior secured credit facility, entered into our seniorunsecured credit agreement for $275.0  million, and equityinvestors made preferred and common equity investments in us in theaggregate of $200.1  million. In addition, we paid financing feesunder the debt facilities of $48.4 million and equity issuance costs of$4.7 million. Following the Acquisition, through December31,  2004, we used $8.0  million to pay down borrowingsunder our senior secured credit facility. For the year endedDecember  31,  2005, we received proceeds from the issuanceof common stock under the initial public offering of $189.2million and proceeds from the issuance of preferred stock to certainmembers of management of $1.2  million. These preferred shareswere converted to common shares in connection with the IPO. We repaid$275.0 million under our senior unsecured credit agreement with theproceeds of our IPO and additional borrowings under our assetsecuritization facility and our amended senior secured credit facilityand available cash. We made total borrowings, including the initialborrowing, under our asset securitization facility of $710.0million, made repayments under our senior secured facility of $797.0million, and made total borrowings under our amended and restatedsenior secured facility of $148.0  million. Cumulative preferreddividends of $23.6  million were paid to preferred shareholdersafter the conversion of preferred shares to common stock in connectionwith the IPO. In addition, we entered into a capital lease for$14.6  million to finance the acquisition of chassis equipment,which is considered a non-cash financing activity.

Net cashprovided by financing activities was $1,334.4  million for thetwelve months ended December  31,  2004 compared to netcash used in financing activities of $69.9  million for thetwelve months ended December  31,  2003. During 2004, netcash provided by our former parent prior to the Acquisition for the tenmonth period ended October  31,  2004 was $115.4million. In order to finance the Acquisition, Trans Ocean, TALInternational Container Corporation and Trans Ocean ContainerCorporation, each of which is a direct or indirect wholly-ownedsubsidiary of ours, entered into our $875.0  million seniorsecured credit facility and made initial borrowings of $805.0million thereunder, we entered into our $275.0  million seniorunsecured credit agreement and made initial borrowings of 

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$275.0  million thereunder and certainof our equity investors made preferred and common equity investments inus in an aggregate amount of $200.1  million. Following theAcquisition, we used $8.0  million to pay down our borrowingsunder our senior secured credit facility. During 2003, we maintained afixed debt-to-capital ratio which resulted in borrowings or repaymentsand capital transactions with our former parent.

ContractualObligations

We are parties to various operating leases and areobligated to make payment related to our long term borrowings. We arealso obligated under various commercial commitments, includingobligations to our equipment manufacturers. Our equipment manufacturerobligations are in the form of conventional accounts payable, and aresatisfied from cash flows from operating and long term financingactivities.

The following table summarizes our contractualobligations and commercial commitments as of December  31,2005:

|                              |  |                       |         |                       |  |                      |        |                     |  |                                      |         |        |  |        |         |        |  |        |         |        |  |  |
|------------------------------|--|-----------------------|---------|-----------------------|--|----------------------|--------|---------------------|--|--------------------------------------|---------|--------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                         |  | PaymentsDue by Period |
|                         |  | (dollars inmillions)  |
| ContractualObligations:      |  | Total                 |         | Less than 1year(2006) |  | 1-3 years(2007-2009) |        | 3-5years(2010-2012) |  | More than 5years (2013andthereafter) |
| Total debtobligations(1):    |  |                  |    |                  |  |                 |   |                |  |                                 |    |   |  |   |    |   |  |   |    |   |
| Assetsecuritizationfacility  |  | $                     | 1,027.5 |                  |  | $                    | 40.5   |                |  | $                                    | 220.2   |   |  | $      | 303.4   |   |  | $      | 463.4   |   |
| Seniorsecured creditfacility |  |                  | 173.8   |                  |  |                 | 10.0   |                |  |                                 | 163.8   |   |  |   | — |   |  |   | — |   |
| Capitalleaseobligations      |  |                  | 19.9    |                  |  |                 | 2.0    |                |  |                                 | 4.4     |   |  |   | 4.6     |   |  |   | 8.9     |   |
| Operatingleases              |  |                  | 8.8     |                  |  |                 | 1.8    |                |  |                                 | 4.8     |   |  |   | 2.2     |   |  |   | — |   |
| Purchaseobligations          |  |                  | 13.8    |                  |  |                 | 13.8   |                |  |                                 | — |   |  |   | — |   |  |   | — |   |
| Totalcontractualobligations  |  | $                     | 1,243.8 |                  |  | $                    | 68.1   |                |  | $                                    | 393.2   |   |  | $      | 310.2   |   |  | $      | 472.3   |   |
|                              |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                     |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Amountsinclude actual and estimated interest for floating-rate debt based onDecember  31,  2005 rates and the net effect of theinterest rate swaps. |

Off-Balance Sheet Arrangements

At December  31,  2005, we did not have anyrelationships with unconsolidated entities or financial partnerships,such entities which are often referred to as structured finance orspecial purpose entities, which would have been established for thepurpose of facilitating off-balance sheet arrangements. We are,therefore, not materially exposed to any financing, liquidity, marketor credit risk that could arise if we had engaged in suchrelationships.

Critical Accounting Policies

Ourconsolidated financial statements have been prepared in conformity withaccounting principles generally accepted in the United States, whichrequire us to make estimates and assumptions that affect the amountsand disclosures reported in the consolidated financial statements andaccompanying notes. Our estimates are based on historical experienceand currently available information. Actual results could differ fromsuch estimates. The following paragraphs summarize our criticalaccounting policies. Additional accounting policies are discussed inthe notes to our historical financial statements contained elsewhere inthis Form 10-K.

Revenue Recognition

OperatingLeases with Customers

We enter into long-term leases and serviceleases with ocean carriers, principally as lessor in operating leases,for marine cargo containers. Long-term leases provide the oceancarriers with 

42

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specified container equipment for aspecified term. Our leasing revenues are based upon the number ofcontainers leased, the applicable per diem rate and the length of thelease. Long-term leases typically range for a period of three to eightyears. Revenues are recognized on a straight-line basis over the lifeof the respective lease. Advanced billings are deferred and recognizedin the period earned. Service leases do not specify the exact number ofcontainers to be leased or the term that each container will remainon-hire but allow the lessee to pick up and drop off containers atvarious locations specified in the lease agreement. Under a servicelease, rental revenue is based on the number of containers utilized atcontracted per diem rates. Revenue for customers where collection isnot assured is deferred and recognized when the amounts are received.Also, in accordance with FASB EITF No. 99-19, Reporting RevenueGross as a Principal versus Net as an Agent, we recognize billingsto customers for damages incurred and certain other pass through costsas leasing revenue as it is earned based on the terms of thecontractual agreements with the customer.

Finance Leaseswith Customers

We enter into finance leases as lessor forcontainer equipment that we own. The net investment in finance leasesrepresents the receivables due from lessees, net of unearned income.Unearned income is recognized on a level yield basis over the leaseterm and is recorded as leasing revenue. Finance leases are usuallylong-term in nature, typically ranging for a period of five to tenyears and may include a bargain purchase option to purchase theequipment at the end of the lease term.

EquipmentTrading Revenue

Equipment trading revenue represents theproceeds on the sale of equipment purchased for resale. The relatedexpenses represent the cost of equipment sold as well as other sellingcosts that are recognized as incurred and are disclosed as equipmenttrading expense in the consolidated statements ofoperations.

Management Fee Income

We manageequipment, which is owned by third parties and we earn management feesbased on the income earned by the leasing and sales of such equipment.Amounts we collect as agent on behalf of third parties that own suchequipment are not included in revenue and costs paid for managedequipment are not included in expense.

OtherRevenues

Other revenues include fee income for third partypositioning of equipment.

Direct OperatingExpenses

Direct operating expenses are directly related to ourequipment under and available for lease. These expenses primarilyconsist of our costs to repair and maintain the equipment, to store theequipment when it is not on lease, to re-position the equipment and aprovision for equipment lost or not expected to be returned. Thesecosts are recognized when incurred. In limited situations, certainpositioning costs may be capitalized.

LeasingEquipment

Leasing equipment is recorded at cost and depreciatedto an estimated residual value on a straight-line basis over theestimated useful life. We will continue to review our depreciationpolicies on a regular basis to determine whether changes have takenplace that would suggest that a change in our depreciation policies,useful lives of our equipment or the assigned residual values iswarranted. In addition, periodically a determination is made, ifindicators of impairment are present, as to whether the carrying valueof our fleet exceeds its estimated future undiscounted cash flows. Theestimated useful lives for our leasing equipment ranges from 10 to 20years from the date of manufacture, for both the Successor andPredecessor companies. Estimated useful lives have been based onindependent appraisals and will be adjusted if necessary based onactual experience. Costs incurred to 

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place new equipment into service, includingcosts to transport the equipment to its initial on-hire location, arecapitalized. We charge repair and maintenance costs that do not extendthe lives of the assets as incurred and include these costs in directoperating expenses.

An allowance is provided through directoperating expenses based on the net book value of a percentage of theunits on lease to certain customers that are considered to benon-performing which we believe we will not ultimately recover. Thepercentage is developed based on historicalexperience.

Equipment Held for Sale

In accordancewith the Financial Accounting Standards Board(‘‘FASB’’) Statement No. 144, Accountingfor the Impairment or Disposal of Long-Lived Assets(‘‘SFAS No. 144’’), container equipmentheld for sale is carried at the lower of its fair value, based oncurrent transactions, less costs to sell or carrying value;depreciation on such assets is halted and disposals generally occurwithin ninety days. Subsequent changes to the asset's fair value,either increases or decreases, are recorded as adjustments to thecarrying value of the equipment held for sale; however, any suchadjustments would not exceed the equipment's carrying value atthe time it was initially classified as held for sale. Initialwrite-downs of assets held for sale are recorded as an impairmentcharge and are included in net loss (gain) on sale of leasingequipment. Realized gains and losses resulting from the sale ofequipment held for sale are recorded as a net loss (gain) on sale ofleasing equipment.

Allowance for DoubtfulAccounts

Our allowance for doubtful accounts is updated on aregular basis and is based upon a review of the collectibility of ourreceivables. This review considers the risk profile of the customer,credit quality indicators such as the level of past-due amounts andeconomic conditions. An account is considered past due when a paymenthas not been received in accordance with the contractual terms.Accounts are generally charged off after an analysis is completed whichindicates that collection of the full principal balance is in doubt.Changes in economic conditions or other events may necessitateadditions or deductions to the allowance for doubtful accounts. Theallowance for doubtful accounts is intended to provide for lossesinherent in the accounts receivable, and requires the application ofestimates and judgments as to the outcome of collection efforts and therealization of collateral, among other things. We believe our allowancefor doubtful accounts is adequate to provide for credit losses inherentin our accounts receivable. However, actual losses could exceed theamounts provided for in certain periods.

IncomeTaxes

We account for income taxes in accordance with Statementof Financial Accounting Standards No. 109, Accounting for IncomeTaxes, (‘‘SFAS No. 109’’). Under SFASNo. 109, deferred tax assets and liabilities are determined based onthe difference between our financial statements and the tax basis ofassets and liabilities using enacted tax rates in effect for the yearin which the differences are expected toreverse.

Goodwill

In accordance with Statement ofFinancial Accounting Standards No. 142, Goodwill and OtherIntangibles we evaluate our goodwill balance for possibleimpairment annually, in the fourth quarter of each year. A review ofgoodwill may also be initiated if events or circumstances indicate thecarrying value may be impaired. In the future, in performing thisevaluation, management will consider many factors including projectedfuture operating results and cash flows, economic trends and othermarket place data.

Recently Issued AccountingPronouncements

In December  2004, the FASB issuedStatement of Financial Accounting Standards No. 123R, Share-BasedPayment, (revised 2004), (‘‘SFAS No.123R’’). This Statement is a revision of SFAS No. 123.SFAS No. 123R supercedes APB No. 25, and its related implementationguidance. SFAS No. 

44

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123R requires companies to recognize in thestatement of operations the fair value of all employee share-basedpayments, including grants of employee stock options, as well ascompensatory employee stock purchase plans. We are required to adoptSFAS No. 123R on January  1,  2006. Based on the number ofoptions currently outstanding which are fully vested, we do not expectthe adoption of SFAS No. 123R to have any impact on our financialposition, results of operations or cash flows. However, future grantsof shared-based compensation will result in the recognition ofcompensation expense.

ITEM 7A:    Quantitative and QualitativeDisclosures About Market Risk

Market risk represents the riskof changes in value of a financial instrument, derivative ornon-derivative, caused by fluctuations in interest rates, foreignexchange rates and equity prices. Changes in these factors could causefluctuations in results of our operations and cash flows. In theordinary course of business, we are exposed to foreign currency,interest rate, and credit risks.

Foreign CurrencyExchange Rate Risk

Although we have significant foreign-basedoperations, the U.S. dollar is the operating currency for the majorityof our leases (both customers obligations and company obligations), andmost of our revenues and expenses in fiscal years 2004 and 2005 weredenominated in U.S. dollars. As a result, foreign currency fluctuationsdid not materially impact our financial results in thoseperiods.

Interest Rate Risk

We enter into interestrate swaps to fix the interest rates on a portion of our debt. Weassess and manage the external and internal risk associated with thesederivative instruments in accordance with the overall operating goals.External risk is defined as those risks outside of our direct control,including counterparty credit risk, liquidity risk, systemic risk andlegal risk. Internal risk relates to those operational risks within themanagement oversight structure and includes actions taken incontravention of our policy.

The primary external risk of ourinterest rate swap agreements is counterparty credit exposure, which isdefined as the ability of a counterparty to perform its financialobligations under a derivative contract. Our counterparty, a majormoney center financial institution, israted‘‘AA’’ or better by nationallyrecognized rating agencies. Credit exposures are measured based on themarket value of outstanding derivatives instruments. Both currentexposures and potential exposures are calculated for each derivativecontract to monitor counterparty credit exposure.

OnDecember  14,  2004, we entered into three interest rateswap contracts with a financial institution to fix the floatinginterest rates on our debt facilities, with an initial notional amountof $500  million, amortizing 7 year term and a fixed rate ofapproximately 3.82%.

On October  28,  2005, weentered into two additional interest rate swap contracts with the samefinancial institution to fix the floating interest rates on our debtfacilities. To hedge the interest rate exposure under the assetsecuritization facility, we entered into an interest rate swap that hada notional amount of $100  million, a non-amortizing term of 6years, with a fixed rate of approximately 4.82%. To hedge theinterest rate exposure under the senior secured credit facility, weentered into an interest rate swap that had a notional amount of$25  million, a non-amortizing term of approximately 2.75 years,with a fixed rate of approximately 4.71%.

As a result ofour variable rate indebtedness, our earnings are affected by changes ininterest rates. However, we utilize interest rate swap agreements tomanage the market risk associated with fluctuations in interest rates.If market interest rates for our variable rate indebtedness averaged 50basis points more than the weighted average interest rate actually paidduring 2005, our interest expense, after considering the effects of ourinterest rate swap agreements, would have increased, and income beforeincomes taxes would have decreased, by $1.4  million for the yearended December  31,  2005. These amounts are determined byconsidering the impact of the hypothetical interest rates on ourborrowings and interest rate swap agreements. This analysis does notconsider the effects of the reduced level of overall economic activitythat could exist in such an environment.

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Credit Risk

Wemaintain detailed credit records regarding our customers and setmaximum exposure limits for our significant customers based on ourreview of these records. Credit criteria include, but are not limitedto, customer payment history, customer financial position andperformance (e.g., net worth leverage, profitability, trade routes,country of domicile, social and political climate, and the type of, andlocation of, containers that are to be supplied.) We diligently monitorour customers' performance and our lease exposures on an ongoingbasis, and our credit management processes are aided by the longpayment experience we have with most of our customers and our broadnetwork of long-standing relationships in the shipping industry thatprovide current information about our customers.

Inrecent years, our credit losses have been minimal. Industry factorsthat have provided credit protection include the strong growth in thecontainer industry and favorable creditor laws in several countriesthat are served by most of our large customers. In addition, we havehistorically recovered approximately 90% of our containers thatwere subject of defaulted contracts and we are able to successfullyre-market these repossessed containers through our worldwide salesinfrastructure. However, we typically incur operating expenses such asrepairs and positioning when containers are recovered after a customerdefault.

For the year ended December  31,2005, our five largest customers accounted for approximately 45%of our leasing revenues, with our largest customer accounting forapproximately 18% of our leasing revenues. As of December31,  2005, approximately 72% of our containers wereon-hire to our 20 largest customers.

The allowance fordoubtful accounts includes an estimate of allowances necessary forreceivables on our operating lease receivables.

|              |                                            |
|--------------|--------------------------------------------|
| ITEM8.  | FINANCIAL STATEMENTS AND SUPPLEMENTARYDATA |

The consolidated financial statements and financialstatement schedule listed under Item 15— Exhibits, FinancialStatement Schedules are filed as a part of this Item 8. Supplementaryfinancial information may be found in Note 15 to the consolidatedfinancial statements.

|               |                                                                                    |
|---------------|------------------------------------------------------------------------------------|
| ITEM 9.  | CHANGESIN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE |

None.

ITEM 9A.    CONTROLSAND PROCEDURES

In accordance with Rule 13a-15(b) under theSecurities Exchange Act of 1934, as amended (the‘‘Exchange Act’’), we carried out anevaluation, under the supervision and with the participation of ourmanagement, including our President and Chief Executive Officer alongwith our Vice President and Chief Financial Officer, of theeffectiveness of the design and operation of our disclosure controlsand procedures (as defined in Rule 13a-14(c) under the Exchange Act) asof the end of the period covered by this Annual Report on Form 10-K. Based upon their evaluation of these disclosure controls andprocedures, our President and Chief Executive Officer along with theVice President and Chief Financial Officer concluded, as of the end ofthe period covered by this Annual Report on Form 10-K, that ourdisclosure controls and procedures were effective to ensure thatinformation required to be disclosed by us in reports we file under theExchange Act is recorded, processed, summarized and reported bymanagement of the Company on a timely basis in order to comply with theCompany’s disclosure obligations under the Exchange Act and theSEC rules thereunder.

Changes in Internal Controls

There were no changes in our internal controls overfinancial reporting (as such term is defined in Rule 13a-15(f) and15d-15(f) under the Securities Exchange Act of 1934) during the periodcovered by this Annual Report on Form 10-K that have materiallyaffected, or are reasonably likely to materially affect, our internalcontrols over financial reporting.

ITEM 9B.    OTHERINFORMATION

Notapplicable.

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PARTIII

ITEM 10.    DIRECTORS AND EXECUTIVE OFFICERS OF THEREGISTRANT

The information required by this item may be foundunder the sections captioned ‘‘Election ofDirectors,’’ ‘‘Occupations of Directors andExecutive Officers,’’ and‘‘Section 16(a) Beneficial Ownership ReportingCompliance’’ in our Proxy Statement for our AnnualMeeting of Stockholders to be held on May 22, 2006 (the‘‘2006 Proxy Statement’’), which isincorporated herein by reference. The 2006 Proxy Statement will befiled with the Securities and Exchange Commission no later than120 days after the close of our fiscal year endedDecember 31, 2005.

ITEM 11.    EXECUTIVECOMPENSATION

The information required by this item may be foundunder the section captioned ‘‘Compensation and OtherInformation Concerning Directors and Officers’’ in the2006 Proxy Statement, which is incorporated herein by reference.

ITEM 12.    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT AND RELATED STOCKHOLDER MATTERS

The informationrequired by this item may be found under the section captioned‘‘Management and Principal Holders of VotingSecurities’’ in the 2006 Proxy Statement, which isincorporated herein by reference.

ITEM 13.    CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS

The information requiredby this item may be found under the section captioned‘‘Certain Relationships and RelatedTransactions’’ in the 2006 Proxy Statement, which isincorporated herein by reference, and in Note 8 to theconsolidated financial statements.

ITEM 14.    PRINCIPALACCOUNTING FEES AND SERVICES

The information required by thisitem may be found under the section captioned ‘‘AuditorFees’’ in the 2006 Proxy Statement, which is incorporatedherein by reference

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PART IV

ITEM 15.    EXHIBITS,FINANCIAL STATEMENT SCHEDULES

(a)(1)    FinancialStatements.

The following financial statements are includedin Item 8 of thisreport:

|                                                                                                                                                                                                                                                                                                                                                                   |  |      |  |  |  |  |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|------|--|--|--|--|
|                                                                                                                                                                                                                                                                                                                                                              |  | Page |
| Reportof Independent Registered Public AccountingFirm                                                                                                                                                                                                                                                                                                             |  | F-2  |
| ConsolidatedBalance Sheets at December  31,  2005 and December31,  2004(Successor)                                                                                                                                                                                                                                                                                |  | F-3  |
| ConsolidatedStatement of Operations for the year ended December  31,2005 and two months ended December  31,  2004 (Successor)and Combined Consolidated Statements of Operations for the ten monthsended October  31,  2004 and year ended December31,  2003 (Predecessor)                                                                                         |  | F-4  |
| ConsolidatedStatements of Stockholders’ Equity (Deficit) and ComprehensiveIncome for the year ended December  31,  2005 and twomonths ended December  31,  2004 (Successor) and CombinedConsolidated Statements of Owner's Net Investment andComprehensive Income for the ten months ended October  31,2004 and year ended December  31,  2003(Predecessor) |  | F-5  |
| ConsolidatedStatement of Cash Flows for the year ended December  31,2005 and two months ended December  31,  2004 (Successor)and Combined Consolidated Statements of Cash Flows for the ten monthsended October  31,  2004 and year ended December  31,2003(Predecessor)                                                                                          |  | F-6  |
| Notesto Consolidated Financial Statements                                                                                                                                                                                                                                                                                                                         |  | F-7  |
|                                                                                                                                                                                                                                                                                                                                                                   |

(a)(2)    Financial StatementSchedules.

The following financial statement schedule for theCompany is filed as part of thisreport:

|                                                                   |  |        |     |        |  |  |
|-------------------------------------------------------------------|--|--------|-----|--------|--|--|
| Reportof Independent Registered Public Accounting Firm onSchedule |  |   | S-1 |   |
| Schedule II —Valuation and QualifyingAccounts               |  |   | S-2 |   |
|                                                                   |

Schedules not listedabove have been omitted because the information required to be setforth therein is not applicable or is shown in the accompanyingConsolidated Financial Statements or notesthereto.

(a)(3)    List of Exhibits.

The followingexhibits are filed as part of and incorporated by reference into thisAnnual Report on Form 10-K:

|                       |  |                                                                                                                                                                                                                                                                                                                                                |  |  |  |  |
|-----------------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNo.            |  | Description                                                                                                                                                                                                                                                                                                                                    |
|    2.1 |  | StockPurchase Agreement, dated July  10,  2004, by and betweenTA Leasing Holding Co, Inc. and Klesch & Company Limited(incorporated by reference from exhibit number 2.1 to TAL InternationalGroup, Inc.’s Form S-1 filed on June  30,  2005,file number 333-126317)                                                                 |
|    2.2 |  | FirstAmendment to Stock Purchase Agreement, dated August  10,2004, by and among TA Leasing Holding Co, Inc., Klesch & CompanyLimited and Transamerica Corporation (incorporated by reference fromexhibit number 2.2 to Amendment No. 1 to TAL International Group,Inc.’s Form S-1 filed on August  26,  2005, filenumber 333-126317) |
|                       |

48

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|                       |  |                                                                                                                                                                                                                                                                                                                                                                                                          |  |  |  |  |
|-----------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNo.            |  | Description                                                                                                                                                                                                                                                                                                                                                                                              |
|    2.3 |  | SecondAmendment to Stock Purchase Agreement, dated September30,  2004, by and among TA Leasing Holding Co, Inc., Klesch &Company Limited and Transamerica Corporation (incorporated by referencefrom exhibit number 2.3 to Amendment  No. 1 to TAL InternationalGroup, Inc.’s Form S-1 filed on August  26,  2005,file number 333-126317)                                                      |
|    2.4 |  | ThirdAmendment to Stock Purchase Agreement, dated November  3,2004, by and among TA Leasing Holding Co, Inc., Klesch & CompanyLimited, TAL International Group, Inc. and Transamerica Corporation(incorporated by reference from exhibit number 2.4 to Amendment No. 1to TAL International Group, Inc.’s Form S-1 filed onAugust  26,  2005, file number 333-126317)                           |
|    2.5 |  | Fourth Amendment to Stock PurchaseAgreement, dated January 3, 2005, by and among TA Leasing Holding Co,Inc., Klesch & Company Limited, TAL International Group, Inc. andTransamerica Corporation (incorporated by reference from exhibit number2.5 to Amendment No. 1 to TAL International Group, Inc.’s FormS-1 filed on August  26,  2005, file number333-126317)                            |
|    2.6 |  | Fifth Amendment toStock Purchase Agreement, dated March  31,  2005, by andamong TA Leasing Holding Co, Inc., Klesch & Company Limited, TALInternational Group, Inc. and Transamerica Corporation (incorporated byreference from exhibit number 2.6 to Amendment No. 1 to TALInternational Group, Inc.’s Form S-1 filed on August26,  2005, file number 333-126317)                             |
| *3.1                  |  | Second Amended and Restated Certificate ofIncorporation of TAL International Group, Inc.                                                                                                                                                                                                                                                                                                                 |
| *3.2                  |  | Amended and Restated Bylaws of TAL InternationalGroup, Inc.                                                                                                                                                                                                                                                                                                                                              |
|    4.1 |  | Form of Common StockCertificate (incorporated by reference from exhibit number 4.1 toAmendment No. 3 to TAL International Group, Inc.’s Form S-1filed on October  5,  2005, file number333-126317)                                                                                                                                                                                                 |
| 10.1                  |  | Amended and RestatedCredit Agreement, dated as of August  1,  2005, by andamong TAL International Container Corporation, Trans Ocean Ltd., TransOcean Container Corporation, the Lenders party thereto and FortisCapital Corp. (incorporated by reference from exhibit number 10.1 toAmendment No. 1 to TAL International Group, Inc.’s Form S-1filed on August  26,  2005, file number333-126317) |
| 10.2                  |  | Amended and RestatedSecurity Agreement, dated as of August  1,  2005, by andamong TAL International Container Corporation, Trans Ocean Ltd., TransOcean Container Corporation and Fortis Capital Corp. (incorporated byreference from exhibit number 10.2 to Amendment No. 1 to TALInternational Group, Inc.’s Form S-1 filed on August26,  2005, file number 333-126317)                          |
| 10.3                  |  | Credit Agreement, dated as of November3,  2004, by and among TAL International Group, Inc., the Lendersparty thereto and Transamerica Accounts Holding Corporation(incorporated by reference from exhibit number 10.3 to TALInternational Group, Inc.’s Form S-1 filed on June30,  2005, file number 333-126317)                                                                                   |
| 10.4                  |  | Amendment No. 1 to Credit Agreement, dated as ofMarch  31,  2005, by and among TAL International Group,Inc., the Lenders party thereto and Transamerica Accounts HoldingCorporation (incorporated by reference from exhibit number 10.4 to TALInternational Group, Inc.’s Form S-1 filed on June30,  2005, file number 333-126317)                                                                 |
|                       |

49

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|                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |  |  |  |
|-------------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNo.              |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|    10.5  |  | AmendmentNo. 2 to Credit Agreement, dated as of May  14,  2005, byand among TAL International Group, Inc., the Lenders party thereto andTransamerica Accounts Holding Corporation (incorporated by referencefrom exhibit number 10.5 to TAL International Group, Inc.’s FormS-1 filed on June  30,  2005, file number333-126317)                                                                                                                                                                                                                                                                                                                         |
|    10.6  |  | Amended and RestatedIntercreditor Agreement, dated as of August  1,  2005, byand among TAL International Group, Inc., TAL International ContainerCorporation, Trans Ocean Ltd., Trans Ocean Container Corporation,Transamerica Accounts Holding Corporation and Fortis Capital Corp.(incorporated by reference from exhibit number 10.6 to Amendment No. 1to TAL International Group, Inc.’s Form S-1 filed onAugust  26,  2005, file number 333-126317)                                                                                                                                                                                                 |
| *10.7                   |  | Amended and Restated Shareholders Agreement,dated as of October  11,  2005, by and among TALInternational Group, Inc. and certain of its stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|    10.8  |  | Investor Subscription Agreement, dated asof November  3,  2004, by and among TAL InternationalGroup, Inc., The Resolute Fund, L.P., The Resolute Fund Singapore PV,L.P., The Resolute Fund Netherlands PV I, L.P., The Resolute FundNetherlands PV II, L.P., The Resolute Fund NQP, L.P., JZ EquityPartners plc, Fairholme Partners, L.P., Fairholme Ventures II, LLC,Fairholme Holdings, Ltd., Edgewater Private Equity Fund III, L.P.,Edgewater Private Equity Fund IV, L.P. and Seacon Holdings Limited(incorporated by reference from exhibit number 10.8 to TALInternational Group, Inc.’s Form S-1 filed on June30,  2005, file number 333-126317) |
| *10.9                   |  | Amended and Restated Management SubscriptionAgreement, dated as of October  11, 2005, by and among TALInternational Group, Inc., Brian M.  Sondey, Chand Khan,Frederico Baptista, Adrian Dunner, John C. Burns, Bernd Schackier andJohn Pearson                                                                                                                                                                                                                                                                                                                                                                                                                |
|    10.10 |  | ManagementConsulting Agreement, dated as of November  3,  2004, byand between TAL International Group, Inc. and The Jordan Company, L.P.(incorporated by reference from exhibit number 10.10 to TALInternational Group, Inc.’s Form S-1 filed on June30,  2005, file number 333-126317)                                                                                                                                                                                                                                                                                                                                                                  |
|    10.11 |  | Management Advisory Agreement, dated as ofNovember  3,  2004, by and between TAL International Group,Inc. and Klesch & Company Limited (incorporated by reference fromexhibit number 10.11 to TAL International Group, Inc.’s Form S-1filed on June  30,  2005, file number333-126317)                                                                                                                                                                                                                                                                                                                                                               |
|    10.12 |  | Amended andRestated Tax Sharing Agreement, dated as of August  1,2005, by and among TAL International Group, Inc. and its subsidiariesnamed therein (incorporated by reference from exhibit number 10.12 toAmendment No. 1 to TAL International Group, Inc.’s Form S-1filed on August  26,  2005, file number333-126317)                                                                                                                                                                                                                                                                                                                                 |
|    10.13 |  | EmploymentAgreement, dated as of November  3,  2004, by and betweenTAL International Group, Inc. and Brian M.  Sondey (incorporatedby reference from exhibit number 10.13 to TAL International Group,Inc.’s Form S-1 filed on June  30,  2005, filenumber 333-126317)                                                                                                                                                                                                                                                                                                                                                                                    |
|    10.14 |  | 2004Management Stock Plan (incorporated by reference from exhibit number10.14 to TAL International Group, Inc.’s Form S-1 filed onJune  30,  2005, file number 333-126317)                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|                         |

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|            |  |                                                                                                                                                                                                                                                                                                                                                                        |  |  |  |  |
|------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNo. |  | Description                                                                                                                                                                                                                                                                                                                                                            |
| 10.15      |  | StockOption Agreement, dated November  3,  2004, by and betweenTAL International Group, Inc. and Brian M.  Sondey (incorporatedby reference from exhibit number 10.15 to TAL International Group,Inc.’s Form S-1 filed on June  30,  2005, filenumber 333-126317)                                                                                                |
| 10.16      |  | Stock OptionAgreement, dated November  3,  2004, by and between TALInternational Group, Inc. and Chand Khan (incorporated by referencefrom exhibit number 10.16 to TAL International Group, Inc.’sForm S-1 filed on June  30,  2005, file number333-126317)                                                                                                      |
| 10.17      |  | Stock Option Agreement,dated November  3,  2004, by and between TAL InternationalGroup, Inc. and Frederico Baptista (incorporated by reference fromexhibit number 10.17 to TAL International Group, Inc.’s Form S-1filed on June  30,  2005, file number333-126317)                                                                                              |
| 10.18      |  | Stock Option Agreement,dated November  3,  2004, by and between TAL InternationalGroup, Inc. and John C. Burns (incorporated by reference from exhibitnumber 10.18 to TAL International Group, Inc.’s Form S-1 filedon June  30,  2005, file number 333-126317)                                                                                                  |
| 10.19      |  | Stock Option Agreement, dated November3,  2004, by and between TAL International Group, Inc. and BerndSchackier (incorporated by reference from exhibit number 10.19 to TALInternational Group, Inc.’s Form S-1 filed on June30,  2005, file number 333-126317)                                                                                                  |
| 10.20      |  | Stock Option Agreement, dated November3,  2004, by and between TAL International Group, Inc. and JohnPearson (incorporated by reference from exhibit number 10.20 to TALInternational Group, Inc.’s Form S-1 filed on June30,  2005, file number 333-126317)                                                                                                     |
| 10.21      |  | Stock Option Agreement, dated November3,  2004, by and between TAL International Group, Inc. and AdrianDunner (incorporated by reference from exhibit number 10.21 to TALInternational Group, Inc.’s Form S-1 filed on June30,  2005, file number 333-126317)                                                                                                    |
| 10.22      |  | Form of Indemnity Agreement between TALInternational Group, Inc., certain of its subsidiaries, each of theirrespective current directors and certain of their respective currentofficers (incorporated by reference from exhibit number 10.22 toAmendment No. 2 to TAL International Group, Inc.’s Form S-1filed on September  20,  2005, file number333-126317) |
| 10.23      |  | Amendment No. 3 to CreditAgreement, dated as of August  1,  2005, by and among TALInternational Group, Inc., the Lenders party thereto and TransamericaAccounts Holding Corporation (incorporated by reference from exhibitnumber 10.23 to Amendment No. 1 to TAL International Group,Inc.’s Form S-1 filed on August  26,  2005, filenumber 333-126317)         |
| 10.24      |  | Indenture, datedas of August  1,  2005, by and between TAL Advantage I LLCand U.S. Bank National Association (incorporated by reference fromexhibit number 10.24 to Amendment No. 1 to TAL International Group,Inc.’s Form S-1 filed on August  26,  2005, filenumber 333-126317)                                                                                |
| 10.25      |  | Series 2005-1Supplement, dated as of August  1,  2005, by and betweenTAL Advantage I LLC and U.S. Bank National Association (incorporated byreference from exhibit number 10.25 to Amendment No. 1 to TALInternational Group, Inc.’s Form S-1 filed on August26,  2005, file number 333-126317)                                                                  |
|            |

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|                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |  |  |  |
|-------------------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|--|--|
| ExhibitNo.              |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|    10.26 |  | ManagementAgreement, dated as of August  1,  2005, by and between TALAdvantage I LLC and TAL International Container Corporation(incorporated by reference from exhibit number 10.26 to Amendment No. 1to TAL International Group, Inc.’s Form S-1 filed onAugust  26,  2005, file number 333-126317)                                                                                                                                                                                                                  |
|    10.27 |  | Contribution and Sale Agreement, dated asof August  1,  2005, by and between TAL Advantage I LLC andTAL International Container Corporation (incorporated by reference fromexhibit number 10.27 to Amendment No. 1 to TAL International Group,Inc.’s Form S-1 filed on August  26,  2005, filenumber 333-126317)                                                                                                                                                                                                       |
|    10.28 |  | Series2005-1 Note Purchase Agreement, dated as of August  1,2005, by and among TAL Advantage I LLC, Fortis Capital Corp., the otherpurchasers party thereto from time to time and the other parties namedtherein (incorporated by reference from exhibit number 10.28 toAmendment No. 1 to TAL International Group, Inc.’s Form S-1filed on August  26,  2005, file number333-126317)                                                                                                                                  |
|    10.29 |  | IntercreditorAgreement, dated as of August  1,  2005, by and betweenFortis Capital Corp. and U.S. Bank National Association (incorporatedby reference from exhibit number 10.29 to Amendment No. 1 to TALInternational Group, Inc.’s Form S-1 filed on August26,  2005, file number 333-126317)                                                                                                                                                                                                                        |
|    10.30 |  | Omnibus Amendment No. 1, dated as ofSeptember  15,  2005, among TAL Advantage I LLC, TALInternational Container Corporation, Fortis Capital Corp. and U.S. BankNational Association (incorporated by reference from exhibit number10.30 to Amendment No. 2 to TAL International Group, Inc.’s FormS-1 filed on September  20,  2005, file number333-126317)                                                                                                                                                            |
|    10.31 |  | Omnibus AmendmentNo. 1, dated as of September  15,  2005, among TALInternational Group, Inc., TAL International Container Corporation,Trans Ocean Ltd., Trans Ocean Container Corp. and Fortis Capital Corp.(incorporated by reference from exhibit number 10.31 to Amendment No. 2to TAL International Group, Inc.’s Form S-1 filed onSeptember  20,  2005, file number 333-126317)                                                                                                                                   |
| *10.32                  |  | Amendment No. 1 to Investor SubscriptionAgreement, dated as of October  11,  2005, by and among TALInternational Group, Inc., The Resolute Fund, L.P., The Resolute FundSingapore PV, L.P., The Resolute Fund Netherlands PV I, L.P., TheResolute Fund Netherlands PV II, L.P., The Resolute Fund NQP, L.P., JZEquity Partners plc, Fairholme Partners, L.P., Fairholme Ventures II,LLC, Fairholme Holdings, Ltd., Edgewater Private Equity Fund III, L.P.,Edgewater Private Equity Fund IV, L.P. and Seacon HoldingsLimited |
| *10.33                  |  | 2005 ManagementOmnibus IncentivePlan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| *10.34                  |  | First Amendment to2004 Management StockPlan                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| *21.1                   |  | List ofSubsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
| *24.1                   |  | Powers of Attorney(included on the signature page to this annual Report on Form10-K)                                                                                                                                                                                                                                                                                                                                                                                                                                         |
| *31.1                   |  | Certification of the ChiefExecutive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of theSecurities Exchange Act of 1934, as amended                                                                                                                                                                                                                                                                                                                                                                                      |
| *31.2                   |  | Certification of the Chief Financial Officerpursuant to Rules 13a-14(a) and 15d-14(a) of the Securities ExchangeAct of 1934, as amended                                                                                                                                                                                                                                                                                                                                                                                      |
| *32.1                   |  | Certificationby Chief Executive Officer pursuant to 18 U.S.C. Section1350                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|                         |

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|                         |  |                                                                           |  |  |  |  |
|-------------------------|--|---------------------------------------------------------------------------|--|--|--|--|
| ExhibitNo.              |  | Description                                                               |
|    *32.2 |  | Certificationby Chief Financial Officer pursuant to 18 U.S.C. Section1350 |
|                         |

|   |                |
|---|----------------|
| * | Filedherewith. |

|    |                    |
|----|--------------------|
| ** | Furnishedherewith. |

(b)    Exhibits.

TheCompany hereby files as part of this Annual Report on Form 10-K theexhibits listed in Item 15(a)(3) set forth above.

(c)    Financial Statement Schedules

TheCompany hereby files as part of this Annual Report on Form 10-K thefinancial statement schedule listed in Item 15(a)(2) set forthabove.

53

----

SIGNATURES 

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the Registrant has duly caused this report to be signed onits behalf by the undersigned, thereunto dulyauthorized.

|                     |  |                             |  |                                                       |  |  |  |  |  |  |
|---------------------|--|-----------------------------|--|-------------------------------------------------------|--|--|--|--|--|--|
|                |  | TALInternational Group,Inc. |
| Date: March 16,2006 |  | By:                         |  | /s/ Brian M.Sondey                                    |
|                |  |                        |  | Brian M.  SondeyPresident and Chief Executive Officer |
|                     |

POWER OFATTORNEY AND SIGNATURES

We, the undersigned officers anddirectors of TAL International Group, Inc. hereby severally constituteand appoint and each of them singly, our true and lawful attorneys,with the power to them and each of them singly, to sign for us and inour names in the capacities indicated below, any amendments to thisAnnual Report on Form 10-K, and generally to do all things in our namesand on our behalf in such capacities to enable TAL International Group,Inc. to comply with the provisions of the Securities Exchange Act of1934, as amended, and all the requirements of the Securities andExchange Commission.

Pursuant to the requirements of theSecurities Exchange Act of 1934, this report has been signed below bythe following persons on behalf of the Registrant, in the capacitiesindicated, on the 16th day of March2006.

|                           |  |                                                                              |  |  |  |  |
|---------------------------|--|------------------------------------------------------------------------------|--|--|--|--|
| Signature                 |  | Title(s)                                                                     |
| /s/Brian M. Sondey        |  | President and Chief Executive Officer(Principal Executive Officer), Director |
| Brian M.Sondey            |
| /s/ ChandKhan             |  | Vice President, Chief Financial Officer (PrincipalFinancial Officer)         |
| ChandKhan                 |
| /s/ Bruce R.Berkowitz     |  | Director                                                                     |
| Bruce R.Berkowitz         |  |                                                                         |
| /s/ A.Richard Caputo, Jr. |  | Director                                                                     |
| A. RichardCaputo, Jr.     |  |                                                                         |
| /s/ BrianJ. Higgins       |  | Director                                                                     |
| Brian J.Higgins           |  |                                                                         |
| /s/ John W.Jordan II      |  | Director                                                                     |
| John W. JordanII          |  |                                                                         |
| /s/ Frederic H.Lindeberg  |  | Director                                                                     |
| Frederic H.Lindeberg      |  |                                                                         |
| /s/ DavidW. Zalaznick     |  | Director                                                                     |
| David W.Zalaznick         |  |                                                                         |
| /s/Douglas J. Zych        |  | Director                                                                     |
| Douglas J.Zych            |  |                                                                         |
|                           |

54

----

INDEXTO FINANCIALSTATEMENTS

|                                                                                                                                                                                                                                                                                                                                                                    |  |        |  |  |  |  |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--------|--|--|--|--|
|                                                                                                                                                                                                                                                                                                                                                               |  | Page   |
| CONSOLIDATEDFINANCIAL STATEMENTS — DECEMBER  31,  2005, 2004 AND2003                                                                                                                                                                                                                                                                                         |  |   |
| Report of IndependentRegistered Public AccountingFirm                                                                                                                                                                                                                                                                                                              |  | F-2    |
| ConsolidatedBalance Sheets at December  31,  2005 and December31,  2004 (Successor)                                                                                                                                                                                                                                                                                |  | F-3    |
| ConsolidatedStatements of Operations for the year ended December  31,2005 and two months ended December  31,  2004 (Successor)and Combined Consolidated Statements of Operations for the ten monthsended October  31,  2004 and year ended December31,  2003 (Predecessor)                                                                                         |  | F-4    |
| Consolidated Statements ofStockholders’ Equity (Deficit) and Comprehensive Income for theyear ended December  31,  2005 and two months endedDecember  31,  2004 (Successor) and Combined ConsolidatedStatements of Owner's Net Investment and Comprehensive Income forthe ten months ended October  31,  2004 and year endedDecember  31,  2003(Predecessor) |  | F-5    |
| Consolidated Statements ofCash Flows for the year ended December  31,  2005 and twomonths ended December  31,  2004 (Successor) and CombinedConsolidated Statements of Cash Flows for the ten months endedOctober  31,  2004 and year ended December31,  2003 (Predecessor)                                                                                        |  | F-6    |
| Notes toConsolidated Financial Statements                                                                                                                                                                                                                                                                                                                          |  | F-7    |
| Reportof Independent Registered Public Accounting Firm onSchedule                                                                                                                                                                                                                                                                                                  |  | S-1    |
| Schedule II — Valuationand Qualifying Accounts andReserves                                                                                                                                                                                                                                                                                                   |  | S-2    |
|                                                                                                                                                                                                                                                                                                                                                                    |

F-1

----

Reportof Independent Registered Public Accounting Firm

TheBoard of Directors and Stockholders TAL InternationalGroup, Inc.

We have audited the accompanying consolidatedbalance sheets of TAL International Group, Inc. (the‘‘Successor Company’’) as ofDecember  31,  2005 and 2004 and the related consolidatedstatements of operations, stockholders' equity (deficit) andcomprehensive income, and cash flows for the year ended December31,  2005 and the period November  1,  2004 throughDecember  31,  2004, and the combined consolidatedstatements of operations, owner's net investment andcomprehensive income, and cash flows for the period from January1,  2004 through October  31,  2004 and for the yearended December  31,  2003 of Transamerica MaritimeContainer (the "Predecessor Company"). Thesefinancial statements are the responsibility of the Company'smanagement. Our responsibility is to express an opinion on thesefinancial statements based on our audits.

We conducted ouraudits in accordance with the standards of the Public CompanyAccounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free of material misstatement. Wewere not engaged to perform an audit of the Company's internalcontrol over financial reporting. Our audits included consideration ofinternal control over financial reporting as a basis for designingaudit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of theCompany's internal control over financial reporting. Accordingly,we express no such opinion. An audit also includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significantestimates made by management, and evaluating the overall financialstatement presentation. We believe that our audits provide a reasonablebasis for our opinion.

In our opinion, the SuccessorCompany consolidated financial statements referred to above presentfairly, in all material respects, the consolidated financial positionof TAL International Group, Inc. at December  31,  2005 and2004, and the consolidated results of its operations and its cash flowsfor the year ended December  31,  2005 and the periodNovember  1,  2004 through December  31,  2004,in conformity with U.S. generally accepted accounting principles.Further, in our opinion, the Predecessor Company combined consolidatedfinancial statements referred to above present fairly, in all materialrespects, the combined consolidated results of operations and cashflows of Transamerica Maritime Container for the period January1,  2004 through October  31,  2004 and for the yearended December  31,  2003, in conformity with U.S.generally accepted accounting principles.

|  | /s/ Ernst& Young LLP |
|--|--------------------------|

Stamford, ConnecticutMarch2,  2006

F-2

----

TALINTERNATIONAL GROUP, INC. Consolidated Balance Sheets(Dollarsin thousands, except sharedata)

|                                                                                                                                                               |  |                  |           |                  |  |        |           |         |  |  |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------|--|------------------|-----------|------------------|--|--------|-----------|---------|--|--|
|                                                                                                                                                          |  | Successor        |
|                                                                                                                                                          |  | December31, 2005 |           | December 31,2004 |
| Assets:                                                                                                                                                       |  |             |      |             |  |   |      |    |
| Cashand cashequivalents                                                                                                                                       |  | $                | 27,259    |             |  | $      | 16,424    |    |
| Accountsreceivable, net of allowances of $820 and$225                                                                                                         |  |             | 31,738    |             |  |   | 35,014    |    |
| Net investment infinance leases                                                                                                                               |  |             | 73,819    |             |  |   | 13,262    |    |
| Leasingequipment, net of accumulated depreciation and allowances of $124,543and$19,029                                                                        |  |             | 1,036,363 |             |  |   | 1,103,423 |    |
| Leaseholdimprovements and other fixed assets, net of accumulated depreciationand amortization of $1,312 and$566                                               |  |             | 3,771     |             |  |   | 4,255     |    |
| Equipment held forsale                                                                                                                                        |  |             | 24,844    |             |  |   | 11,578    |    |
| Goodwill                                                                                                                                                      |  |             | 71,898    |             |  |   | 73,570    |    |
| Deferredfinancing costs                                                                                                                                       |  |             | 3,540     |             |  |   | 47,343    |    |
| Otherassets                                                                                                                                                   |  |             | 26,304    |             |  |   | 14,770    |    |
| Totalassets                                                                                                                                                   |  | $                | 1,299,536 |             |  | $      | 1,319,639 |    |
| Liabilitiesand stockholders' equity(deficit):                                                                                                                 |  |             |      |             |  |   |      |    |
| Accountspayable                                                                                                                                               |  | $                | 7,524     |             |  | $      | 4,580     |    |
| Accruedexpenses                                                                                                                                               |  |             | 30,063    |             |  |   | 38,795    |    |
| Income taxespayable                                                                                                                                           |  |             | 116       |             |  |   | 1,557     |    |
| Deferred incometaxliability                                                                                                                                   |  |             | 9,239     |             |  |   | 2,393     |    |
| Debt:                                                                                                                                                         |  |             |      |             |  |   |      |    |
| Assetsecuritization facility                                                                                                                                  |  |             | 710,000   |             |  |   | —   |    |
| Seniorsecured creditfacility                                                                                                                                  |  |             | 148,000   |             |  |   | 797,000   |    |
| Seniorunsecured creditagreement                                                                                                                               |  |             | —   |             |  |   | 275,000   |    |
| Capitallease obligations                                                                                                                                      |  |             | 14,627    |             |  |   | —   |    |
| Totalliabilities                                                                                                                                              |  |             | 919,569   |             |  |   | 1,119,325 |    |
| Preferredstock, Series A 12.0% cumulative, subject to redemption, 210,000shares authorized, none issued and 200,000 shares issued andoutstanding,respectively |  |             | —   |             |  |   | 203,738   |    |
| Commonstock, subject to redemption, none issued and 338,367 shares issued andoutstanding,respectively                                                         |  |             | —   |             |  |   | 3         |    |
| Stockholders'equity (deficit):                                                                                                                                |  |             |      |             |  |   |      |    |
| Preferredstock, $.001 par value, 500,000 shares authorized, noneissued                                                                                        |  |             | —   |             |  |   | —   |    |
| Commonstock, $.001 par value, 100,000,000 shares authorized, 32,882,208 and9,812,139 shares issued and outstanding,respectively                               |  |             | 33        |             |  |   | 10        |    |
| Additionalpaid-incapital                                                                                                                                      |  |             | 394,389   |             |  |   | 87        |    |
| Accumulateddeficit                                                                                                                                            |  |             | (13,737   | )           |  |   | (3,541    | )  |
| Accumulatedother comprehensive (loss)income                                                                                                                   |  |             | (718      | )           |  |   | 17        |    |
| Totalstockholders' equity(deficit)                                                                                                                            |  |             | 379,967   |             |  |   | (3,427    | )  |
| Totalliabilities and stockholders' equity(deficit)                                                                                                            |  | $                | 1,299,536 |             |  | $      | 1,319,639 |    |
|                                                                                                                                                               |

Theaccompanying notes to consolidated financial statements are an integralpart of these statements.

F-3

----

TAL INTERNATIONAL GROUP, INC. Consolidated Statements of Operations and Combined ConsolidatedStatements of Operations (Dollars in thousands, except per sharedata)

|                                                                                                          |  |                            |            |                                 |  |                                |            |                           |  |        |         |        |  |        |         |         |  |  |
|----------------------------------------------------------------------------------------------------------|--|----------------------------|------------|---------------------------------|--|--------------------------------|------------|---------------------------|--|--------|---------|--------|--|--------|---------|---------|--|--|
|                                                                                                     |  | Successor                  |            | Predecessor                     |
|                                                                                                     |  | Yearended December 31,2005 |            | TwomonthsendedDecember 31, 2004 |  | TenmonthsendedOctober 31, 2004 |            | YearendedDecember 31,2003 |
| Revenues:                                                                                                |  |                       |       |                            |  |                           |       |                      |  |   |    |   |  |   |    |    |
| Leasingrevenues, including income recognized on finance leases of $5,387,$185, $208, and $0,respectively |  | $                          | 285,406    |                            |  | $                              | 48,365     |                      |  | $      | 242,963 |   |  | $      | 301,352 |    |
| Equipmenttradingrevenue                                                                                  |  |                       | 24,244     |                            |  |                           | 1,713      |                      |  |   | 9,641   |   |  |   | 15,235  |    |
| Managementfeeincome                                                                                      |  |                       | 6,482      |                            |  |                           | 1,071      |                      |  |   | 6,046   |   |  |   | 6,612   |    |
| Otherrevenues                                                                                            |  |                       | 2,383      |                            |  |                           | 313        |                      |  |   | 2,858   |   |  |   | 2,823   |    |
| Totalrevenues                                                                                            |  |                       | 318,515    |                            |  |                           | 51,462     |                      |  |   | 261,508 |   |  |   | 326,022 |    |
| Expenses:                                                                                                |  |                       |       |                            |  |                           |       |                      |  |   |    |   |  |   |    |    |
| Equipmenttradingexpenses                                                                                 |  |                       | 19,227     |                            |  |                           | 1,361      |                      |  |   | 7,044   |   |  |   | 12,822  |    |
| Directoperatingexpenses                                                                                  |  |                       | 26,907     |                            |  |                           | 4,372      |                      |  |   | 23,043  |   |  |   | 37,268  |    |
| Administrativeexpenses                                                                                   |  |                       | 40,671     |                            |  |                           | 6,419      |                      |  |   | 29,014  |   |  |   | 38,404  |    |
| Depreciationandamortization                                                                              |  |                       | 115,138    |                            |  |                           | 19,769     |                      |  |   | 119,449 |   |  |   | 134,985 |    |
| Equipmentrentalexpense                                                                                   |  |                       | 299        |                            |  |                           | 1,140      |                      |  |   | 4,342   |   |  |   | 36,264  |    |
| Provision(reversal) for doubtfulaccounts                                                                 |  |                       | 559        |                            |  |                           | 225        |                      |  |   | 300     |   |  |   | (33     | )  |
| Net(gain) loss on sale of leasingequipment                                                               |  |                       | (9,665     | )                          |  |                           | (126       | )                    |  |   | 3,325   |   |  |   | 35,940  |    |
| Write-offof deferred financingcosts                                                                      |  |                       | 43,503     |                            |  |                           | —    |                      |  |   | — |   |  |   | — |    |
| Interestand debtexpense                                                                                  |  |                       | 72,379     |                            |  |                           | 13,185     |                      |  |   | 22,181  |   |  |   | 23,756  |    |
| Unrealized(gain) on interest rateswaps                                                                   |  |                       | (12,499    | )                          |  |                           | (2,432     | )                    |  |   | — |   |  |   | — |    |
| Managementfees and other Parent Companycharges                                                           |  |                       | 4,878      |                            |  |                           | —    |                      |  |   | 28,360  |   |  |   | — |    |
| Totalexpenses                                                                                            |  |                       | 301,397    |                            |  |                           | 43,913     |                      |  |   | 237,058 |   |  |   | 319,406 |    |
| Incomebefore incometaxes                                                                                 |  |                       | 17,118     |                            |  |                           | 7,549      |                      |  |   | 24,450  |   |  |   | 6,616   |    |
| Incometax expense                                                                                        |  |                       | 7,446      |                            |  |                           | 2,680      |                      |  |   | 8,926   |   |  |   | 740     |    |
| Netincome                                                                                                |  |                       | 9,672      |                            |  |                           | 4,869      |                      |  | $      | 15,524  |   |  | $      | 5,876   |    |
| Preferredstock dividends and accretion to redemptionvalue                                                |  |                       | (19,868    | )                          |  |                           | (8,410     | )                    |  |   |    |   |  |   |    |    |
| Netloss applicable to commonstockholders                                                                 |  | $                          | (10,196    | )                          |  | $                              | (3,541     | )                    |  |   |    |   |  |   |    |    |
| Netloss per common share: Basic and Diluted(a)                                                           |  | $                          | (0.68      | )                          |  | $                              | (0.35      | )                    |  |   |    |   |  |   |    |    |
| Weightedaverage number of common shares outstanding — Basic andDiluted                             |  |                       | 14,912,942 |                            |  |                           | 10,150,506 |                      |  |   |    |   |  |   |    |    |
|                                                                                                          |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                      |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (a) | Forthe periods ended October  31,  2004 and prior,owner’s equity consisted of owner’s net investment, and,therefore, no income (loss) per share data has been presented. |

The accompanying notes to consolidated financial statementsare an integral part of thesestatements.

F-4

----

TALInternational Group, Inc.

Combined Consolidated Statements ofOwner's Net Investment and Comprehensive Income and ConsolidatedStatements of Stockholders' Equity (Deficit) and ComprehensiveIncome (Dollars in thousands, except shareamounts)

|                                                                       |  |                                     |            |                            |  |                    |         |                                       |  |                       |         |                      |  |        |         |         |  |        |         |         |  |        |         |         |  |        |        |         |  |  |
|-----------------------------------------------------------------------|--|-------------------------------------|------------|----------------------------|--|--------------------|---------|---------------------------------------|--|-----------------------|---------|----------------------|--|--------|---------|---------|--|--------|---------|---------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                                                  |  |     CommonStock |            | Additional Paid-in Capital |  | AccumulatedDeficit |         | Accumulated Other ComprehensiveIncome |  | Owner's NetInvestment |         | Comprehensive Income |
|                                                                  |  | Shares                              |            | Amount                     |
| Predecessor:                                                          |  |                                |       |                       |  |               |    |                                  |  |                  |    |                 |  |   |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| Balanceat December  31,2002                                           |  |                                | —    |                       |  | $                  | — |                                  |  | $                     | — |                 |  | $      | — |    |  | $      | 290     |    |  | $      | 111,522 |    |  |   |   |    |
| Comprehensiveincome:                                                  |  |                                |       |                       |  |               |    |                                  |  |                  |    |                 |  |   |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| Netincome                                                             |  |                                | —    |                       |  |               | — |                                  |  |                  | — |                 |  |   | — |    |  |   | — |    |  |   | 5,876   |    |  | $      | 5,876  |    |
| Foreigncurrency translationadjustment                                 |  |                                | —    |                       |  |               | — |                                  |  |                  | — |                 |  |   | — |    |  |   | 187     |    |  |   | 187     |    |  |   | 187    |    |
| Comprehensiveincome                                                   |  |                                |       |                       |  |               |    |                                  |  |                  |    |                 |  |   |    |    |  |   |    |    |  |   |    |    |  | $      | 6,063  |    |
| DistributionstoParent                                                 |  |                                | —    |                       |  |               | — |                                  |  |                  | — |                 |  |   | — |    |  |   | — |    |  |   | (16,587 | )  |  |   |   |    |
| Balanceat December  31,2003                                           |  |                                | —    |                       |  |               | — |                                  |  |                  | — |                 |  |   | — |    |  |   | 477     |    |  |   | 100,998 |    |  |   |   |    |
| Comprehensiveincome:                                                  |  |                                |       |                       |  |               |    |                                  |  |                  |    |                 |  |   |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| Netincome                                                             |  |                                | —    |                       |  |               | — |                                  |  |                  | — |                 |  |   | — |    |  |   | — |    |  |   | 15,524  |    |  | $      | 15,524 |    |
| Foreigncurrency translationadjustment                                 |  |                                | —    |                       |  |               | — |                                  |  |                  | — |                 |  |   | — |    |  |   | 52      |    |  |   | 52      |    |  |   | 52     |    |
| Comprehensiveincome                                                   |  |                                |       |                       |  |               |    |                                  |  |                  |    |                 |  |   |    |    |  |   |    |    |  |   |    |    |  | $      | 15,576 |    |
| Capitalcontributions fromParent                                       |  |                                |       |                       |  |               |    |                                  |  |                  |    |                 |  |   |    |    |  |   |    |    |  |   | 37,694  |    |  |   |   |    |
| DistributionstoParent                                                 |  |                                | —    |                       |  |               | — |                                  |  |                  | — |                 |  |   | — |    |  |   | — |    |  |   | (12,390 | )  |  |   |   |    |
| Balanceat October  31,2004                                            |  |                                | —    |                       |  | $                  | — |                                  |  | $                     | — |                 |  | $      | — |    |  | $      | 529     |    |  | $      | 141,878 |    |  |   |   |    |
| Successor:                                                            |  |                                |       |                       |  |               |    |                                  |  |                  |    |                 |  |   |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| Saleof commonstock                                                    |  |                                | 9,812,139  |                       |  | $                  | 10      |                                  |  | $                     | 87      |                 |  | $      | — |    |  | $      | — |    |  | $      | — |    |  |   |   |    |
| Comprehensiveincome:                                                  |  |                                |       |                       |  |               |    |                                  |  |                  |    |                 |  |   |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| Netincome                                                             |  |                                | —    |                       |  |               | — |                                  |  |                  | — |                 |  |   | 4,869   |    |  |   | — |    |  |   | — |    |  | $      | 4,869  |    |
| Foreigncurrency translationadjustment                                 |  |                                | —    |                       |  |               | — |                                  |  |                  | — |                 |  |   | — |    |  |   | 17      |    |  |   | — |    |  |   | 17     |    |
| Comprehensiveincome                                                   |  |                                |       |                       |  |               |    |                                  |  |                  |    |                 |  |   |    |    |  |   |    |    |  |   |    |    |  | $      | 4,886  |    |
| Accretionof preferred stock to redemptionvalue                        |  |                                |       |                       |  |               |    |                                  |  |                  |    |                 |  |   | (4,672  | )  |  |   |    |    |  |   |    |    |  |   |   |    |
| Preferredstockdividends                                               |  |                                | —    |                       |  |               | — |                                  |  |                  | — |                 |  |   | (3,738  | )  |  |   | — |    |  |   | — |    |  |   |   |    |
| Balanceat December  31,2004                                           |  |                                | 9,812,139  |                       |  |               | 10      |                                  |  |                  | 87      |                 |  |   | (3,541  | )  |  |   | 17      |    |  |   | — |    |  |   |   |    |
| Saleof common stock — initial publicoffering                    |  |                                | 11,500,000 |                       |  |               | 12      |                                  |  |                  | 189,188 |                 |  |   | — |    |  |   | — |    |  |   | — |    |  |   |   |    |
| Conversion— redeemable common and preferredstock                |  |                                | 11,570,069 |                       |  |               | 11      |                                  |  |                  | 201,197 |                 |  |   | — |    |  |   | — |    |  |   | — |    |  |   |   |    |
| Commonshares issued tomanagement                                      |  |                                |       |                       |  |               |    |                                  |  |                  | 3,917   |                 |  |   | — |    |  |   | — |    |  |   | — |    |  |   |   |    |
| Comprehensiveincome:                                                  |  |                                |       |                       |  |               |    |                                  |  |                  |    |                 |  |   |    |    |  |   |    |    |  |   |    |    |  |   |   |    |
| Netincome                                                             |  |                                | —    |                       |  |               | — |                                  |  |                  | — |                 |  |   | 9,672   |    |  |   | — |    |  |   | — |    |  | $      | 9,672  |    |
| Foreigncurrency translationadjustment                                 |  |                                | —    |                       |  |               | — |                                  |  |                  | — |                 |  |   | — |    |  |   | (67     | )  |  |   | — |    |  |   | (67    | )  |
| Unrealizedlosses — cash flow hedges, net of income taxes of$370 |  |                                | —    |                       |  |               | — |                                  |  |                  | — |                 |  |   | — |    |  |   | (668    | )  |  |   | — |    |  |   | (668   | )  |
| Comprehensiveincome                                                   |  |                                |       |                       |  |               |    |                                  |  |                  |    |                 |  |   |    |    |  |   |    |    |  |   |    |    |  | $      | 8,937  |    |
| Preferredstockdividends                                               |  |                                | —    |                       |  |               | — |                                  |  |                  | — |                 |  |   | (19,868 | )  |  |   |    |    |  |   | — |    |  |   |   |    |
| Balanceat December  31,2005                                           |  |                                | 32,882,208 |                       |  | $                  | 33      |                                  |  | $                     | 394,389 |                 |  | $      | (13,737 | )  |  | $      | (718    | )  |  | $      | — |    |  |   |   |    |
|                                                                       |

Theaccompanying notes to consolidated financial statements are an integralpart of these statements.

F-5

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TAL International Group,Inc.Consolidated Statement of Cash Flows and Combined ConsolidatedStatements of Cash Flows (Dollars inthousands) 

|                                                                                 |  |                            |          |                            |  |                            |            |                           |  |        |          |         |  |        |         |         |  |  |
|---------------------------------------------------------------------------------|--|----------------------------|----------|----------------------------|--|----------------------------|------------|---------------------------|--|--------|----------|---------|--|--------|---------|---------|--|--|
|                                                                            |  | Successor                  |          | Predecessor                |
|                                                                            |  | Yearended December 31,2005 |          | Two monthsDecember31, 2004 |  | Ten months October 31,2004 |            | YearendedDecember 31,2003 |
| Cashflows from operatingactivities:                                             |  |                       |     |                       |  |                       |       |                      |  |   |     |    |  |   |    |    |
| Netincome                                                                       |  | $                          | 9,672    |                       |  | $                          | 4,869      |                      |  | $      | 15,524   |    |  | $      | 5,876   |    |
| Adjustmentsto reconcile net income to net cash provided by operatingactivities: |  |                       |     |                       |  |                       |       |                      |  |   |     |    |  |   |    |    |
| Depreciationandamortization                                                     |  |                       | 115,138  |                       |  |                       | 19,769     |                      |  |   | 119,449  |    |  |   | 134,985 |    |
| Net(gain) loss on sale of leasingequipment                                      |  |                       | (9,665   | )                     |  |                       | (126       | )                    |  |   | 3,325    |    |  |   | 35,940  |    |
| Deferredincometaxes                                                             |  |                       | 6,846    |                       |  |                       | 2,300      |                      |  |   | (20,782  | )  |  |   | (42,973 | )  |
| Unrealizedgain on interest rateswaps                                            |  |                       | (12,499  | )                     |  |                       | (2,432     | )                    |  |   | —  |    |  |   | — |    |
| Write-offof deferred financingcosts                                             |  |                       | 43,503   |                       |  |                       | —    |                      |  |   | —  |    |  |   | — |    |
| Amortizationof deferred financingcosts                                          |  |                       | 4,023    |                       |  |                       | —    |                      |  |   | —  |    |  |   | — |    |
| Stockcompensation charge                                                        |  |                       | 3,917    |                       |  |                       | —    |                      |  |   | —  |    |  |   | — |    |
| Changesin operating assets andliabilities:                                      |  |                       |     |                       |  |                       |       |                      |  |   |     |    |  |   |    |    |
| Accountsreceivable                                                              |  |                       | 3,276    |                       |  |                       | 2,882      |                      |  |   | (5,701   | )  |  |   | 7,362   |    |
| Accountspayable                                                                 |  |                       | 2,944    |                       |  |                       | (14,030    | )                    |  |   | 13,558   |    |  |   | (2,037  | )  |
| Accruedexpenses                                                                 |  |                       | (8,732   | )                     |  |                       | 9,109      |                      |  |   | (12,357  | )  |  |   | (18,784 | )  |
| Incometaxespayable                                                              |  |                       | (1,441   | )                     |  |                       | 380        |                      |  |   | (12,793  | )  |  |   | 2,357   |    |
| Otherassets                                                                     |  |                       | (63      | )                     |  |                       | 5,449      |                      |  |   | 3,438    |    |  |   | 1,524   |    |
| Equipmentpurchased for resale,net                                               |  |                       | (8,778   | )                     |  |                       | (751       | )                    |  |   | 958      |    |  |   | 526     |    |
| Other,net                                                                       |  |                       | (1,956   | )                     |  |                       | (1,733     | )                    |  |   | (3,068   | )  |  |   | (6,358  | )  |
| Netcash provided by operatingactivities                                         |  |                       | 146,185  |                       |  |                       | 25,686     |                      |  |   | 101,551  |    |  |   | 118,418 |    |
| Cashflows from investingactivities:                                             |  |                       |     |                       |  |                       |       |                      |  |   |     |    |  |   |    |    |
| Cashpaid to consummate the Acquisition, net of cashacquired                     |  |                       | —  |                       |  |                       | (1,209,242 | )                    |  |   | —  |    |  |   | — |    |
| Purchasesof leasing equipment and other fixedassets                             |  |                       | (145,539 | )                     |  |                       | (29,775    | )                    |  |   | (256,882 | )  |  |   | (94,822 | )  |
| Proceedsfrom sale ofequipment                                                   |  |                       | 93,213   |                       |  |                       | 10,111     |                      |  |   | 50,741   |    |  |   | 46,771  |    |
| Investmentsin financeleases                                                     |  |                       | (44,493  | )                     |  |                       | —    |                      |  |   | (4,301   | )  |  |   | — |    |
| Cashcollections on finance leases, net of unearnedincome                        |  |                       | 8,737    |                       |  |                       | 574        |                      |  |   | 2,698    |    |  |   | 1,293   |    |
| Other                                                                           |  |                       | (67      | )                     |  |                       | —    |                      |  |   | —  |    |  |   | — |    |
| Netcash used in investingactivities                                             |  |                       | (88,149  | )                     |  |                       | (1,228,332 | )                    |  |   | (207,744 | )  |  |   | (46,758 | )  |
| Cashflows from financingactivities:                                             |  |                       |     |                       |  |                       |       |                      |  |   |     |    |  |   |    |    |
| Proceedsfrom issuance of preferredstock                                         |  |                       | 1,205    |                       |  |                       | 195,328    |                      |  |   | —  |    |  |   | — |    |
| Proceedsfrom issuance of commonstock                                            |  |                       | 189,200  |                       |  |                       | 100        |                      |  |   | —  |    |  |   | — |    |
| Netborrowings under asset securitizationfacility                                |  |                       | 710,000  |                       |  |                       | —    |                      |  |   | —  |    |  |   | — |    |
| Financingfees paid under debtfacilities                                         |  |                       | —  |                       |  |                       | (48,358    | )                    |  |   | —  |    |  |   | — |    |
| (Repayment)proceeds from borrowing under senior unsecured creditagreement       |  |                       | (275,000 | )                     |  |                       | 275,000    |                      |  |   | —  |    |  |   | — |    |
| (Repayment)proceeds from borrowing under senior secured credit facility,net     |  |                       | (797,000 | )                     |  |                       | 797,000    |                      |  |   | —  |    |  |   | — |    |
| Netborrowings under amended senior secured creditfacility                       |  |                       | 148,000  |                       |  |                       | —    |                      |  |   | —  |    |  |   | — |    |
| Preferreddividendspaid                                                          |  |                       | (23,606  | )                     |  |                       | —    |                      |  |   | —  |    |  |   | — |    |
| Changein due to affiliates,net                                                  |  |                       | —  |                       |  |                       | —    |                      |  |   | 90,061   |    |  |   | (53,332 | )  |
| DistributionstoParent                                                           |  |                       | —  |                       |  |                       | —    |                      |  |   | (12,390  | )  |  |   | (16,587 | )  |
| Capitalcontributions                                                            |  |                       | —  |                       |  |                       | —    |                      |  |   | 37,694   |    |  |   | — |    |
| Netcash (used in) provided by financingactivities                               |  |                       | (47,201  | )                     |  |                       | 1,219,070  |                      |  |   | 115,365  |    |  |   | (69,919 | )  |
| Netincrease in cash and cashequivalents                                         |  |                       | 10,835   |                       |  |                       | 16,424     |                      |  |   | 9,172    |    |  |   | 1,741   |    |
| Cashand cash equivalents, beginning ofperiod                                    |  |                       | 16,424   |                       |  |                       | —    |                      |  |   | 2,167    |    |  |   | 426     |    |
| Cashand cash equivalents, end ofperiod                                          |  | $                          | 27,259   |                       |  | $                          | 16,424     |                      |  | $      | 11,339   |    |  | $      | 2,167   |    |
| Supplementaldisclosures:                                                        |  |                       |     |                       |  |                       |       |                      |  |   |     |    |  |   |    |    |
| Interestpaid                                                                    |  | $                          | 78,994   |                       |  | $                          | 32         |                      |  | $      | —  |    |  | $      | — |    |
| Incometaxespaid                                                                 |  | $                          | 1,362    |                       |  | $                          | —    |                      |  | $      | —  |    |  | $      | — |    |
| Supplementalnon-cash financingactivities:                                       |  |                       |     |                       |  |                       |       |                      |  |   |     |    |  |   |    |    |
| Purchasesof leasing equipment financed through capital leaseobligations         |  | $                          | 14,627   |                       |  | $                          | —    |                      |  | $      | —  |    |  | $      | — |    |
| Transfersfrom leasing equipment to financeleases                                |  | $                          | 22,145   |                       |  | $                          | —    |                      |  | $      | 5,839    |    |  | $      | 5,248   |    |
|                                                                                 |

Theaccompanying notes to consolidated financial statements are an integralpart of these statements.

F-6

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TALINTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIALSTATEMENTS

Note 1 — Description of the Business andBasis of Presentation 

TAL International Group,Inc. (‘‘TAL,’’ the‘‘Company,’’ or‘‘Successor’’) was formed on October26, 2004 and commenced operations on November  4,  2004with the completion of the acquisition transaction described below. Theagreements affecting this acquisition provided for an effective date ofOctober  31,  2004, at which date the risks and rewards ofownership of the business were transferred to TAL. TAL consists of theconsolidated accounts of Trans Ocean Ltd.(‘‘TOL’’) and TAL International ContainerCorporation (‘‘TALI’’), formerly known asTransamerica Leasing Inc., and theirsubsidiaries.

Transamerica Maritime Container (the‘‘Predecessor’’) consisted of the maritimecontainer operations of Transamerica Finance Corporation(‘‘TFC,’’ the‘‘Parent’’ or ‘‘ParentCompany’’). The combined consolidated financialstatements of the Predecessor have been derived from the accountingrecords of TOL and TALI and certain of their subsidiaries. Materialintercompany and inter-division balances have been eliminated incombination and consolidation. TOL and TALI were wholly-owned indirectsubsidiaries of TFC, which is an indirect subsidiary of AEGON N.V.

The Company provides (and the Predecessor provided)long-term leases, service leases and finance leases, along withmaritime container management services, through a worldwide network ofoffices, third party depots and other facilities. The Company operatesin both international and domestic markets. The majority of theCompany's business is derived from leasing its containers toshipping line customers through a variety of long-term and short-termcontractual lease arrangements. The Company also provides containersales and positioning services. TAL also enters into managementagreements with third party container owners under which the Companymanages the leasing and selling of containers on behalf of the thirdparty owners. The Company also leases chassis used for thetransportation of containers domestically via rail androads.

Effective October  31,  2004, TALacquired all of the outstanding capital stock of TOL and TALI forapproximately $1.2  billion in cash, including $275.0million of financing provided by the seller (an affiliate of AEGONN.V.). This acquisition of TOL and TALI is referred to as the‘‘Acquisition.’’ The Acquisition wasaccounted for using the purchase method of accounting, and,accordingly, the consideration paid has been allocated based on theestimated fair values of the assets acquired and liabilities assumed.The excess of the consideration paid over the estimated fair value ofthe net assets acquired and liabilities assumed, including separatelyidentifiable intangible assets, was allocated to goodwill. The changein goodwill from December  31,  2004 to December31,  2005 resulted from adjustments to the purchase priceallocation during the allocation period.

The followingtable sets forth the final allocation of the purchase price inconnection with the acquisition (inthousands):

|                                              |  |        |           |        |  |  |
|----------------------------------------------|--|--------|-----------|--------|--|--|
| Workingcapital                               |  | $      | 7,441     |   |
| Leasingequipment                             |  |   | 1,101,242 |   |
| Finance leasereceivables                     |  |   | 13,836    |   |
| Leasehold improvementsand other fixed assets |  |   | 4,394     |   |
| Equipment heldforsale                        |  |   | 11,039    |   |
| Intangibles                                  |  |   | 4,800     |   |
| Goodwill                                     |  |   | 71,898    |   |
| Purchaseprice                                |  | $      | 1,214,650 |   |
|                                              |

F-7

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The following unaudited pro formainformation presents the results of operations of the Company as if theAcquisition had taken place at the beginning of each respective period.The pro forma financial information is not necessarily indicative ofthe actual results of operations had the transaction been effected onthe assumed dates. The following is the pro forma information for theyears ended December  31,  2004 and 2003 (in thousands,except sharedata):

|                                                   |  |        |         |        |  |        |         |         |  |  |
|---------------------------------------------------|--|--------|---------|--------|--|--------|---------|---------|--|--|
|                                              |  | 2004   |         | 2003   |
| Totalrevenues                                     |  | $      | 315,864 |   |  | $      | 329,368 |    |
| Netincome (loss) applicable to commonstockholders |  | $      | 2,292   |   |  | $      | (12,208 | )  |
| Earnings(loss) per commonshare:                   |  |   |    |   |  |   |    |    |
| Basic andDiluted                                  |  | $      | 0.23    |   |  | $      | (1.20   | )  |
|                                                   |

Thepro forma net income amounts reflect the following items: (i) reversalof the amortization of initial direct lease costs, (ii) adjustments todepreciation expense arising from the valuation of the leasingequipment as a result of the purchase price allocation from theAcquisition, (iii) increase in net loss (gain) on sale of leasingequipment associated with the fair value adjustments to leasingequipment under the purchase method of accounting, (iv) adjustments forinterest expense from new borrowings related to the Acquisition and theelimination of historical interest on debt repaid in the Acquisition,(v) elimination of non-recurring Predecessor expenses, (vi) adjustmentsto record management fees resulting from the Acquisition, (vii) therelated income tax effect of the above items based upon a pro formaeffective income tax rate of 37.0%, and (viii) adjustments forthe accrual of dividends related to the preferred stock.

Note 2— Summary of Significant Accounting Policies

Principles of Consolidation

As a result of theAcquisition, the financial information for the period afterOctober  31,  2004 represents that of the SuccessorCompany. Prior to October  31,  2004, the combinedconsolidated financial statements include the accounts of thePredecessor Company as described above. Due to the change in the basisof accounting resulting from the application of the purchase method ofaccounting, the Predecessor Company's combined consolidatedfinancial statements and Successor Company's consolidatedfinancial statements are not necessarily comparable.

Theconsolidated financial statements include the accounts of therespective entities and their subsidiaries. All intercompanytransactions and balances have been eliminated in consolidation.Certain reclassifications have been made to the accompanying priorperiod financial statements and notes to conform with the currentyear’s presentation.

Cash and CashEquivalents

Cash and cash equivalents includes allcash balances and highly liquid investments having original maturitiesof three months or less at the time of purchase.

Allowancefor Doubtful Accounts

The Company's allowancefor doubtful accounts is provided based upon a review of thecollectibility of its receivables. This review is based on the riskprofile of the receivables, credit quality indicators such as the levelof past-due amounts and economic conditions. Generally, the Companydoes not require collateral on accounts receivable balances. An accountis considered past due when a payment has not been received inaccordance with the contractual terms. Accounts are generally chargedoff after an analysis is completed which indicates that collection ofthe full principal balance is in doubt. Changes in economic conditionsor other events may necessitate additions or deductions to theallowance for doubtful accounts. The allowance for doubtful accounts isintended to provide for losses inherent in the accounts receivable, andrequires the application of estimates and judgments as to the outcomeof collection efforts and the realization of collateral, among otherthings. The Company believes its allowance for doubtful accounts isadequate to provide for credit losses inherent in its accountsreceivable.

F-8

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Concentration of Credit Risk

The equipment leases and trade receivables subject theCompany to potential credit risk. The Company extends credit to itscustomers based upon an evaluation of the customer's financialcondition and credit history. For the year ended December31,  2005, one customer accounted for 18% of leasingrevenues. The same one customer accounted for 16% of leasingrevenues for both the ten months ended October  31,  2004and two months ended December  31,  2004. For the yearended December  31,  2003, the same one customer accountedfor 15% of leasing revenues.

Net Investment inFinance Leases

The amounts reported as net investmentin finance leases are recorded at the aggregate future lease payments,including any purchase options granted to customers, less unearnedincome. Interest from these leases is recognized over the term of thelease using the effective interest method as a component of leasingrevenue.

Leasing Equipment

Leasingequipment is recorded at cost and depreciated to an estimated residualvalue on a straight-line basis over the equipment’s estimateduseful life. The estimated useful lives for the Company's leasingequipment ranges from 10 to 20 years from the date of manufacture, forboth the Successor and Predecessor companies. Periodically, ifindicators of impairment are present, the Company evaluates whether thecarrying value of the equipment exceeds its estimated futureundiscounted cash flows. Costs incurred to place new equipment intoservice, including costs to transport the equipment to its initialon-hire location, are capitalized. The Company charges repair andmaintenance costs, that do not extend the lives of the assets, todirect operating expenses as incurred.

The net book valueof the leasing equipment by principal container type at December31,  2005 and 2004 was (inthousands):

|                                   |  |        |           |        |  |        |           |        |  |  |
|-----------------------------------|--|--------|-----------|--------|--|--------|-----------|--------|--|--|
|                              |  | 2005   |           | 2004   |
| Drycontainerunits                 |  | $      | 733,324   |   |  | $      | 786,627   |   |
| Refrigeratedcontainerunits        |  |   | 238,772   |   |  |   | 257,590   |   |
| Specialcontainer units andchassis |  |   | 64,267    |   |  |   | 59,206    |   |
|                              |  | $      | 1,036,363 |   |  | $      | 1,103,423 |   |
|                                   |

Includedin the amounts above are container units not on lease atDecember  31,  2005 and 2004 with a total net book value of$110.4  million and $68.9  million,respectively.

An allowance is provided through directoperating expenses based on the net book value of a percentage of theunits on lease to certain customers that are considered to benon-performing which the Company believes it will not ultimatelyrecover. The percentage is developed based on historicalexperience.

Leasehold Improvements and Other FixedAssets

Leasehold improvements are recorded at costand amortized on a straight-line basis over the shorter of the initialterm of the respective lease or the estimated useful life of theimprovement. Costs of major additions and improvements are capitalized.Expenditures for maintenance and repairs are expensed as incurred.Other fixed assets, which consist primarily of computer software,computer equipment and furniture, are recorded at cost and amortized ona straight-line basis over their respective estimated useful lives,which range from three to seven years.

Equipment Held forSale

In accordance with the Financial AccountingStandards Board’s (‘‘FASB’’)Statement of Financial Accounting Standards No. 144, Accounting forthe Impairment or Disposal of Long-Lived Assets(‘‘SFAS No. 144’’), container equipmentheld for sale is carried at the lower of its estimated fair value,

F-9

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based on current transactions, less costs tosell or carrying value; depreciation on such assets is halted anddisposals generally occur within ninety days. Subsequent changes to theasset's fair value, either increases or decreases, are recordedas adjustments to the carrying value of the equipment held for sale;however, any such adjustments would not exceed the equipment'scarrying value at the time it was initially classified as held forsale. Initial write-downs of assets held for sale are recorded as animpairment charge and are included in net (gain) loss on sale ofleasing equipment. Realized gains and losses resulting from the sale ofequipment held for sale are recorded as a (gain) loss on sale ofleasing equipment.

Goodwill

In connectionwith the Acquisition, the Company recorded $71.9  million ofgoodwill. The Company accounts for goodwill in accordance withStatement of Financial Accounting Standards("SFAS") No. 141, Goodwill and OtherIntangible Assets (‘‘SFAS No. 141’’).SFAS No.141 requires goodwill and other intangible assets withindefinite lives to be reviewed for impairment annually or morefrequently if circumstances indicate a possible impairment, which isperformed by the Company in the fourth quarter of each year. TheCompany’s annual review of goodwill as of October31,  2005 indicated that no impairment of goodwill existed.Changes to goodwill from December  31,  2004 toDecember  31, 2005 represent adjustments to the allocation of thepurchase price made during the allocation period.

DeferredFinancing Costs

Deferred financing costs representthe fees incurred in connection with the financing of theCompany's debt obligations and are amortized over the estimatedterm of the obligations using the effective interestmethod.

Initial Direct Costs

In accordancewith SFAS No. 91, Accounting for Nonrefundable Fees and CostsAssociated with Originating or Acquiring Loans and Initial Direct Costsof Leases, certain costs incurred to move or reposition existingleasing equipment that is placed under a new lease contract arecapitalized. The Company’s criteria for capitalization of thesecosts are as follows: the new contract term must be greater than oneyear in length, a required minimum number of twenty-foot equivalentunits (‘‘TEU’’) must be placed on-hire, andthe TEU are required to be moved overseas. Initial direct costs areamortized on a straight-line basis over the lease term as a reductionof leasing revenues.

Intangibles

Inconnection with the purchase price allocation, the Company recordedintangible assets related to the fair value of its lease relationships,which are included in other assets at December  31,  2005and 2004. The fair value of these assets on the date of the Acquisitionwas $4.8  million, which is being amortized over a period ofthree to seven years. Accumulated amortization was $1.0  millionand $0.1  million as of December  31,  2005 and 2004,respectively. Estimated amortization for each of the next five yearswill be approximately $0.9  million, $0.8  million,$0.6  million, $0.6  million, and $0.6  million,respectively. No intangible assets existed prior to theAcquisition.

Fair Value of FinancialInstruments 

The carrying amounts of cash andcash equivalents and accounts receivable approximate fair value atDecember  31,  2005 and 2004 because of the short-termmaturity of those instruments.

The interest on the seniorsecured facility and the asset securitization facility is based onvariable interest rates, and the interest on the senior unsecuredagreement was at an increasing rate over the term of the obligation.Therefore, the Company believes that the carrying values of its debtinstruments at December  31,  2005 and 2004 approximatefair value.

Due to Affiliates

Due toaffiliates includes amounts due to TFC and other related entities andconsisted of borrowings and costs incurred on the Company'sbehalf. Interest was charged monthly on the average daily balance ofthese advances.

F-10

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RevenueRecognition

Operating Leases withCustomers

The Company enters into long-term leasesand service leases with ocean carriers, principally as lessor inoperating leases, for marine cargo containers. Long-term leases providethe ocean carriers with specified container equipment for a specifiedterm. The leasing revenues are based upon the number of containersleased, the applicable per diem rate and the length of the lease.Long-term leases typically range for a period of three to eight years.Revenues are recognized on a straight-line basis over the life of therespective lease. Advanced billings are deferred and recognized in theperiod earned. Service leases do not specify the exact number ofcontainers to be leased or the term that each container will remainon-hire but allow the customer to pick up and drop off containers atvarious locations specified in the lease agreement. Under a servicelease, rental revenue is based on the number of containers utilized atcontracted per diem rates. Revenue for customers where collection isnot assured is deferred and recognized when the amounts are received.Also, in accordance with FASB EITF No. 99-19, Reporting RevenueGross as a Principal versus Net as an Agent, the Company recognizesbillings to customers for damages incurred and certain other passthrough costs as leasing revenue as it is earned based on the terms ofthe contractual agreements with the customer.

Finance Leaseswith Customers

The Company enters into finance leasesas lessor for container equipment owned by the Company. The netinvestment in finance leases represents the receivables due fromlessees, net of unearned income. Unearned income is recognized on alevel yield basis over the lease term and is recorded as leasingrevenue. Finance leases are usually long-term in nature, typicallyranging for a period of five to ten years and may include a bargainpurchase option to purchase the equipment at the end of the leaseterm.

Equipment Trading Revenue

Equipmenttrading revenue represents the proceeds on the sale of equipmentpurchased for resale. The related expenses are recognized as incurredand are presented as equipment trading expense in the consolidatedstatements of operations.

Management FeeIncome

The Company manages equipment, which is ownedby third parties, and earns management fees based on the income earnedby the leasing and sale of that equipment. Amounts collected by theCompany as agent on behalf of third parties that own such equipment arenot included in revenue and costs paid for managed equipment are notincluded in expenses by the Company.

OtherRevenues

Other revenues include principally feeincome for third party positioning of equipment.

DirectOperating Expenses

Direct operating expenses aredirectly related to the Company's equipment under and availablefor lease. These expenses primarily consist of the Company'scosts to repair and maintain the equipment, to store the equipment whenit is not on lease, to reposition the equipment, and a provision forequipment lost or not expected to be returned. These costs arerecognized when incurred. In limited situations, certain positioningcosts may be capitalized.

Equipment RentalExpense

Equipment rental expense is theCompany's cost of equipment that it leases fromothers.

F-11

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Derivative Instruments

The Company uses derivatives in the management of itsinterest rate exposure on its long-term borrowings. The Companyaccounts for derivative instruments in accordance with SFAS No. 133,Accounting for Derivative Instruments and Hedging Activities(‘‘SFAS No. 133’’), as amended andinterpreted. SFAS No. 133 requires that all derivative instruments berecorded on the balance sheet at their fair value and establishedcriteria for both the designation and effectiveness of hedgingactivities.

Income Taxes

The Companyaccounts for income taxes in accordance with SFAS No. 109,Accounting for Income Taxes, (‘‘SFAS No.109’’). Under SFAS No. 109, deferred tax assets andliabilities are determined based on the difference between theCompany's financial statements and the tax basis of assets andliabilities using enacted tax rates in effect for the year in which thedifferences are expected to reverse.

Foreign CurrencyTranslation

The net assets and operations of foreignsubsidiaries included in the consolidated financial statements areattributable primarily to the Company's UK subsidiaries. Theaccounts of these subsidiaries have been converted at rates of exchangein effect at year-end as to balance sheet accounts and at an average ofexchange rates for the year as to income statement accounts. Theeffects of changes in exchange rates in translating foreignsubsidiaries' financial statements are included inshareholders’ equity (deficit) and owner's net investmentas accumulated other comprehensive income.

Stock-BasedCompensation

The Company accounts for itsstock-based compensation plans using the intrinsic value methodprescribed in Accounting Principles Board Opinion No. 25, Accountingfor Stock Issued to Employees (‘‘APB No.25’’). Under the intrinsic value method, compensationcost equal to the difference between the fair value of the shares andthe exercise price on the date of grant is recognized from the date ofgrant over the vesting period of the options. The Company has adoptedthe disclosure only provisions of SFAS No. 123, Accounting forStock-Based Compensation (‘‘SFAS No.123’’), as amended by SFAS No. 148, Accounting forStock-Based Compensation — Transition and Disclosure(‘‘SFAS No. 148’’).

Thefollowing table illustrates the effect on net loss and loss per shareapplicable to common stockholders had the fair value method ofaccounting been applied to the Company's stock compensation plansfor the year ended December  31,  2005 and the two monthsended December  31,  2004 (in thousands, except per sharedata).

|                                                                               |  |                           |         |                                  |  |        |         |         |  |  |
|-------------------------------------------------------------------------------|--|---------------------------|---------|----------------------------------|--|--------|---------|---------|--|--|
|                                                                          |  | YearendedDecember 31,2005 |         | Two monthsendedDecember 31, 2004 |
| Net loss applicableto common stockholders:                                    |  |                      |    |                             |  |   |    |    |
| Asreported                                                                    |  | $                         | (10,196 | )                           |  | $      | (3,541  | )  |
| Add:Stock-based compensation expense included in reported netloss             |  |                      | 3,917   |                             |  |   | — |    |
| Deduct:Stock-based compensation expense determined under the fair valuemethod |  |                      | (11,294 | )                           |  |   | (3      | )  |
| Proforma net loss applicable to commonstockholders                            |  | $                         | (17,573 | )                           |  | $      | (3,544  | )  |
| Basicand diluted loss per commonshare:                                        |  |                      |    |                             |  |   |    |    |
| Asreported                                                                    |  | $                         | (0.68   | )                           |  | $      | (0.35   | )  |
| Proforma                                                                      |  | $                         | (1.18   | )                           |  | $      | (0.35   | )  |
|                                                                               |

F-12

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The estimated weighted average fairvalue of options granted during the year ended December  31, 2005and the two months ended December  31,  2004 were $14.02and $0.01 per share, respectively. The fair value of options grantedunder the Company’s fixed stock option plans during the yearended December  31,  2005 and the two months endedDecember  31,  2004 were estimated on the dates of grantusing the Black-Scholes option-pricing model with the followingweighted-average assumptionsused:

|                         |  |        |         |         |  |        |         |         |  |  |
|-------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|                    |  | 2005   |         | 2004    |
| Expectedlife (in years) |  |   | 4       |    |  |   | 4       |    |
| Risk-freeinterestrates  |  |   | 4.80    | %  |  |   | 3.52    | %  |
| Volatility              |  |   | 50      | %  |  |   | 50      | %  |
| Dividendyield           |  |   | — |    |  |   | — |    |
|                         |

Optionsgranted in November  2004 to purchase 400,945 shares and optionsgranted in April  2005 to purchase 53,667 shares became fullyvested as of the date of the initial public offering(‘‘IPO’’) on October  17,  2005— (see Note 3). Options granted on the IPO date to purchase612,195 shares at an exercise price equal to the IPO offering price of$18.00 per share became fully vested as of December  30,2005 as their acceleration was approved by the Compensation Committeeof the Company’s Board of Directors. The purpose of theaccelerated vesting was to avoid future compensation expense associatedwith these options that the Company would otherwise recognize in itsconsolidated statements of operations upon the adoption of SFAS No.123(R), Share-Based Payments, (revised 2004) ("SFASNo. 123(R)"). The future compensation expense that willnot be incurred, based on the Company’s implementation date forSFAS No. 123(R) of January  1,  2006, is approximately$1.8  million per year in 2006, 2007 and 2008, and $1.5million in 2009. However, the acceleration resulted in an increase of$7.4  million in the pro-forma stock-based compensation expensefor the year ended December 31, 2005 shownabove.

Comprehensive Income(Loss)

Comprehensive income (loss) includes netincome (loss), unrealized gains (losses), net of income taxes onderivative instruments designated as cash flow hedges and foreigntranslation adjustments.

Earnings (Loss) PerShare

Basic earnings (loss) per share is computed bydividing income (loss) available to common shareholders by the weightedaverage number of common shares outstanding for the period. Dilutedearnings (loss) per share reflect the potential dilution that wouldoccur if securities or other contracts to issue common stock wereexercised or converted into common stock. For the year endedDecember  31,  2005 and the two months endedDecember  31,  2004, basic loss per share and diluted lossper share were the same due to the net losses applicable to commonshareholders incurred in both periods.

All common shareand per share information have been retroactively adjusted to reflect a101.5052-for-1 stock split. See Note 3.

Use ofEstimates

The preparation of the financial statementsin conformity with accounting principles generally accepted in theUnited States requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities and thedisclosure of contingent assets and liabilities at the date of theconsolidated financial statements and the reported amounts of revenuesand expenses during the reporting periods. Actual results may differfrom those estimates.

F-13

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Recently Issued AccountingPronouncements

In December  2004, the FASB issuedSFAS No. 123R. This statement is a revision of SFAS No. 123. SFAS No.123R supercedes APB Opinion No. 25, and its related implementationguidance. SFAS No. 123R requires companies to recognize in thestatement of operations the fair value of all employee share-basedpayments, including grants of employee stock options, as well ascompensatory employee stock purchase plans. The Company is required toadopt SFAS No. 123R on January  1,  2006. Based on thenumber of options currently outstanding which are fully vested,management does not expect the adoption of SFAS No.123R to have asignificant impact on the financial position, results of operations orcash flows of the Company. However, future grants of share-basedcompensation will result in the recognition of compensationexpense.

Note 3 — Initial Public Offering

On October  17,  2005, the Company sold11.5  million shares of common stock at a price of $18.00 pershare in an IPO which generated net proceeds of approximately$189.2  million, after deducting underwriter discounts and otheroffering expenses. The Company used the net proceeds of this offering,together with additional borrowings under the asset securitizationfacility and the amended and restated senior secured credit facilityand available cash, to repay the entire outstanding principal andaccrued cash interest due on the senior unsecured credit agreementwhich was approximately $288.0  million on October17,  2005. Related to the IPO, the following activities alsooccurred:

|  |          |                                                                                                                                                                                                                                                                            |
|--|----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 1)  | The Company’s stockholdersapproved a 101.5052-for-1 stock split which became effective prior tothe consummation of the IPO. All share and per share information in theaccompanying financial statements have been retroactively restated toreflect this stock split. |

|  |          |                                                                                                                                                                                                                                    |
|--|----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 2)  | All 201,205outstanding shares of the Company’s Series A 12.0%cumulative senior preferred stock were converted into 11,178,035 sharesof common stock on October  17,  2005, based on the IPOprice of $18.00 per common share. |

|  |          |                                                                                                                                                                                                                                                                                                             |
|--|----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 3)  | Previouslyissued options granted to various employees of the Company to purchase454,612 shares of common stock became fully vested on October17,  2005, and as a result, the unamortized balance of unearnedcompensation of approximately $3.4  million was recognized ascompensation expense at that date. |

|  |          |                                                                                                                                                                                                                      |
|--|----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 4)  | Optionswere granted to various employees of the Company to purchase 612,195shares of the Company’s common stock as of the IPO date, with anexercise price equal to the IPO price of the common stock of$18.00. |

|  |          |                                                                                                                                         |
|--|----------|-----------------------------------------------------------------------------------------------------------------------------------------|
|  | 5)  | Management consulting agreementsbetween the Company and certain of the Company’s stockholderswere terminated on October  17,2005. |

|  |          |                                                                                                                                       |
|--|----------|---------------------------------------------------------------------------------------------------------------------------------------|
|  | 6)  | The Company paid the aggregateoutstanding accrued dividends on the Series A 12.0% cumulativesenior preferred stock of $23.6  million. |

Sale ofAdditional Shares — Over-Allotment Option

OnOctober  21,  2005, the underwriters of TAL’s IPOexercised their over-allotment option in part and purchased 1.0million additional shares of common stock from certain of TAL’sstockholders. TAL did not receive any proceeds from the sale of theshares pursuant to the over-allotment option.

F-14

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Note 4 — Debt

Summaryof major activities 

During the third and fourthquarters of 2005, the Company completed the following refinancingtransactions:

|  |           |                                                                                                                                                                                              |
|--|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (1)  | Effective August1,  2005, the Company entered into an asset securitizationfacility which provides for advances from time to time up to a maximumaggregate principal amount of $875.0million. |

|  |           |                                                                                                                                                                                                                                                                                        |
|--|-----------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (2)  | The Company used the proceeds of itsinitial borrowings of $705.0  million under the assetsecuritization facility to repay a portion of the outstanding principalamount under the $875.0  million senior secured credit facilitythat it entered into in connection with theAcquisition. |

|  |           |                                                                                                                                                                                                                                                                                    |
|--|-----------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (3)  | The Company amended and restatedthe $875.0  million senior secured credit facility, reducing themaximum aggregate commitment amount thereunder to $175.0million, and as a result, the Company wrote off $24.3  million ofdeferred financing costs during the third quarter of2005. |

|  |           |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|--|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (4)  | On October  17,  2005, theCompany used the net proceeds of the IPO, as well as additionalborrowings under its asset securitization facility and the amended andrestated senior secured credit facility and available cash, to repayapproximately $288.0  million due on the senior unsecured creditagreement which consisted of the entire outstanding principal andaccrued cash interest then due. In connection with the repayment of thesenior unsecured credit agreement, in October  2005, the Companywrote off $19.2  million of deferred financing costs, andreversed $5.4  million of excess accrued interest to interestexpense. |

Asset Securitization Facility

Effective August  1,  2005, the Companyentered into an asset securitization facility pursuant to which itcontributed, and may from time to time in the future continue tocontribute, certain eligible containers, together with the relatedleases, to TAL Advantage I LLC, a newly created special purpose entity(the ‘‘SPE’’) which is a wholly-ownedconsolidated subsidiary of the Company, whose primary business activityis to issue asset backed notes under the Company’s assetsecuritization facility. On August  1,  2005, the Companymade its initial transfer of eligible containers to the SPE, which thenissued an initial series of asset backed notes with a maximum aggregateprincipal amount of $875.0  million, (the ‘‘Series2005-1 Notes’’), the terms of which are more fullydescribed below. The SPE’s initial borrowing under the assetsecuritization facility was $705.0  million. As ofDecember  31,  2005, the outstanding balance under thefacility was $710.0  million.

The SPE'sborrowing capacity under the Series 2005-1 Notes is determined byreference to a variable advance rate percentage of the net book valuesof the SPE's eligible containers, subject to certain adjustments.Based on the applicable advance rate of 82%, the SPE’sborrowing capacity was $710.7  million at December31,  2005. At December  31,  2005, the applicablecommitment fee and interest rate were 0.25% and LIBOR plus1.50%, respectively. To the extent a Rated Securitization is notcompleted by the SPE prior to August  1,  2007, thecurrently prevailing interest rate will increase to LIBOR plus1.625% per annum from that time through the maturity of thefacility. The weighted average interest rate on this facility as ofDecember  31,  2005 was 5.7%.

The assetsecuritization facility is secured by a first priority lien onsubstantially all of the SPE's assets. The leasing businessrelated to the eligible containers transferred to the SPE is managed bythe Company, and in connection with its role as manager, it receivesmanagement fees equal to 12% of the net cash receipts (afterdirect operating expenses) of the SPE together with disposition feesequal to 5% of the sales and casualty proceeds in respect of anyof the SPE's containers, all as defined. To the extent thatdistributable cash remains after the payment of all principal,interest, fees, hedging costs and other amounts payable pursuant to theasset securitization facility, such remaining amounts may betransferred by the SPE to the Company.

F-15

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The Series 2005-1 Notes initiallyhave a three year revolving period, and, unless the SPE issues anadditional series of asset backed notes in a rated securitization thatmeets certain timing, rating and principal thresholds (a‘‘Rated Securitization’’) prior toAugust  1,  2008, this revolving period will be followed bya ten year scheduled principal amortization period. In the event thatthe SPE consummates a Rated Securitization prior to August1,  2007, the revolving period of the Series 2005-1 Notes willautomatically convert into a 364-day revolving period (which period canbe extended with the consent of the noteholders), and in the event thatthe SPE consummates a Rated Securitization between August1,  2007 and August  1,  2008, the revolving periodshall be converted into such period as the SPE and the noteholdersshall then agree (or in the event that no such agreement shall bereached, a period terminating on August  1,2008).

Accrued interest and fees and a portion of theoutstanding principal amount of the Series 2005-1 Notes, together withcertain other amounts, are payable by the SPE on a monthly basis. Theportion of the outstanding principal amount of the Series 2005-1 Notes,if any, payable on any such payment date during the revolving periodwill be equal to the amount by which the outstanding principal amountof the Series 2005-1 Notes exceeds the SPE's then effectiveborrowing capacity.

Senior Secured Credit Facility

In connection with the Acquisition, the Companyentered into an $875.0  million senior secured credit facility.Upon the closing of the asset securitization facility on August1,  2005, the Company amended and restated the senior securedcredit facility to, among other things, reduce the maximum aggregatecommitments thereunder to $175.0  million. The final maturitydate of this facility is August  1,  2008. AtDecember  31,  2005, the outstanding balance under thefacility was $148.0  million.

The Company’sborrowing capacity under this facility is based upon a variable advancerate percentage of the net book values, as calculated in the creditagreement, of the Company’s eligible containers and eligiblechassis, subject to certain adjustments. At December  31,2005, the variable advance rate percentage was 85%, but issubject to annual decreases of 1% for each full calendar yearfollowing the IPO until a minimum advance rate of 82% isreached. At December  31,  2005, the borrowing capacity was$163.2  million. The Company’s eligible containers for thepurposes of determining borrowing capacity under this facility will notinclude any containers transferred to the SPE in connection with theasset securitization facility described above. The senior securedcredit facility is secured by a first priority lien on theCompany’s eligible containers, eligible chassis, related leasesand lease rights and a pledge of the equity interests of theSPE.

At December  31,  2005, the seniorsecured credit facility applicable commitment fee and interest ratewere 0.375% and LIBOR plus 2.125%, respectively. Thisrate will remain in place until such time as the variable advance ratepercentage decreases to 82%, at which time the interest ratewill further decrease to LIBOR plus 2.00% per annum. Interestand fees and a portion of the outstanding principal amount of the loansunder this facility, together with certain other amounts, are payableon a quarterly basis. The portion of the outstanding principal amountof the loans, if any, payable on any such payment date will be equal tothe amount by which the outstanding principal amount of the loansexceeds the Company’s then effective borrowing capacity. Theweighted average interest rate under this facility as ofDecember  31,  2005 was 6.2%.

Due tothe refinancing noted above, the Company wrote off $24.3  millionof deferred financing costs during 2005 that related to the seniorsecured credit facility.

FinancialCovenants

In addition to customary events of defaultand early amortization events, the Series 2005-1 Notes containfinancial covenants which require, among others, that the SPE maintainan EBIT, as defined, to cash interest expense ratio of at least 1.00 to1.00 as of any payment date prior to April  2007 and at least1.10 to 1.00 as of any payment date from and after April  2007.The Series 2005-1 Notes also contain certain restrictions relating toincurring indebtedness or liens, restricted payments, the making ofcertain investments and certain other matters.

F-16

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In addition to customary events ofdefault, the senior secured credit facility contains financialcovenants which require that (i) the Company maintain a consolidatedleverage ratio, as defined, of 4.75 to 1.00, (ii) commencing with thefiscal quarter ending December  31,  2005, the Companymaintain a consolidated tangible net worth of at least an amount equalto its consolidated net worth as of August  1,  2005, plus50% of its consolidated net income since August  1,2005, plus 100% of the net cash proceeds from the IPO, minus$10.0  million, and (iii) commencing with the fiscal quarterending December  31,  2005, the Company maintain aconsolidated EBIT, as defined, to consolidated cash interest expenseratio of at least 1.10 to 1.00, as well as containing restrictions onincurring indebtedness or liens, paying dividends and other restrictedpayments, the making of certain investments and certain othermatters.

The Company is a holding company and, other thaninvestments in subsidiaries, has no operations, assets, liabilities,revenues or expenses. Accordingly, the Company is dependent upondividends, loans, advances or other distributions from its subsidiariesin order to pay dividends or make other distributions related to itscommon stock. Certain provisions of the senior secured credit facilityand the asset securitizaton facility limit such payments ordistributions to the Company, and also limit the Company'sability to pay dividends or make other distributions on its commonstock. At December 31, 2005, substantially all of the Company'sconsolidated shareholders' equity is restricted pursuant to theterms of the senior secured credit facility and asset securitizationfacility.

Senior Unsecured Credit Agreement

In connection with the Acquisition, the Companyentered into a senior unsecured credit agreement with an affiliate ofits former parent which provided for a $275.0  million term loanfacility with a final maturity of November  2,  2014. Thiscredit facility bore interest at an initial interest rate of8.75% which increased by 0.25% per annum each 90-dayperiod following the Acquisition, up to a maximum interest rate of11.5% per annum. The Company accrued interest under this creditagreement at an effective rate of 11.08% over the 10-year lifeof the credit agreement.

In connection with the Acquisition andthe Company's entry into this facility, the Company deposited$6.0 million into an escrow account. Since this facility was not repaiduntil October 2005, the escrow account was required to be disbursed tothe lenders in monthly installments of $1.0 million on or before thelast day of the months of March, April, May, June, July and August2005. All disbursements were made as required in 2005.

OnOctober  17,  2005, the Company used the net proceeds ofthe IPO, as well as additional borrowings under its assetsecuritization facility and the amended and restated senior securedcredit facility and available cash, to repay approximately$288.0  million due on the senior unsecured credit agreementwhich consisted of the entire outstanding principal and interest thendue. At the time of repayment, the interest rate of the seniorunsecured credit agreement had increased to 9.5%, resulting in$5.4  million of excess accrued interest, representing thedifference between the overall effective rate of 11.08% and theactual rate at the time of payment, which was reversed and is includedin interest and debt expense in the accompanying statement ofoperations for the year ended December 31, 2005. In connection with therepayment, the Company wrote off $19.2  million of deferredfinancing costs.

Capital Lease Obligations

Effective December  23,  2005, theCompany entered into a capital lease with a financial institution tofinance the purchase of $14.6  million of chassis. Thelease agreement is structured as a ten year Terminal Rental AdjustmentClause (‘‘TRAC’’) lease with a purchaseoption at the end of the lease term equal to the TRAC amount as definedin the lease. For income tax purposes, this lease is treated as anoperating lease. Payments include interest at the rate of 5.46%.As of December  31,  2005, the lease obligation totaled$14.6  million.

F-17

----

At December  31,2005, future lease payments under these capital leases are as follows(inthousands):

|                                   |  |        |        |         |  |  |
|-----------------------------------|--|--------|--------|---------|--|--|
| 2006                              |  | $      | 1,961  |    |
| 2007                              |  |   | 1,865  |    |
| 2008                              |  |   | 1,266  |    |
| 2009                              |  |   | 1,272  |    |
| 2010                              |  |   | 1,547  |    |
| 2011 andthereafter                |  |   | 12,007 |    |
|                              |  |   | 19,918 |    |
| Less:amount representing interest |  |   | (5,291 | )  |
| Capital leaseobligation           |  | $      | 14,627 |    |
|                                   |

InterestRate Swaps 

To hedge the risk associated withfluctuations in interest rates on long-term borrowings, the Companyentered into three interest rate swap contracts on December14,  2004 with a financial institution to fix the floatinginterest rates on a portion of the borrowings under its senior securedcredit facility. The interest rate swap contracts had a fixed rate ofapproximately 3.82%, an initial notional amount of $500million and an amortizing term of seven years.

Inconnection with the refinancing transaction in August  2005,these interest rate swap contracts were modified to reflect the termsunder the asset securitization facility. The revised contracts wereeffective on September  20,  2005. No terminationsettlements were made as the fixed rate, notional amounts and maturitydate remained the same.

On October  28,2005, the Company entered into two additional interest rate swapcontracts with the same financial institution to fix the floatinginterest rates on additional borrowings under its asset securitizationfacility and its senior secured credit facility. The first interestrate swap has a notional amount of $100  million, anon-amortizing term of 6 years, a fixed rate of approximately4.82%, to hedge the interest rate exposure under its assetsecuritization facility. The second interest rate swap has a notionalamount of $25  million, a non-amortizing term of approximately2.75 years, and a fixed rate of approximately 4.71%, to hedgethe interest rate exposure under its senior secured creditfacility.

On November  1,  2005, the Companydesignated all interest rate swap contracts as cash flow hedges, inaccordance with SFAS No.133, at which time the fair value of theinterest rate swaps was $15.3 million. The contracts are recorded atfair value on the consolidated balance sheets, with the effectiveportion of their change in fair value from the designation date beingreflected in other comprehensive income (loss) and reclassified intoearnings in the same period or periods during which the hedgedtransaction affects earnings. The ineffective portion, if any, iscalculated as the excess of the fair value of the hedge contracts overthe change in expected cash outflows of interest for the underlyingdebt instrument and is included in the unrealized (gain) loss oninterest rate swaps in the consolidated statements of operations. Inaddition, the fair value of $15.3 million at the date the interest rateswap contracts were designated as cash flow hedges will be recognizedin income using the interest method over the remaining life of thecontracts and will be included in unrealized (gain) loss on interestrate swaps in the consolidated statements of operations. Amountsrecorded in accumulated other comprehensive income (loss) would bereclassified into earnings upon termination of these interest rate swapagreements and related debt instruments prior to their contractualmaturity.

The fair value of the interest rate swaps was$13.9  million and $2.4  million at December31,  2005 and 2004, respectively, which is included in otherassets in the consolidated balance sheets. In its consolidatedstatements of operations, the Company recognized a net unrealized gainof $12.5  million and $2.4  million for the year endedDecember  31,  2005 and the two months ended December 31,2004, respectively, which represents the change in fair value of theswaps prior to designation as cash flow hedges and the amortization ofthe fair value upon designation as described above.

Thecounterparty to these agreements is a highly rated financialinstitution. In the unlikely event that the counterparty fails to meetthe terms of the interest rate swap agreements, the Company’sexposure 

F-18

----

is limited to the interest rate differentialon the notional amount at each monthly settlement period over the lifeof the agreements. The Company does not anticipate any non-performanceby the counterparty.

Note 5 — Net Investment in FinanceLeases 

The following table represents thecomponents of the net investment in finance leases at December31, 2005 and 2004 (inthousands):

|                                |  |        |         |         |  |        |        |         |  |  |
|--------------------------------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                           |  | 2005   |         | 2004    |
| Grossfinance leasereceivables  |  | $      | 112,600 |    |  | $      | 15,292 |    |
| Unearnedincome                 |  |   | (38,781 | )  |  |   | (2,030 | )  |
| Netinvestment in financeleases |  | $      | 73,819  |    |  | $      | 13,262 |    |
|                                |

Contractualmaturities of the Company’s gross direct finance leasereceivables subsequent to December  31,  2005 are asfollows (inthousands):

|                   |  |        |         |        |  |  |
|-------------------|--|--------|---------|--------|--|--|
| 2006              |  | $      | 19,197  |   |
| 2007              |  |   | 16,942  |   |
| 2008              |  |   | 13,388  |   |
| 2009              |  |   | 11,940  |   |
| 2010              |  |   | 9,752   |   |
| 2011andthereafter |  |   | 41,381  |   |
|              |  | $      | 112,600 |   |
|                   |

Note6 — Loss Per Share

The following table sets forththe calculation of basic and diluted loss per share of the Company forthe year ended December  31,  2005 and the two months endedDecember  31,  2004 (in thousands, except sharedata):

|                                                                               |  |                             |            |                                  |  |        |            |         |  |  |
|-------------------------------------------------------------------------------|--|-----------------------------|------------|----------------------------------|--|--------|------------|---------|--|--|
|                                                                          |  | Yearended December 31, 2005 |            | Two months endedDecember 31,2004 |
| Numerator:                                                                    |  |                        |       |                             |  |   |       |    |
| Netloss applicable to common stockholders for basic and diluted loss pershare |  | $                           | (10,196    | )                           |  | $      | (3,541     | )  |
| Denominator:                                                                  |  |                        |       |                             |  |   |       |    |
| Weightedaverage shares outstanding for basic loss pershare                    |  |                        | 14,912,942 |                             |  |   | 10,150,506 |    |
| Dilutivestockoptions                                                          |  |                        | —    |                             |  |   | —    |    |
| Weightedaverage shares for diluted loss pershare                              |  |                        | 14,912,942 |                             |  |   | 10,150,506 |    |
| Lossper share: — Basic andDiluted                                       |  | $                           | (0.68      | )                           |  | $      | (0.35      | )  |
|                                                                               |

Forthe year ended December  31,  2005 and the two months endedDecember  31, 2004 options to purchase 1,066,807 and 400,945shares of common stock, respectively, were not included in thecalculation of weighted average shares for diluted loss per sharebecause their effects were antidilutive.

For the periodsended October  31,  2004 and prior, owner’s equityconsisted of owner’s net investment and, therefore, no earnings(loss) per share data has been presented.

Note 7 —Capital Stock and Stock Options

PreferredStock

The Company's board of directors amended theCompany's certificate of incorporation and authorized 500,000shares of preferred stock and designated 210,000 of them as Series A12.0% Cumulative Senior Preferred Stock (‘‘SeriesA Preferred Stock’’).

F-19

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In October  2004, theCompany sold 200,000 shares of the Series A Preferred Stock for netproceeds of $195.3  million (net of issuance costs of $4.7million). The Company accounted for these issuance costs as a chargeagainst net income available to common stockholders in the two monthsended December  31,  2004. The liquidation preference ofthe Series A Preferred Stock was $1,000 per share plus accrueddividends.

Dividends on the Series A Preferred Stock werecumulative, whether or not declared, and were payable semi-annually incash or, at the option of the Company, were deferred until theoccurrence of a mandatory redemption event, as defined. No dividendswere payable on the Company's common stock until all accrued butunpaid dividends on the Series A Preferred Stock were fully paid.Accrued dividends were accounted for as a charge against net incomeavailable to common stockholders as accrued.

As ofDecember  31,  2004, the Company had an obligation toredeem all shares of the Series A Preferred Stock upon the occurrenceof a change in control, as defined. A change in control included anyevent by which the holders of the majority of the Company'scommon stock, as of the date of sale of the Series A Preferred Stock,no longer held such a majority. Since the holders of the Series APreferred Stock controlled the Company's board of directors, theoccurrence of an event causing a change in control was not within thecontrol of the Company and, accordingly, the carrying amount of theSeries A Preferred Stock was classified outside of permanentstockholders' equity. The holders of the Series A Preferred Stockhad no conversion or voting rights.

On February9,  2005, the Company's board of directors approved and onApril  1,  2005, the Company sold to certain members ofmanagement of the Company 1,205 shares of its Series A 12.0%Cumulative Senior Preferred Stock for approximately $1.2million.

In August  2005, the holders of all of theSeries A Preferred Stock agreed to amend the terms of the Series APreferred Stock to make it automatically convert into shares of theCompany's common stock upon the closing of an initial publicoffering of shares of the Company's common stock. The conversionprice was equal to the IPO price of shares of the Company'scommon stock, or $18.00 per share. This agreement was effected by theCompany's amended and restated certificate of incorporation whichbecame effective on October  5,  2005. All accrueddividends on the Series A Preferred Stock through the date of theconversion were paid in cash in November  2005.

CommonStock

In connection with the Acquisition, certainemployees of the Company purchased 338,367 shares of theCompany's common stock at the same price and terms per share aspaid by all of the other equity investors. In connection with thepurchase of these securities, the Company entered into a subscriptionagreement (the ‘‘Subscription Agreement’’)with these employee shareholders that contained certain companyrepurchase provisions in the event of employee termination, dependenton the reason for termination. These repurchase provisions terminatedupon the closing of the IPO of the Company's common stock onOctober  17,  2005. The repurchase provisions required theclassification of these common shares subject to the subscriptionagreements outside of permanent equity in the accompanying consolidatedbalance sheet at December  31,  2004.

OnFebruary  9,  2005, the Company's board of directorsapproved and on April  1,  2005, the Company sold tocertain members of management of the Company 53,667 shares of commonstock at a price of $0.01 per share. In addition, the Company'sboard of directors approved the grant of options to purchase 53,667shares of common stock. The price of the common stock issued and theexercise price of the options granted were deemed to be less than theirfair value for financial statement reporting purposes by approximately$3.9  million. Included in the stock subscription agreements werecall provisions which gave the Company, under certain circumstances,the right to repurchase the common shares for a price less thanestimated market value for a four year period. The options also had afour year vesting schedule. As a result, the total unearnedcompensation of $3.9  million was being amortized over fouryears. The Company’s call provision terminated, and all of theoptions previously issued became fully vested upon the consummation ofthe IPO on October  17,  2005, and the unamortized balanceof unearned compensation of approximately $3.4  million wasrecognized as compensation expense at that date.

F-20

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Stock Option Plans

2004Management Stock Plan

During 2004, the Companyadopted the 2004 Management Stock Plan (the ‘‘2004Plan’’), which provides for the issuance of awards in theform of stock options, stock appreciation rights, restricted stock andcertain other instruments to employees, consultants and members of theCompany's board of directors. A total of 534,425 shares werereserved for issuance under the 2004 Plan. During 2004, options topurchase a total of 400,945 shares were granted at an exercise price of$0.01 per share, which the board of directors believed equaled the fairvalue per share of the Company's common stock. All such optionsremained outstanding at December  31,  2004. All optionsgranted during 2004 vested ratably over four years, except upon achange in control, as defined, in which case all outstanding unvestedoptions would become fully vested and exercisable. No options werevested at December  31,  2004.

During 2005,options to purchase an additional 53,667 shares were granted at anexercise price of $0.01 per share. These options were to vest ratablyover four years, except upon a change in control, as defined, in whichcase all outstanding unvested options would become fully vested andexercisable.

Upon completion of the IPO on October17,  2005, all of the options outstanding under the 2004 Planbecame fully vested. All options granted during 2004 and 2005 had aninitial contractual life of ten years.

2005 ManagementOmnibus Incentive Plan

In October  2005, theCompany adopted the TAL International Group, Inc. 2005 ManagementOmnibus Incentive Plan (the ‘‘2005 Plan’’),which provided for the issuance of awards in the form of stock options,stock appreciation rights and restricted stock. A total of 2,500,000shares of common stock were reserved for issuance under the 2005 Plan.In October  2005, the board of directors approved the grant ofoptions under the 2005 Plan to purchase an aggregate of 612,195 sharesof the Company’s common stock upon consummation of the IPO withan exercise price equal to the IPO price of the common stock, and avesting period of four years. As discussed in Note 2, all 612,195options granted on the IPO date became fully vested as ofDecember  30,  2005, the date their acceleration wasapproved by the Compensation Committee of the Company’s board ofdirectors.

Stock option activity under the Plans fromNovember  1, 2004 to December  31, 2005 was asfollows:

|                                 |  |         |           |                                |  |        |         |        |  |  |
|---------------------------------|--|---------|-----------|--------------------------------|--|--------|---------|--------|--|--|
|                            |  | Options |           | Weighted-AverageExercise Price |
| Outstanding November  1,2004    |  |    | —   |                           |  |   | — |   |
| Granted− November  4,2004 |  |    | 400,945   |                           |  | $      | 0.01    |   |
| Exercised                       |  |    | —   |                           |  |   | — |   |
| Canceled                        |  |    | —   |                           |  |   | — |   |
| OutstandingDecember  31,2004    |  |    | 400,945   |                           |  | $      | 0.01    |   |
|                            |  |    |      |                           |  |   |    |   |
| Granted− April  1,2005    |  |    | 53,667    |                           |  | $      | 0.01    |   |
| Granted −October  17,2005 |  |    | 612,195   |                           |  | $      | 18.00   |   |
| Exercised                       |  |    | —   |                           |  |   | — |   |
| Canceled                        |  |    | —   |                           |  |   | — |   |
| OutstandingDecember  31,2005    |  |    | 1,066,807 |                           |  | $      | 10.33   |   |
|                            |  |    |      |                           |  |   |    |   |
| Exercisable:                    |  |    |      |                           |  |   |    |   |
| December31,2004                 |  |    | —   |                           |  |   | — |   |
| December31,2005                 |  |    | 1,066,807 |                           |  | $      | 10.33   |   |
|                                 |

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The following table summarizesinformation about stock options outstanding at December  31,2005:

|                         |  |                                |           |                                   |  |                              |  |                               |       |                              |  |        |           |        |  |   |       |        |  |  |  |  |
|-------------------------|--|--------------------------------|-----------|-----------------------------------|--|------------------------------|--|-------------------------------|-------|------------------------------|--|--------|-----------|--------|--|---|-------|--------|--|--|--|--|
|                    |  | OptionsOutstanding             |           | OptionsExercisable                |
| Rangeof Exercise Prices |  | NumberOutstandingas of12/31/05 |           | WeightedAverageRemainingLife(Yrs) |  | WeightedAverageExercisePrice |  | NumberExercisableasof12/31/05 |       | WeightedAverageExercisePrice |
| $0.01                   |  |                           | 454,612   |                              |  | 8.9                          |  | $                             | 0.01  |                         |  |   | 454,612   |   |  | $ | 0.01  |   |
| $18.00                  |  |                           | 612,195   |                              |  | 9.8                          |  | $                             | 18.00 |                         |  |   | 612,195   |   |  | $ | 18.00 |   |
| $0.01-$18.00            |  |                           | 1,066,807 |                              |  | 9.4                          |  | $                             | 10.33 |                         |  |   | 1,066,807 |   |  | $ | 10.33 |   |
|                         |

Theweighted average remaining contractual life of options outstanding atDecember  31,  2005 and 2004 was 9.4 and 9.8 years,respectively.

Note 8 — Related PartyTransactions

Management ConsultingAgreements

The Company recognized $4.9 million forthe year ended December  31,  2005 of management fees andexpenses relating to management consulting agreements with certain ofthe Company’s stockholders. The management consulting agreementswere terminated as of the effective date of the IPO, October17,  2005.

Predecessor Allocated Costs andExpenses

Prior to the Acquisition and in the normalcourse of its operations, the Predecessor had transactions with theParent and its affiliates. These transactions consisted of borrowingsand repayments, capital transactions, interest on advances and pension,stock savings plans and other post retirement benefits. In addition,the Predecessor was charged a corporate service fee for costs relatedto services provided by TFC. These expenses included legal, humanresources, tax, treasury, certain information technology functions andother services. The determination of these expenses was based uponspecific identification, salary and headcount statistics, estimatesbased on analyses of time spent by individual employees amongaffiliates or other reasonable measures of allocation. Managementbelieves that the allocation methodologies used were reasonable. Hadthe Predecessor not been part of the consolidated operations of TFC,actual expenses incurred may have been different from the allocationmethods used. The Predecessor allocated certain overhead costs to itsaffiliates. These costs included legal, human resources, finance andcertain information technology functions. The allocation of these costswas based upon specific identification, salary and head countstatistics and estimates based on analysis of time spent by individualemployees. These transactions, along with federal and state income taxliabilities, were generally settled through the due to affiliatesaccount.

The following table sets forth certain of thesetransactions and their effects on the combined consolidated financialstatements for the ten months ended October  31,  2004 andyear ended December  31, 2003 (in thousands, except percentageamounts):

|                                      |  |                                 |         |                            |  |        |         |         |  |  |
|--------------------------------------|--|---------------------------------|---------|----------------------------|--|--------|---------|---------|--|--|
|                                 |  | Tenmonths endedOctober 31, 2004 |         | Year endedDecember 31,2003 |
| TFC allocatedinterest                |  | $                               | 22,265  |                       |  | $      | 24,020  |    |
| Averageannual interestrate           |  |                            | 3.8     | %                     |  |   | 3.7     | %  |
| Corporateservice fee                 |  |                            | — |                       |  | $      | 2,885   |    |
| Overheadcosts allocated toaffiliates |  |                            | — |                       |  | $      | (1,584  | )  |
| Employeecompensation                 |  | $                               | 27,012  |                       |  |   | — |    |
| OtherParentcosts                     |  | $                               | 1,348   |                       |  |   | — |    |
|                                      |

Pensionand Stock Savings Plans and Other Post EmploymentBenefits

The Predecessor participated with AEGON USA,Inc., an indirect U.S. subsidiary of AEGON, and certain of itssubsidiaries (collectively, ‘‘AEGON USA’’)in a number of non-contributory defined 

F-22

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benefit pension plans and other benefitprograms covering most U.S. salaried employees and certain otherparticipants. In addition, the Predecessor participated in the AEGONUSA Employee Stock Savings Plan (‘‘the 401(k)plan’’). The 401(k) plan was a contributory definedcontribution plan covering eligible U.S employees that elected toparticipate. The total expense relating to these plans totaled$0.8  million and $0.2  million for the ten months endedOctober  31,  2004 and the year ended December31,  2003, respectively. Prior to the Acquisition, themaintenance of and the liability for the pension plans and other planswere the responsibility of AEGON USA.

Note 9 — Segmentand Geographic Information

Industry SegmentInformation

The Company's operations include theacquisition, leasing, re-leasing and subsequent sale of multiple typesof intermodal containers. Intermodal freight containers are large,standardized steel boxes used to transport freight by ship, rail ortruck. The Company leases three principal types of containers (1) dryfreight containers, which are used for general cargo such asmanufactured component parts, consumer staples, electronics andapparel, (2) refrigerated containers, which are used for perishableitems such as fresh and frozen foods, and (3) special containers, whichare used for heavy and oversized cargo such as marble slabs, buildingproducts and machinery. As such, the Company believes that the businessoperates in one industry segment.

Geographic SegmentInformation

The Company's customers use thecontainers for their global trade utilizing many worldwide traderoutes. The Company earns its revenue from international containerswhen the containers are in use and carrying cargo around the world.Substantially all of the Company's leasing related revenues aredenominated in U.S. dollars. As all of the Company's containersare used internationally, where no one container is domiciled in oneparticular place for a prolonged period of time, all of theCompany's long-lived assets are considered to be international.The following table represents the allocation of domestic andinternational revenues for the periods indicated based thecustomers' primary domicile (inthousands):

|                    |  |                           |         |                                 |  |                                 |        |                           |  |        |         |        |  |        |         |        |  |  |
|--------------------|--|---------------------------|---------|---------------------------------|--|---------------------------------|--------|---------------------------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|               |  | Successor                 |         | Predecessor                     |
|               |  | YearendedDecember 31,2005 |         | Two months endedDecember31,2004 |  | Ten months ended October31,2004 |        | Year endedDecember31,2003 |
| Totalrevenues:     |  |                      |    |                            |  |                            |   |                      |  |   |    |   |  |   |    |   |
| Domestic           |  | $                         | 30,695  |                            |  | $                               | 4,863  |                      |  | $      | 27,057  |   |  | $      | 35,151  |   |
| Asia               |  |                      | 143,507 |                            |  |                            | 22,665 |                      |  |   | 112,207 |   |  |   | 137,062 |   |
| Europe             |  |                      | 125,927 |                            |  |                            | 21,108 |                      |  |   | 108,561 |   |  |   | 136,173 |   |
| Otherinternational |  |                      | 18,386  |                            |  |                            | 2,826  |                      |  |   | 13,683  |   |  |   | 17,636  |   |
| Total              |  | $                         | 318,515 |                            |  | $                               | 51,462 |                      |  | $      | 261,508 |   |  | $      | 326,022 |   |
|                    |

Note10 — Net (Gain) Loss on Sale of Leasing Equipment

The net (gain) loss on sale of leasing equipment consists ofthe following (inthousands):

|                                            |  |                           |         |                                 |  |                                 |        |                            |  |        |         |         |  |        |        |         |  |  |
|--------------------------------------------|--|---------------------------|---------|---------------------------------|--|---------------------------------|--------|----------------------------|--|--------|---------|---------|--|--------|--------|---------|--|--|
|                                       |  | Successor                 |         | Predecessor                     |
|                                       |  | YearendedDecember 31,2005 |         | Two months endedDecember31,2004 |  | Ten months ended October31,2004 |        | Year ended December31,2003 |
| Impairment loss on equipment held forsale  |  | $                         | 3,596   |                            |  | $                               | 925    |                       |  | $      | 16,726  |    |  | $      | 43,895 |    |
| Gainon sale of equipment —net        |  |                      | (13,261 | )                          |  |                            | (1,051 | )                     |  |   | (13,401 | )  |  |   | (7,955 | )  |
| Net(gain) loss on sale of leasingequipment |  | $                         | (9,665  | )                          |  | $                               | (126   | )                     |  | $      | 3,325   |    |  | $      | 35,940 |    |
|                                            |

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Note 11 — Income Taxes

The following table sets forth the income tax expense(benefit) for Successor and the Predecessor for the periods indicated(inthousands):

|                |  |                           |         |                                  |  |                                |         |                            |  |        |         |         |  |        |         |         |  |  |
|----------------|--|---------------------------|---------|----------------------------------|--|--------------------------------|---------|----------------------------|--|--------|---------|---------|--|--------|---------|---------|--|--|
|           |  | Successor                 |         | Predecessor                      |
|           |  | YearendedDecember 31,2005 |         | Two months ended December31,2004 |  | Ten months endedOctober31,2004 |         | Year ended December31,2003 |
| Currenttaxes:  |  |                      |    |                             |  |                           |    |                       |  |   |    |    |  |   |    |    |
| Federal        |  | $                         | — |                             |  | $                              | 240     |                       |  | $      | 26,929  |    |  | $      | 42,464  |    |
| State          |  |                      | — |                             |  |                           | — |                       |  |   | 2,464   |    |  |   | 856     |    |
| Foreign        |  |                      | 244     |                             |  |                           | 140     |                       |  |   | 315     |    |  |   | 393     |    |
|           |  |                      | 244     |                             |  |                           | 380     |                       |  |   | 29,708  |    |  |   | 43,713  |    |
| Deferredtaxes: |  |                      |    |                             |  |                           |    |                       |  |   |    |    |  |   |    |    |
| Federal        |  |                      | 7,020   |                             |  |                           | 2,107   |                       |  |   | (18,850 | )  |  |   | (39,803 | )  |
| State          |  |                      | 77      |                             |  |                           | 187     |                       |  |   | (1,932  | )  |  |   | (3,170  | )  |
| Foreign        |  |                      | 105     |                             |  |                           | 6       |                       |  |   | — |    |  |   | — |    |
|           |  |                      | 7,202   |                             |  |                           | 2,300   |                       |  |   | (20,782 | )  |  |   | (42,973 | )  |
| Total          |  | $                         | 7,446   |                             |  | $                              | 2,680   |                       |  | $      | 8,926   |    |  | $      | 740     |    |
|                |

Thefollowing table reconciles federal income taxes computed at thestatutory rate with income tax expense (benefit) (inthousands):

|                                                                                        |  |                           |       |                                  |  |                                 |         |                            |  |        |         |        |  |        |         |         |  |  |
|----------------------------------------------------------------------------------------|--|---------------------------|-------|----------------------------------|--|---------------------------------|---------|----------------------------|--|--------|---------|--------|--|--------|---------|---------|--|--|
|                                                                                   |  | Successor                 |       | Predecessor                      |
|                                                                                   |  | YearendedDecember 31,2005 |       | Two months ended December31,2004 |  | Ten months ended October31,2004 |         | Year ended December31,2003 |
| Federal income taxes at statutoryrate                                                  |  | $                         | 5,992 |                             |  | $                               | 2,642   |                       |  | $      | 8,558   |   |  | $      | 2,316   |    |
| Stateincome taxes (net of federal income taxbenefit)                                   |  |                      | 131   |                             |  |                            | 121     |                       |  |   | 346     |   |  |   | 89      |    |
| Reversalof excess state tax liabilities (net of federal income taxexpense)             |  |                      | (81   | )                           |  |                            | — |                       |  |   | — |   |  |   | (1,594  | )  |
| Non-deductibleequity-based compensation relating principally to incentive stockoptions |  |                      | 1,371 |                             |  |                            | — |                       |  |   | — |   |  |   | — |    |
| Other/ effect of permanentdifferences                                                  |  |                      | 33    |                             |  |                            | (83     | )                     |  |   | 22      |   |  |   | (71     | )  |
|                                                                                   |  | $                         | 7,446 |                             |  | $                               | 2,680   |                       |  | $      | 8,926   |   |  | $      | 740     |    |
|                                                                                        |

During2005, New York State enacted a change in its tax law that favorablyimpacted the Company. Primarily as a result of this change in law, theCompany’s effective state income tax rate was reduced from3% to 1%.

In conjunction with theAcquisition, both the seller and the purchaser elected to have theprovisions of Internal Revenue Code Section 338(h)(10) apply to thesale, resulting in the transaction being treated as a taxable assetsale for U.S. income tax purposes. As a result of this election, thetax basis of the Company's assets and liabilities were adjustedto fair market value, resulting in the elimination of the U.S. netdeferred tax liability balance that existed immediately prior to thesale.

Prior to the Acquisition, the taxable results forthe Predecessor were included in the consolidated federal and certainstate income tax returns filed by Transamerica Corporation(‘‘Transamerica’’), the parent of TFC.Transamerica, by the terms of a tax sharing agreement with TFC,generally required the Predecessor to accrue and settle income taxobligations as if its individual legal subsidiaries filed separatereturns with the applicable taxing authorities. All other state, localand foreign tax 

F-24

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requirements were satisfied by the variouslegal subsidiaries directly with the appropriate taxing authorities.Under the tax sharing agreement, Transamerica provided TFC and itssubsidiaries an unlimited carryforward period for the utilization ofall federal tax attributes including, but not limited to, net operatinglosses, foreign tax credits, capital losses and charitablecontributions. The Predecessor provided for deferred income taxes basedon enacted tax rates in effect on the dates that the temporarydifferences between the book and tax bases of assets and liabilitieswere expected to reverse.

Pre-acquisition earningsassociated with the Predecessor’s investments in its foreignsubsidiaries were considered permanently reinvested by TFC. Therefore,no U.S. federal income taxes were provided on those earnings. The totalundistributed foreign earnings for which no deferred U.S. taxes wereaccrued through the date of the Acquisition were approximately$3.6  million. For post-acquisition periods, U.S. income taxeshave not been provided on earnings of the Company’s foreignsubsidiaries as it is the Company’s policy to permanentlyreinvest its foreign earnings. The cumulative amount of such earningswas approximately $1.6  million at December  31,2005. In connection with the Acquisition, the Company made electionsunder Internal Revenue Code Section 338(g), as permitted under thestock purchase agreement, to treat the stock acquisition of the foreignsubsidiaries as asset acquisitions. The effect of the election was totreat the foreign corporations as new entities for the purchaser, withno prior earnings.

At October  31,  2004, theCompany transferred all of its deferred income taxes to TFC for finalsettlement. In addition, as a result of the Company's InternalRevenue Code Section 338(g) election the total undistributed foreignearnings of the Predecessor's foreign subsidiaries ofapproximately $3.6  million as of the date of sale, for whichdeferred income taxes had not been provided by the Predecessor, weretreated as distributed to the Predecessor as adividend.

Deferred income tax assets and liabilities arecomprised of the following (inthousands):

|                                  |  |                        |         |        |  |        |         |        |  |  |
|----------------------------------|--|------------------------|---------|--------|--|--------|---------|--------|--|--|
|                             |  | Yearsended December31, |
|                             |  | 2005                   |         | 2004   |
| Deferredincome tax assets:       |  |                   |    |   |  |   |    |   |
| Netoperating losscarryforwards   |  | $                      | 34,416  |   |  | $      | 634     |   |
| Allowancefor losses              |  |                   | 2,350   |   |  |   | 108     |   |
| Writedown of assets held forsale |  |                   | — |   |  |   | 149     |   |
| Accruedliabilities andother      |  |                   | 3,412   |   |  |   | 3,632   |   |
|                             |  |                   | 40,178  |   |  |   | 4,523   |   |
| Deferredincome taxliabilities:   |  |                   |    |   |  |   |    |   |
| Accelerateddepreciation          |  |                   | 41,166  |   |  |   | 6,614   |   |
| Goodwillamortization             |  |                   | 3,299   |   |  |   | 302     |   |
| Derivativeinstruments            |  |                   | 4,952   |   |  |   | — |   |
|                             |  |                   | 49,417  |   |  |   | 6,916   |   |
| Netdeferred income taxliability  |  | $                      | 9,239   |   |  | $      | 2,393   |   |
|                                  |

TheCompany has U.S. Federal net operating loss carryforwards ofapproximately $96.5  million at December  31,  2005.These losses will expire in 2024 and 2025. The Company expects to fullyapply these losses to the future taxable income that will be generatedthrough the reversal of temporary differences, mainly accelerateddepreciation, prior to their expiration. In addition, the Company ismonitoring changes in ownership of its stock that may trigger annuallimitations to the amount of net operating losses that may be utilizedin future years under Internal Revenue Code Section 382. The Companydoes not believe any of its net operating loss carryforwards arecurrently subject to Section 382 limitations.

Note 12 —Savings Plan

The Company's employees participatein a defined contribution plan generally covering all of its U.S.salaried employees. Under the provisions of the Plan, an employee isvested with respect to Company 

F-25

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contributions after four years of service.The Company matches employee contributions up to 3% of qualifiedcompensation and may, at its discretion, make voluntary contributions.Contributions for the year ended December  31,  2005 andtwo months ended December  31,  2004, were approximately$0.2  million and $0.3  million, respectively. Included inthe contributions for the two months ended December 31, 2004 is aone-time lump sum contribution of $0.2 million.

Note 13 —Rental Income Under Operating Leases

The following arethe minimum future rentals at December  31,  2005 due TALunder operating leases (excluding service leases) of containers (inthousands):

|                   |  |        |         |        |  |  |
|-------------------|--|--------|---------|--------|--|--|
| 2006              |  | $      | 153,994 |   |
| 2007              |  |   | 123,889 |   |
| 2008              |  |   | 85,149  |   |
| 2009              |  |   | 48,957  |   |
| 2010              |  |   | 22,494  |   |
| 2011andthereafter |  |   | 27,968  |   |
|              |  | $      | 462,451 |   |
|                   |

Note14 — Commitments and Contingencies

LeaseCommitments

The Company has non-cancelable operatinglease agreements principally for equipment and for facilities used inthe Company's operations. Total rent expense was $2.2million, $1.2  million, $5.9  million and $38.0million, for the year ended December  31,  2005, the twomonths ended December  31,  2004, the ten months endedOctober  31,  2004, and the year ended December31,  2003, respectively.

Future minimum rentalcommitments under non-cancelable operating leases at December31,  2005 were as follows (in thousands):

|                   |  |        |       |        |  |  |
|-------------------|--|--------|-------|--------|--|--|
| 2006              |  | $      | 1,837 |   |
| 2007              |  |   | 1,561 |   |
| 2008              |  |   | 1,772 |   |
| 2009              |  |   | 1,452 |   |
| 2010              |  |   | 1,586 |   |
| 2011andthereafter |  |   | 610   |   |
|              |  | $      | 8,818 |   |
|                   |

AtDecember  31,  2005 the aggregate future minimum rentals tobe received under non-cancelable subleases were as follows (inthousands):

|                    |  |        |       |        |  |  |
|--------------------|--|--------|-------|--------|--|--|
| 2006               |  | $      | 380   |   |
| 2007               |  |   | 409   |   |
| 2008               |  |   | 430   |   |
| 2009               |  |   | 430   |   |
| 2010               |  |   | 430   |   |
| 2011 andthereafter |  |   | 609   |   |
|               |  | $      | 2,688 |   |
|                    |

PurchaseCommitments

At December  31,  2005, theCompany had commitments to purchase equipment in the amount of$13.8  million payable through the end of 2006.

F-26

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Contingencies 

TheCompany is party to various pending or threatened legal or regulatoryproceedings arising in the ordinary course of its business. Based uponinformation presently available, management of the Company does notexpect any liabilities arising from these matters to have a materialeffect on the consolidated financial position, results of operations orcash flows of the Company.

Indemnities

TheSenior Secured Credit Facility and the Asset Securitization Facilitycontain standard provisions present in loans of these types whichobligate the Company to reimburse the lenders thereunder for anyincreased costs associated with continuing to hold the loans thereunderon its books which arise as a result of broadly defined regulatorychanges, including changes in reserve requirements and bank capitalrequirements. These indemnities would have the practical effect ofincreasing the interest rate on the Company’s debt if they wereto be triggered. In all cases, the Company has the right to repay theapplicable loan and avoid the increased costs. The term of theseindemnities matches the length of the related term of the applicableloan.

Note 15 — Selected Quarterly Financial Data(Unaudited)

The following table sets forth certain key interimfinancial information for the years ended December  31, 2005 and2004:

|                                                    |  |                                        |        |                |  |              |        |               |  |   |         |         |  |   |        |        |  |  |
|----------------------------------------------------|--|----------------------------------------|--------|----------------|--|--------------|--------|---------------|--|---|---------|---------|--|---|--------|--------|--|--|
|                                               |  | FirstQuarter                           |        | Second Quarter |  | ThirdQuarter |        | FourthQuarter |
|                                               |  | (In thousands, except pershareamounts) |
|                                               |  | Successor                              |
| 2005:                                              |  |                                   |        |           |  |         |        |          |
| Totalrevenues                                      |  | $                                      | 77,532 |           |  | $            | 80,533 |          |  | $ | 81,079  |    |  | $ | 79,371 |   |
| Netincome(loss)                                    |  | $                                      | 13,385 |           |  | $            | 316    |          |  | $ | (5,755  | )  |  | $ | 1,726  |   |
| Netincome (loss) applicable to commonstockholders  |  | $                                      | 7,357  |           |  | $            | (5,815 | )        |  | $ | (12,323 | )  |  | $ | 585    |   |
| Netincome (loss) per basic and diluted commonshare |  | $                                      | 0.72   |           |  | $            | (0.57  | )        |  | $ | (1.21   | )  |  | $ | 0.02   |   |
|                                                    |

|                                           |  |                                         |        |                |  |              |        |                |  |                          |        |        |        |         |        |         |  |   |        |        |  |  |
|-------------------------------------------|--|-----------------------------------------|--------|----------------|--|--------------|--------|----------------|--|--------------------------|--------|--------|--------|---------|--------|---------|--|---|--------|--------|--|--|
|                                      |  | FirstQuarter                            |        | Second Quarter |  | ThirdQuarter |        | Fourth Quarter |
|                                      |  | (In thousands, except per shareamounts) |        |           |
|                                      |  | Predecessor                             |        | Successor      |
| 2004:                                     |  |                                    |        |           |  |         |        | October        |  | November− December |
| Totalrevenues                             |  | $                                       | 78,725 |           |  | $            | 79,059 |           |  | $                        | 78,037 |   |        | $       | 25,687 |    |  | $ | 51,462 |   |
| Netincome(loss)                           |  | $                                       | 2,382  |           |  | $            | 7,603  |           |  | $                        | 8,359  |   |        | $       | (2,820 | )  |  | $ | 4,869  |   |
| Netloss applicable to commonstockholders  |  |                                    | N/A    |           |  | N/A          |        | N/A            |  | N/A                      |        | $      | (3,541 | )  |
| Netloss per basic and diluted commonshare |  |                                    | N/A    |           |  | N/A          |        | N/A            |  | N/A                      |        | $      | (0.35  | )  |
|                                           |

|  |
|--|
|  |  |
|  |

|  |                                                                                                                                                                                                                                                                                                                                                                                                        |
|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | *Note: Fourth quarter 2004 total revenues and net income (loss) arecomprised of one month Predecessor results (October 2004) and twomonths Successor results (November – December  2004).Fourth quarter 2004 net income (loss) applicable to common stockholdersand net income (loss) per basic and diluted common share reflect of twomonths Successor results (November – December2004). |

F-27

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Reportof Independent Registered Public Accounting Firm onSchedule

The Board of Directors and StockholdersTALInternational Group, Inc.

We have audited the consolidatedbalance sheets of TAL International Group, Inc. (the"Successor Company") as of December 31, 2005and 2004 and the related consolidated statements of operations,stockholders' equity (deficit) and comprehensive income, and cashflows for the year ended December 31, 2005 and the period November 1,2004 through December 31, 2004, and the combined consolidatedstatements of operations, owner's net investment andcomprehensive income, and cash flows for the periods from January 1,2004 through October 31, 2004 and for the year ended December 31, 2003of Transamerica Maritime Container (the "PredecessorCompany"), and have issued our report thereon dated March2, 2006 (included elsewhere in this Annual Report on Form 10-K). Ouraudits also included the financial statement schedule listed in Item15(a)(2) of this Annual Report on Form 10-K. This schedule is theresponsibility of the Company's management. Our responsibility isto express an opinion based on our audits.

In our opinion, thefinancial statement schedule referred to above, when considered inrelation to the basic financial statements taken as a whole, presentsfairly in all material respects the information set forththerein.

    /s/ Ernst & YoungLLP                    

Stamford, ConnecticutMarch2, 2006

S-1

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SCHEDULEII

TAL International Group, Inc. Valuation andQualifying Accounts and ReservesYears ended December31,  2005, 2004 and 2003(In thousands)

|                                           |  |         |         |                       |  |            |         |           |  |               |         |         |  |        |         |        |  |        |         |        |  |  |
|-------------------------------------------|--|---------|---------|-----------------------|--|------------|---------|-----------|--|---------------|---------|---------|--|--------|---------|--------|--|--------|---------|--------|--|--|
|                                      |  | Balance |         | Additions/(Reversals) |  | Write-offs |         | Other (a) |  | EndingBalance |
| Allowance for doubtfulaccounts:           |  |    |    |                  |  |       |    |      |  |          |    |    |  |   |    |   |  |   |    |   |
| Successor:                                |  |    |    |                  |  |       |    |      |  |          |    |    |  |   |    |   |  |   |    |   |
| Forthe year ended December  31,2005       |  | $       | 225     |                  |  | $          | 559     |      |  | $             | — |    |  | $      | 36      |   |  | $      | 820     |   |
| Forthe two months ended December  31,2004 |  | $       | — |                  |  | $          | 225     |      |  | $             | — |    |  | $      | — |   |  | $      | 225     |   |
| Predecessor:                              |  |    |    |                  |  |       |    |      |  |          |    |    |  |   |    |   |  |   |    |   |
| Forthe ten months ended October  31,2004  |  | $       | 2,032   |                  |  | $          | 300     |      |  | $             | (38     | )  |  | $      | 16      |   |  | $      | 2,310   |   |
| Forthe year ended December  31,2003       |  | $       | 1,996   |                  |  | $          | (34     | )    |  | $             | (5      | )  |  | $      | 75      |   |  | $      | 2,032   |   |
| Allowancefor equipmentloss:               |  |    |    |                  |  |       |    |      |  |          |    |    |  |   |    |   |  |   |    |   |
| Successor:                                |  |    |    |                  |  |       |    |      |  |          |    |    |  |   |    |   |  |   |    |   |
| Forthe year ended December  31,2005       |  | $       | — |                  |  | $          | 138     |      |  | $             | — |    |  | $      | — |   |  | $      | 138     |   |
| Forthe two months ended December  31,2004 |  | $       | — |                  |  | $          | — |      |  | $             | — |    |  | $      | — |   |  | $      | — |   |
| Predecessor:                              |  |    |    |                  |  |       |    |      |  |          |    |    |  |   |    |   |  |   |    |   |
| Forthe ten months ended October  31,2004  |  | $       | 3,402   |                  |  | $          | (1,615  | )    |  | $             | (114    | )  |  | $      | — |   |  | $      | 1,673   |   |
| Forthe year ended December  31,2003       |  | $       | 7,835   |                  |  | $          | (4,221  | )    |  | $             | (212    | )  |  | $      | — |   |  | $      | 3,402   |   |
|                                           |

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|  |  |
|  |

|     |                                                                |
|-----|----------------------------------------------------------------|
| (a) | Primarilyrelates to the effect of foreign currencytranslation. |

S-2

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