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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549



Form 10-K

ý

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For The Fiscal Year Ended December 31, 2009oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the Transition Period
from                                to


Commission file number- 001-32638

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

Delaware(State or other jurisdiction of
incorporation or organization)

20-1796526(I.R.S. Employer
Identification Number)100 Manhattanville Road, Purchase, New York(Address of principal executive office)

10577-2135(Zip Code)


(914) 251-9000(Registrant's telephone number including area code)

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

Title of Each Class

Name of Each Exchange On Which RegisteredCommon stock, $0.001 par value per share

The New York Stock Exchange


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

Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act. Yes o    No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes o    No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past
90 days. Yes þ    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and
post such files). Yes o    No o

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o

Accelerated filer þ

Non-accelerated filer o

Smaller reporting company o(Do not check if a smaller reporting company)


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

The aggregate market value of voting common shares held by non-affiliates of the registrant as of June 30, 2009 was approximately
$62.3 million.

As
of February 19, 2010, there were 30,709,104 shares of the Registrant's common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part of Form 10-K

Document Incorporated by ReferencePart II, Item 5, Part III, Items 10, 11, 12, 13, and 14

Portion of the Registrant's proxy statement to be filed in connection with the Annual Meeting of the Stockholders of the Registrant to be held on April 29, 2010.




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TAL International Group, Inc.    2009 Annual Report on Form 10-K    Table of Contents



PagePART IItem 1.

Business

4Item 1A.

Risk Factors

14Item 1B.

Unresolved Staff Comments

29Item 2.

Properties

29Item 3.

Legal Proceedings

29Item 4.

Submission of Matters to a Vote of Security Holders

30PART IIItem 5.

Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

30Item 6.

Selected Financial Data

33Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

35Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

62Item 8.

Financial Statements and Supplementary Data

63Item 9.

Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

63Item 9A.

Controls and Procedures

63Item 9B.

Other Information

66PART IIIItem 10.

Directors, Executive Officers and Corporate Governance

66Item 11.

Executive Compensation

66Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

66Item 13.

Certain Relationships and Related Transactions, and Director Independence

66Item 14.

Principal Accountant Fees and Services

66PART IVItem 15.

Exhibits and Financial Statement Schedules

67Signatures

73Index to Financial Statements

F-1Report of Independent Registered Public Accounting Firm

F-2Consolidated Balance Sheets

F-3Consolidated Statements of Operations

F-4Consolidated Statements of Stockholders' Equity and Comprehensive
Income

F-5Consolidated Statements of Cash Flows

F-6Notes to Consolidated Financial Statements

F-7Schedule II  Valuation and Qualifying Accounts

S-1


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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that involve substantial risks and
uncertainties. In addition, we, or our executive officers on our behalf, may from time to time make forward-looking statements in reports and other documents we file with the Securities and Exchange
Commission, or SEC, or in connection with oral statements made to
the press, potential investors or others. All statements, other than statements of historical facts, including statements regarding our strategy, future operations, future financial position, future
revenues, projected costs, prospects, plans and objectives of management are forward-looking statements. The words "expect," "estimate," "anticipate," "predict," "believe," "think," "plan," "will,"
"should," "intend," "seek," "potential" and similar expressions and variations are intended to identify forward-looking statements, although not all forward-looking statements contain these
identifying words.

Forward-looking
statements in this report are subject to a number of known and unknown risks and uncertainties that could cause our actual results, performance or achievements to differ
materially from those described in the forward-looking statements, including, but not limited to, the risks and uncertainties described in the section entitled "Risk Factors" in this report as well as
in the other documents we file with the SEC from time to time, and such risks and uncertainties are specifically incorporated herein by reference.

Forward-looking
statements speak only as of the date the statements are made. Except as required under the federal securities laws and rules and regulations of the SEC, we undertake no
obligation to update or revise forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information. We caution you not to
unduly rely on the forward-looking statements when evaluating the information presented in this report.

WEBSITE ACCESS TO COMPANY'S REPORTS AND CODE OF ETHICS

Our Internet website address is www.talinternational.com. Our annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are
available free of charge through our website as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC.

We
have adopted a code of ethics that applies to all of our employees, officers, and directors, including our principal executive officer and principal financial officer. The text of our
code of ethics is posted on our website at http://www.talinternational.com/within the Corporate Governance portion of the Investors section of our website.

Also,
copies of our annual report and Code of Ethics will be made available, free of charge, upon written request to:

TAL
International Group, Inc.
100 Manhattanville Road
Purchase, New York 10577
Attn: Marc Pearlin, Vice President, General Counsel and Secretary
Telephone: (914) 251-9000

SERVICE MARKS MATTERS

The following items referred to in this annual report are registered or unregistered service marks in the United States and/or foreign
jurisdictions pursuant to applicable intellectual property laws and are the property of TAL International and our subsidiaries: TAL®, Tradex®, Trader® and
Greyslot®.

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PART I

ITEM 1.    BUSINESS

Our Company

We are one of the world's largest and oldest lessors of intermodal containers and chassis. Intermodal containers are large,
standardized steel boxes used to transport freight by ship, rail or truck. Because of the handling efficiencies they provide, intermodal containers are the primary means by which many goods and
materials are shipped internationally. Chassis are used for the transportation of containers domestically.

TAL
International Group, Inc. ("TAL" or the "Company") was formed on October 26, 2004, and commenced operations on November 4, 2004, when it acquired
all of the outstanding capital stock of TAL International Container Corporation ("the Acquisition"). The operations of TAL's predecessor companies commenced in 1963.

Business Segments

We operate our business in one industry, intermodal transportation equipment, and have two business
segments:



Equipment Leasing Segment

Our equipment leasing operations include the acquisition, leasing, re-leasing and ultimate sale of multiple types of
intermodal transportation equipment, primarily intermodal containers. We have an extensive global presence, offering leasing services through 18 offices in 11 countries and 199 third-party container
depot facilities in 37 countries as of December 31, 2009. Our customers are among the world's largest shipping lines and include, among others, APL-NOL, CMA CGM, Maersk Line,
Mediterranean Shipping Company and NYK Line.

We
primarily lease three principal types of equipment: (1) dry freight containers, which are used for general cargo such as manufactured component parts, consumer staples,
electronics and apparel, (2) refrigerated containers, which are used for perishable items such as fresh and frozen foods, and (3) special containers, which are used for heavy and
oversized cargo such as marble slabs, building products and machinery. We also lease chassis, which are used for the transportation of containers domestically, and tank containers, which are used to
transport bulk liquid products such as chemicals. We also finance port equipment, which includes container cranes, reach stackers and other related equipment.

We
generally lease our equipment on a per diem basis to our customers under three types of leases: long-term leases, finance leases and service leases. Long-term
leases typically have initial contractual terms ranging from three to eight years and provide us with stable cash flow and low transaction costs by requiring customers to maintain specific units
on-hire for the duration of the lease. Finance leases are typically structured as full payout leases, and provide for a predictable recurring revenue stream with the lowest daily cost to
the customer because customers are generally required to retain the equipment for the duration of its useful life. Service leases command a premium per diem rate in exchange for providing customers
with a greater level of operational flexibility by allowing the pick-up and drop-off of units during the lease term. We also have expired long-term leases whose
fixed

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terms
have ended but for which the related units remain on-hire and for which we continue to receive rental payments pursuant to the terms of the initial contract. Some leases have
contractual terms that have features reflective of both long-term and service leases, and we classify such leases as either long-term or service leases, depending upon which
features we believe are more predominant.

Our
leases require lessees to maintain the equipment in good operating condition, defend and indemnify us from liabilities relating to the equipments' contents and handling, and return
the equipment to specified drop-off locations. As of December 31, 2009, 68% of our
on-hire containers and chassis were on long-term leases, 12% were on finance leases, 16% were on service leases and 4% were on long-term leases whose fixed terms
have expired. As of December 31, 2009, our long-term leases had an average remaining lease term of 43 months.

Our
equipment leasing revenues primarily consist of leasing revenues derived from the lease of our owned equipment and, to a lesser extent, fees received for managing equipment owned by
third parties. The most important driver of our profitability is the extent to which leasing revenues, which are driven primarily by our owned equipment fleet size, utilization and average rental
rates, exceed our ownership and operating costs.

Equipment Trading Segment

Through our extensive operating network, we purchase containers from shipping line customers and other sellers of containers and resell
these containers to container traders and users of containers for storage and one-way shipments. Over the last five years, we have sold an average of approximately 41,000
twenty-foot equivalent units (TEU) of containers purchased for resale annually.

Total
revenues for the equipment trading segment are primarily made up of equipment trading revenues, which represents the proceeds from sales of trading equipment. The profitability of
this segment is largely driven by the volume of units purchased and sold, our per unit selling margin, and our direct operating and administrative expenses.

Industry Overview

Intermodal containers provide a secure and cost-effective method of transporting raw materials, component parts and
finished goods because they can be used in multiple modes of transport. By making it possible to move cargo from a point of origin to a final destination without repeated unpacking and repacking,
containers reduce freight and labor costs. In addition, automated handling of containers permits faster loading and unloading of vessels, more efficient utilization of transportation equipment and
reduced transit time. The protection provided by sealed containers also reduces cargo damage and the loss and theft of goods during shipment.

Over
the last twenty-five years, containerized trade has grown at a rate greater than that of general worldwide economic growth. According to Clarkson Research Studies
("Clarkson"),
worldwide containerized cargo volume increased at a compound annual growth rate ("CAGR") of 8.6% from 1985 to 2009. We believe that this high historical growth was due to several factors, including
the shift in global manufacturing capacity to lower labor cost areas such as China and India, the continued integration of developing high growth economies into global trade patterns and the continued
conversion of cargo from bulk shipping into containers. However, due to the recent global financial crisis and recession, global containerized trade growth turned significantly negative beginning in
the fourth quarter of 2008, and Clarkson estimates that containerized trade volumes decreased by approximately 10% in 2009. Clarkson is currently projecting that containerized trade volumes will
rebound somewhat in 2010, but they are not projecting growth rates to return to the historical level in the near future.

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Container
leasing firms maintain inventories of new and used containers in a wide range of worldwide locations and supply these containers primarily to shipping line customers under a
variety of short and long-term lease structures. According to Containerisation International as reported in mid-2009, container lessors' ownership was approximately
10.4 million TEU or 38% of the total worldwide container fleet of 27.4 million TEU.

Leasing
containers helps shipping lines improve their overall container fleet efficiency and provides the shipping lines with an alternative source of equipment financing. Given the
uncertainty and variability of export volumes, and the fact that shipping lines have difficulty in accurately forecasting their container requirements at a port-by-port level,
the availability of containers for lease reduces a shipping line's need to purchase and maintain larger container inventory buffers. In addition, the drop-off flexibility provided by
operating leases also allows the shipping lines to adjust their container fleet sizes and the mix of container types in their fleets both seasonally and over time and helps to balance trade flows.
Leasing containers also provides shipping lines with an additional source of funding to help them manage a high-growth, asset-intensive business.

Spot
leasing rates are typically a function of, among other things, new equipment prices (which are heavily influenced by steel prices), interest rates and the equipment supply and
demand balance at a particular time and location. Average leasing rates on an entire portfolio of leases respond more gradually to changes in new equipment prices, because lease agreements are
generally only re-priced upon the expiration of the lease. In addition, the value that lessors receive upon resale of equipment is closely related to the cost of new equipment.

Operations

We operate our business through 18 worldwide offices located in 11 different countries as of December 31, 2009. Our field
operations include a global sales force, a global container operations group, an equipment resale group, and a logistics services group. Our headquarters are located in Purchase, New York, USA.

Our Equipment

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

Our
fleet primarily consists of three types of equipment:



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Over
the last few years, we have added three equipment types to our fleet:



Our Leases

Most of our revenues are derived from leasing our equipment fleet to our core shipping line customers. The majority of our leases are structured as operating
leases, though we also provide customers with finance leases. Regardless of lease type, we seek to exceed our targeted return on our investments over the life cycle of the equipment by managing
utilization, lease rates, and the used equipment sale process.

Our
lease products provide numerous operational and financial benefits to our shipping line customers. These benefits include:



Operating Leases.Operating leases are structured to allow customers flexibility to pick-up equipment on short notice and to
drop-off equipment prior to the end of its useful life. Because of this flexibility, most of our containers and chassis will go through several pick-up and drop-off
cycles. Our operating lease contracts specify a per diem rate for equipment on-hire, where and when such equipment can be returned, how
the customer will be charged for damage and the charge for lost or destroyed equipment, among other things.

We
categorize our operating leases as either long-term leases or service leases. Some leases have contractual terms that have features reflective of both
long-term and service leases. We classify such leases as either long-term or service leases, depending upon which features we believe are predominant.

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Long-term
leases typically have initial contractual terms ranging from three to eight years with an average term of approximately five years at lease inception. Our long-term
leases require our customers to maintain specific units on-hire for the duration of the lease term, and they provide us with predictable recurring cash flow. As of December 31,
2009, 68% of our on-hire containers and chassis were under long-term operating leases. As of December 31, 2009, our long-term leases had an average remaining
duration of 43 months, assuming no leases are renewed. However, we believe that many of our customers will renew leases for equipment that is less than sale age at the expiration of the lease.
In addition, our equipment typically remains on-hire at the contractual per diem rate for an additional six to twelve months beyond the end of the contractual lease term due to the
logistical requirements of our customers having to return the containers and chassis to specific drop-off locations.

We
also have expired long-term leases whose fixed terms have ended but for which the related units remain on-hire and for which we continue to receive rental
payments pursuant to the terms of the initial contract. As of December 31, 2009, 4% of our on-hire containers and chassis were on long-term leases whose fixed terms have
expired but for which the related units remain on-hire and for which we continue to receive rental payments.

Some
of our long-term leases give our customers Early Termination Options ("ETOs"). If exercised, ETOs allow customers to return equipment prior to the expiration of the
long-term lease. However, if an ETO is exercised, the customer is required to pay a penalty per diem rate that is applied retroactively to the beginning of the lease. As a result of this
retroactive penalty, ETOs have historically rarely been exercised.

Service
leases allow our customers to pick-up and drop-off equipment during the term of the lease, subject to contractual limitations. Service leases provide the
customer with a higher level of flexibility than term leases and, as a result, typically carry a higher per diem rate. The terms of our service leases can range from twelve months to five years,
though because equipment can be returned during the term of a service lease and since service leases are generally renewed or modified and extended upon expiration, lease term does not dictate
expected on-hire time for our equipment on service leases. As of December 31, 2009, 16% of our on-hire containers and chassis were under service leases and this
equipment has been on-hire for an average of 38 months.

Finance Leases.Finance leases provide our customers with an alternative method to finance their equipment acquisitions. Finance leases
typically
have lease terms ranging from five to ten years. Finance leases are generally structured for specific quantities of equipment, generally require the customer to keep the equipment on-hire
for its remaining useful life, and typically provide the customer with a purchase option at the end of the lease term. As of December 31, 2009, approximately 12% of our on-hire
containers and chassis were under finance leases.

Lease Documentation.In general, our lease agreements consist of two basic elements, a master lease agreement and a lease addendum.
Lease addenda
contain the business terms (including daily rate, term duration and drop-off schedule, among other things) for specific leasing transactions, while master lease agreements outline the
general rights and obligations of the lessor and lessee under all of the lease addenda covered by the master lease agreement (lease addenda will specify the master lease agreement that governs the
lease addenda). For most customers, we have a small number of master lease agreements (often one) and a large number of lease addenda.

Our
master lease agreements generally require the lessees to pay rentals, depot charges, taxes and other charges when due, to maintain the equipment in good condition, to return the
equipment in accordance with the return condition set forth in the master lease agreement, to use the equipment in compliance with all federal, state, local and foreign laws, and to pay us for the
value of the equipment as determined by us if the equipment is lost or destroyed. The default clause gives us certain legal remedies in the event that the lessee is in breach of the lease.

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The
master lease agreements usually contain an exclusion of warranties clause and require lessees to defend and indemnify us in most instances from third-party claims arising out of the
lessee's use, operation, possession or lease of the equipment. Lessees are generally required to maintain all risks physical damage insurance, comprehensive general liability insurance and to
indemnify us against loss. We also maintain our own off-hire physical damage insurance to cover our equipment when it is not on-hire to lessees and third-party liability
insurance for both on-hire and off-hire equipment. Nevertheless, such insurance or indemnities may not fully protect us against damages arising from the use of our containers.

Logistics Management, Re-leasing, Depot Management and Equipment Disposals.We believe that managing the period after our equipments'
first lease is the most important aspect of our business. Successful management of this period requires disciplined logistics management, extensive re-lease capability, careful cost
control and effective sales of used equipment.

Logistics Management.Since the late 1990's, the shipping industry has been characterized by large regional trade imbalances, with
loaded containers
generally flowing from export-oriented economies in Asia to North America and Western Europe. Because of these trade imbalances, shipping lines have an incentive to return leased containers in North
America and Europe to reduce the cost of empty container backhaul. TAL attempts to mitigate the risk of these unbalanced trade flows by maintaining a large portion of our fleet on
long-term and finance leases and by contractually restricting the ability of our customers to return containers outside of Asian demand locations.

In
addition, TAL attempts to minimize the costs of any container imbalances by moving empty containers as cheaply as possible. To accomplish this, TAL has developed an
in-house group of experts, which we call Greyslot, to manage our empty container positioning program. As part of their mandate to reposition our empty containers, Greyslot maintains
frequent contact with various shipping lines and vessel owners to identify available vessel space, and our success with managing our own positioning program has led to additional revenue
opportunities. For the last several years Greyslot has acted as a broker of empty vessel space for moving additional empty containers for third parties. Our third-party customers include leasing
companies and shipping lines, and such third-party business has usually represented a majority of the containers moved by Greyslot. While we believe we manage our logistics risks and costs
effectively, logistical risk remains an important element of our business due to competitive pressures, changing trade patterns and other market factors and uncertainties.

Re-Leasing.Since our operating leases allow customers to return containers and chassis, we typically are required to place containers
and chassis on several leases during their useful lives. Initial lease transactions for new containers and chassis can usually be generated with a limited sales and customer service infrastructure
because initial leases for new containers and chassis typically cover large volumes of units and are fairly standardized transactions. Used equipment, on the other hand, is typically leased out in
small transactions that are structured to accommodate pick-ups and returns in a variety of locations. As a result, leasing companies benefit from having a large number of customers and
maintaining a high level of operating contact with these customers.

Depot Management.As of December 31, 2009, we managed our equipment fleet through 199 third-party owned and operated depot
facilities located
in 37 countries. Depot facilities are generally responsible for repairing our containers and chassis when they are returned by lessees and for storing the equipment while it is off-hire.
We have a worldwide operations group that is responsible for managing our depot contracts and they also periodically visit the depot facilities to conduct
inventory and repair audits. We also supplement our internal operations group with the use of independent inspection agents.

We
are in constant communication with our depot partners through the use of electronic data interchange, or EDI. Our depots gather and prepare all information related to the activity of
our

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equipment
at their facilities and transmit the information via EDI and the Internet to us. The information we receive from our depots updates our fully integrated container fleet management and
tracking system.

Most
of the depot agency agreements follow a standard form and generally provide that the depot will be liable for loss or damage of equipment and, in the event of loss or damage, will
pay us the previously agreed loss value of the applicable equipment. The agreements require the depots to maintain insurance against equipment loss or damage and we carry insurance to cover the risk
that the depot's insurance proves insufficient.

Our
container repair standards and processes are generally managed in accordance with standards and procedures specified by the Institute of International Container Lessors (IICL). The
IICL establishes and documents the acceptable interchange condition for containers and the repair procedures required to return damaged containers to the acceptable interchange condition. At the time
that containers are returned by lessees, the depot arranges an inspection of the containers to assess the repairs required to return the containers to acceptable IICL condition. This inspection
process also splits the damage into two components, customer damage and normal wear and tear. Items typically designated as customer damage include dents in the container and debris left in the
container, while items such as rust are typically designated as normal wear and tear.

Our
leases are generally structured so that the lessee is responsible for the customer damage portion of the repair costs, and customers are billed for damages at the time the equipment
is returned. We sometimes offer our customers a repair service program whereby we, for an additional payment by the lessee (in the form of a higher per-diem rate or a flat fee at
off-hire), assume financial responsibility for all or a portion of the cost of repairs upon return of the equipment (but not of total loss of the equipment), up to a
pre-negotiated amount.

Equipment Disposals.Our in-house equipment sales group has a worldwide team of specialists that manage the sale process for our used
containers and chassis from our lease fleet. We generally sell to domestic storage companies, freight forwarders (who often use the containers for one-way trips) and other purchasers of
used containers. We believe we are one of the world's largest sellers of used containers.

We
have sold over 70,000 TEU of our owned and managed used containers on average over the last five years. The sale prices we receive for our used containers from our lease fleet are
influenced by many factors, including the level of demand for used containers compared to the number of used containers available for disposal in a particular location, the cost of new containers, and
the level of damage on the containers. While our total revenue is primarily made up of leasing revenues, gains or losses on the sale of used containers can have a significant positive or negative
impact on our profitability.

Equipment Trading.We also buy and sell new and used containers and chassis acquired from third parties. We typically purchase our
equipment trading
fleet from our shipping line customers or other sellers of used or new equipment. Trading margins are dependent on the volume of units purchased and resold, selling prices, cost paid for equipment
sold and selling and administrative costs. We have sold approximately 41,000 TEU of containers purchased from third parties for resale on average over the last five years.

Management Services

A portion of our container fleet is managed for third-party owners. We receive a specified percentage of the net revenue generated by our managed containers in
return for our management services. If operating expenses were to exceed revenues, the owners are obligated to pay the excess or we may deduct the excess, including our management fee, from future net
revenues. We typically

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receive
a commission for selling managed containers, though in some cases, we are compensated for sales through a percentage sharing of sale proceeds over an agreed floor amount. Typically the terms
of the management agreements are 10 to 12 years from the acceptance dates of containers under the agreement.

Environmental

We may be subject to environmental liability in connection with our current or historical operations that could adversely affect our
business and financial prospects despite insurance coverage, terms of leases and other arrangements for use of the containers that place the responsibility for environmental liability on the end user.
In certain countries like the United States,
the owner of a leased container may be liable for the costs of environmental damage from the discharge of the contents of the container even though the owner is not at fault. We have not yet
experienced any such claims, although we cannot assure you that we will not be subject to such claims in the future. Liability insurance policies, including ours, usually exclude claims for
environmental damage. Our lessees are required to indemnify us from such claims. Some of our lessees may have separate insurance coverage for environmental damage, but we cannot assure you that any
such policies would cover or otherwise offset any liability we may have as the owner of a leased container. Our standard master tank container lease agreement insurance clause requires our tank
container lessees to provide pollution liability insurance. Such insurance or indemnities may not fully protect us against damages arising from environmental damage.

Countries
that are signatories to the Montreal Protocol on the environment agreed in November 1992 to restrict the use of environmentally destructive refrigerants, banning production
(but not use) of chlorofluorocarbon compounds ("CFCs") beginning in January 1996. Less than 1% of our refrigerated containers still use CFC refrigerants. Over 99% of our refrigerated containers
currently use R134A or 404A refrigerant. While R134A and 404A do not contain CFC's, the European Union has instituted regulations to phase out the use of R134A in automobile air conditioning systems
beginning in 2011 due to concern that the release of R134A into the atmosphere may contribute to global warming. The European Union regulations do not restrict the use of R134A in refrigerated
containers or trailers, though we are continuing to monitor regulatory developments. If future regulations prohibit the use or servicing of containers using R134A or 404A refrigerants, we could be
forced to incur large retrofitting expenses.

An
additional environmental concern affecting our operations relates to the construction materials used in our dry containers. The floors of dry containers are plywood usually made from
tropical hardwoods. Due to concerns regarding de-forestation of tropical rain forests and climate change, many countries which have been the source of these hardwoods have implemented
severe restrictions on the cutting and export of these woods. Accordingly, container manufacturers have switched a significant portion of production to more readily available alternatives such as
birch, bamboo, and other farm grown wood species. Container users are also evaluating alternative designs which will limit the amount of plywood required and are also considering possible synthetic
materials to replace the plywood. These new woods or other alternatives have not proven their durability over the 13-15 year life of a dry container and if they cannot perform as
well as the hardwoods have historically, the future repair and operating costs for these containers could be significantly higher.

Credit Controls

We monitor our customers' performance and our lease exposures on an ongoing basis. Our credit management processes are aided by the
long payment experience we have with most of our customers and our broad network of relationships in the shipping industry that provides current information about our customers' market reputations.
Credit criteria may include, but are not limited to, customer payment history, customer financial position and performance (e.g., net worth, leverage, profitability),

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trade
routes, country of domicile, social and political climate, and the type of, and location of, equipment that is to be supplied. To mitigate the impact from potential defaults, we entered into a
credit insurance policy in the third quarter of 2009 that in certain circumstances covers losses and costs incurred in default situations. However, this policy has significant deductibles, exclusions
and payment and other limitations, and therefore may not protect us from losses arising from customer defaults.

Marketing and Customer Service

Our global sales and customer service force is responsible for developing and maintaining relationships with senior operations staff at
our shipping line customers, negotiating lease contracts and maintaining day-to-day coordination with junior level staff at our customers. This close customer communication
helps us to negotiate lease contracts that satisfy both our financial return requirements and our customers' operating needs and ensures that we are aware of our customers' potential equipment
shortages and that they are aware of our available equipment inventories.

Customers

We believe that we have strong, long standing relationships with our largest customers, most of whom we have done business with for
over 20 years. We currently have equipment on-hire to more than 300 customers, although approximately 76% of our units are on-hire to our 20 largest customers. Our
customers are mainly international shipping lines, but we also lease containers to freight forwarding companies and manufacturers. The shipping industry has been consolidating for a number of years,
and further consolidation could increase the portion of our revenues that come from our largest customers. Our five largest customers
accounted for approximately 52% of our 2009 leasing revenues. Our largest customer is CMA CGM, which accounted for approximately 17% of our leasing revenues in 2009 and 12% in 2008.
APL-NOL accounted for approximately 12% of our leasing revenues in 2009, 15% in 2008 and 18% in 2007. Mediterranean Shipping Company accounted for approximately 10% of our leasing revenues
in 2009. No other customer exceeded 10% of our leasing revenues in 2009, 2008 or 2007. A default by any of these major customers could have a material adverse impact on our business, financial
condition and future prospects.

Currency

Although we have significant foreign-based operations, the U.S. dollar is the operating currency for the large majority of our leases
(and company obligations), and most of our revenues and expenses are denominated in U.S. dollars. However we pay our non-U.S. staff in local currencies; and our direct operating expenses
and disposal transactions for our older containers are often structured in foreign currencies. We record unrealized foreign currency exchange gains and losses primarily due to fluctuations in exchange
rates related to our Euro and Pound Sterling transactions and related assets.

Systems and Information Technology

We have a proprietary, fully integrated fleet management system. The system tracks all of our equipment individually by unit number,
provides design specifications for the equipment, tracks on-hire and off-hire transactions, matches each on-hire unit to a lease contract and each
off-hire unit to a depot contract, maintains the major terms for each lease contract, calculates the monthly bill for each customer and tracks and bills for equipment repairs. Our system
is EDI capable, which means it can receive and process equipment activity transactions electronically.

In
addition, our system allows our business partners to conduct business with us through the Internet. It allows customers to check our equipment inventories, review design
specifications, request clearances for returning equipment (the system will issue the clearance electronically if the return to

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the
specified location is currently allowed by the contract covering the equipment), request bookings for equipment pick-ups and review and approve repair bills.

Suppliers

We have long relationships with all of our major suppliers. We purchase most of our containers and chassis in China. There are four
large manufacturers of dry and special containers and three large manufacturers of refrigerated containers, though for both dry containers and refrigerated containers, the largest manufacturer
accounts for 50% or more of global production volume. Our operations staff reviews the designs for our containers and periodically audits the production facilities of our suppliers. In addition, we
use our Asian operations group and third party inspectors to visit factories when our containers are being produced to provide an extra layer of quality control. Nevertheless, defects in our
containers do sometimes occur. We work with the manufacturers to correct these defects, and our manufacturers have generally honored their warranty obligations in such cases.

Competition

We compete with over ten other major intermodal equipment leasing companies, many smaller lessors, manufacturers of intermodal
equipment and companies offering finance leases as distinct from operating leases. It is common for our customers to utilize several leasing companies to meet their equipment needs.

Our
competitors compete with us in many ways, including lease pricing, lease flexibility, supply reliability and customer service. In times of weak demand or excess supply, leasing
companies often respond by lowering leasing rates and increasing the logistical flexibility offered in their lease agreements. In addition, new entrants into the leasing business have been attracted
by the high rate of containerized trade growth in recent years, and they are often aggressive on pricing and lease flexibility.

While
we are forced to compete aggressively on price, we attempt to emphasize our supply reliability and high level of customer service to our customers. We invest heavily to ensure
adequate equipment availability in high demand locations, dedicate large portions of our organization to building customer relationships, and maintaining close day-to-day
coordination with customers' operating staffs and we have developed powerful and user-friendly systems that allow our customers to transact with us through the Internet.

Employees

As of December 31, 2009, we employed 184 people, in 18 offices, in 11 countries. We believe that our relations with our
employees are good and we are not a party to any collective bargaining agreements.

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ITEM 1A.    RISK FACTORS

Container leasing demand can be negatively affected by numerous market factors as well as external political and economic events that are beyond our control.
Decreasing leasing demand could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Demand for containers depends largely on the rate of world trade and economic growth. Demand for leased containers is also driven by our customers' "lease vs.
buy" decisions. Cyclical recessions can negatively affect lessors' operating results because during economic downturns or periods of reduced trade, shipping lines tend to lease fewer containers, or
lease containers only at reduced rates, and tend to rely more on their own fleets to satisfy a greater percentage of their requirements.

In
2009, the rate of global economic growth slowed significantly causing global containerized trade growth to decrease. Clarkson Research Studies ("Clarkson") estimates that global
containerized trade volumes decreased by approximately 10% in 2009, and this decrease in trade volume led to reduced demand for containers, lower utilization of our containers, a decrease in market
leasing rates and a decrease in our leasing revenues and profitability. The decreased demand for containers also constrained our ability to invest in new containers, and the size of our container
fleet decreased in 2009 and the average age of our fleet increased. While Clarkson is currently projecting some growth in trade volumes for 2010, the projected rate of growth is well below historical
average levels, and it is possible that market conditions, and our utilization, average lease rates, lease revenues and profitability will be negatively impacted by the weak global economy for some
time.

Other
general factors affecting demand for leased containers, container utilization and per diem rental rates include:



Any
of the aforementioned factors may have a material adverse effect on our business, financial condition, results of operations or cash flows.

Lease rates may decrease, resulting in reduced revenues, lower margins, and reduced profitability and cash flows.

Market leasing rates are typically a function of, among other things, new equipment prices (which are heavily influenced by steel prices), interest rates, the
type and length of the lease, the equipment supply and demand balance at a particular time and location, and other factors more fully described below. A decrease in leasing rates can have a materially
adverse affect on our leasing revenues, profitability and cash flow.

A
decrease in market leasing rates impacts both our new container investments and the existing containers in our fleet. Most of our existing containers are on operating leases, which
means that the

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lease
term is shorter than the expected life of the container, so the lease rate we receive for the container is subject to change at the expiration of the current lease. As a result, during periods
of low lease rates, the average lease rate we receive for our containers is negatively impacted by both the addition of new containers at low lease rates as well as the turnover of existing containers
from leases with higher lease rates to leases with lower lease rates.

During
the second half of 2008, market lease rates decreased rapidly due to the global economic slowdown and the resulting decrease in trade volumes and leasing demand. Market leasing
rates remained low in 2009 as most leasing companies faced large excess inventories of containers for most of the year, even in traditionally strong demand locations. TAL's average
leasing rates, leasing revenues and profitability decreased significantly in 2009 as containers were returned from leases with relatively high lease rates and placed on hire on leases with lower lease
rates. In addition, TAL entered into several agreements with major customers that lowered the lease rates on existing leases in return for
lease term extensions or other drop-off restrictions. Market lease rates and TAL's average lease rates are likely to remain under pressure as long as the global economy and
trade volumes remain weak.

Leasing
rates can also be negatively impacted by decrease in steel prices and new container prices (as occurred from 1998 - 2003 and in 2005), the entrance of
new leasing companies, overproduction of new containers by factories and over-buying of new containers by shipping lines and leasing competitors.

In
addition, our lease rates may not increase when market conditions improve or when container prices increase. For example, in 2006, our average leasing rates decreased throughout the
year despite good leasing demand and relatively high container prices. The decrease in average leasing rates was mainly the result of lease renegotiations in which we offered several customers reduced
lease rates in return for extensions of leases covering older containers.

Lessee defaults may adversely affect our business, financial condition, results of operations and cash flow by decreasing revenues and increasing storage,
positioning, collection, recovery and lost equipment expenses.

Our containers and chassis are leased to numerous customers. Rent and other charges, as well as indemnification for damage to or loss of our equipment, are
payable under the leases and other arrangements by the lessees. Inherent in the nature of the leases and other arrangements for use of the equipment is the risk that once the lease is consummated, we
may not receive, or may experience delay in realizing, all of the amounts to be paid in respect of the equipment. A delay or diminution in amounts received under the leases and other arrangements
could adversely affect our business and financial prospects and our ability to make payments on our debt.

The
cash flow from our equipment, principally lease rentals, management fees and proceeds from the sale of owned equipment, is affected significantly by our ability to collect payments
under leases and other arrangements for the use of the equipment and our ability to replace cash flows from terminating leases by re-leasing or selling equipment on favorable terms. All of
these factors are subject to external economic conditions and performance by lessees and service providers that are beyond our control.

When
lessees or sublessees of our containers and chassis default, we may fail to recover all of our equipment, and the containers and chassis we do recover may be returned in damaged
condition or to locations where we will not be able to efficiently re-lease or sell them. As a result, we may have to repair and reposition these containers and chassis to other places
where we can re-lease or sell them, and we may lose lease revenues and incur additional operating expenses in repossessing and storing the equipment.

Due
to the global economic crisis and the resulting decrease in trade volumes, we currently face an increased level of customer default risk. In general, the profitability of our
shipping line customers

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deteriorated
significantly in 2008 due to decreasing freight rates caused by excess vessel capacity and most major shipping lines recorded large financial losses in 2009. Excess vessel capacity is
likely to persist for several years due to the combination of large vessel deliveries planned for the next several years and a decrease in the rate of global containerized trade growth. In addition,
the ongoing financial crisis makes lessee defaults more likely since shipping lines may face difficulty in arranging financing for their committed vessel purchases and any operating losses they may
incur. Several shipping lines, including our largest customer, are currently involved in comprehensive financial restructuring negotiations with their major creditors.

Our
balance sheet includes an allowance for doubtful accounts as well as an equipment reserve related to the expected costs of recovering and remarketing containers currently in the
possession of customers that have either defaulted or that we believe currently present a significant risk of loss. However, we do not maintain a general equipment reserve for units
on-hire under operating leases to performing customers. As a result, any major customer default would have a significant impact on our profitability at the time the customer defaulted.
Such a default could also have a material adverse effect on our business condition and financial prospects

Used container selling prices may decrease leading to lower gains or potentially large losses on the disposal of our equipment.

Although our revenues primarily depend upon equipment leasing, our profitability is also affected by the residual values of our containers upon the expiration of
their leases because, in the ordinary course of our business, we sell certain containers when such containers are returned to us. The volatility of the residual values of such equipment may be
significant. These values, which can vary substantially, depend upon, among other factors, the global supply and demand balance for containers, the location of the containers, worldwide steel prices
and the cost of new containers, the supply and demand for used containers at a particular location, applicable maintenance standards, refurbishment needs, inflation rates, market conditions, materials
and labor costs and equipment obsolescence. Most of these factors are outside of our control. Operating leases, which represent the predominant form of leases in our portfolio, are subject to greater
residual value risk than finance leases.

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

From
1999 through 2003 our average sale prices for used containers were historically low due to low prices for new containers and an extreme over-supply of used containers in
North America and Europe following the Asia crisis. We recorded large losses on the disposal of our equipment during these years. Used container selling prices were generally at historically high
levels from 2005-2008, resulting in substantial gains on the disposal of our equipment, due to the increased cost of new containers, a high rate of containerized trade growth and the
resulting limited amount of idle container inventories.

Market
conditions for used equipment in 2009 deteriorated due the decrease in global trade volumes and the resulting decrease in leasing demand and build-up of excess
container inventories. In 2009 average disposal prices decreased by approximately 25% from 2008 levels, and used container selling prices are likely to remain under pressure as long as excess
container inventories persist. A further decrease in used container selling prices from the 2009 level could result in net disposal losses and significantly reduce our profitability.

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Equipment trading is dependent upon a steady supply of used equipment.

We purchase used containers for resale from our shipping line customers and other sellers. If the supply of equipment becomes limited because these sellers
develop other means for disposing of their equipment or develop their own sales network, we may not be able to purchase the inventory necessary to meet our goals, and our equipment trading revenues
and our profitability could be negatively impacted.

Abrupt changes in selling prices on equipment purchased for resale could negatively affect our equipment trading margins.

We purchase and sell containers opportunistically as part of our equipment trading segment. We purchase equipment for resale on the premise that we will turnover
this inventory in a relatively short time frame. If selling prices rapidly deteriorate and we are holding a large inventory that was purchased when prices for equipment were higher, then our gross
margins could decline or become negative.

If we are unable to finance capital expenditures, our business and growth plans will be adversely affected.

We periodically make capital investments to, among other things, maintain and expand our container fleet. However, financing has become scarcer and more expensive
due to the ongoing financial crisis. If we are unsuccessful in obtaining sufficient additional financing on acceptable terms, we will not be able to invest in our fleet and our profitability will
decrease. Even if we are successful in securing additional financial commitments, we expect that our effective interest rates will increase over time.

We have a substantial amount of debt outstanding on a consolidated basis and have significant debt service obligations which could adversely affect our financial
condition or our ability to fulfill our obligations and make it more difficult for us to fund our operations.

We have a significant amount of debt outstanding on a consolidated basis. As of December 31, 2009, we had outstanding indebtedness of approximately
$1.1 billion under our asset backed securities program and our other credit facilities. In addition, we have capital lease obligations in the amount of $93.7 million. Our interest and
debt expense for the fiscal year ended December 31, 2009 was approximately $68.8 million. As of December 31, 2009, our total net debt (total debt plus equipment purchases payable
less cash) to total revenue earning assets was 68%.

Our
substantial debt could have important consequences for investors, including the following:



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

Despite our substantial leverage, we and our subsidiaries may be able to incur additional indebtedness. This could further exacerbate the risks described above.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future. Although our asset backed securities program and our other credit
facilities contain restrictions on the incurrence of additional indebtedness, such restrictions are subject to a number of qualifications and exceptions, and, under certain circumstances, indebtedness
incurred in compliance with such restrictions could be substantial. To the extent that new indebtedness is added to our and our subsidiaries' current debt levels, the risks described above would
increase.

We will require a significant amount of cash to service and repay our outstanding indebtedness and fund future capital expenditures. Our ability to generate cash
depends on many factors beyond our control.

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

We
cannot assure investors that:



If
we cannot generate sufficient cash from our operations to meet our debt service and repayment obligations, we may need to reduce or delay capital expenditures, the development of our
business generally and any acquisitions. In addition, we may need to refinance our debt, obtain additional financing or sell assets, which we may not be able to do on commercially reasonable terms or
at all.

Our customers may decide to lease fewer containers. Should shipping lines decide to buy a larger percentage of the containers they operate, our utilization rate
would decrease, resulting in decreased leasing revenues, increased storage costs and increased positioning costs.

We, like other suppliers of leased containers, are dependent upon decisions by shipping lines to lease rather than buy their container equipment. Should shipping
lines decide to buy a larger percentage of
the containers they operate, our utilization rate would decrease, resulting in decreased leasing revenues, increased storage costs and increased positioning costs. A decrease in the portion of leased
containers would also reduce our investment opportunities and significantly constrain our growth. Most of the factors affecting the decisions of our customers are outside our control.

While
the percentage of leased containers has been fairly steady historically, this percentage has been decreasing over the last few years, with the percentage of leased containers
decreasing from 46% as reported in 2004 to 38% as reported in 2009, according to Containerisation International. We believe that increased share of containers owned directly by the shipping lines is
the result of the improved financial performance, increased operating scale and improved information systems of our

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customers,
which make it easier for our customers to finance and deploy new container purchases efficiently.

We are dependent upon continued demand from our large customers and any default or significant reduction of orders from any of our large customers, and especially
our largest customer, could have a material adverse effect on our business, financial condition and future prospects.

Our largest customers account for a significant portion of our revenues. Our five largest customers represented approximately 52% of our leasing revenues in the
2009 fiscal year, with our single largest customer representing approximately 17% during this period. Furthermore, the shipping industry has been consolidating for a number of years, and further
consolidation is expected and could increase the portion of our revenues that come from our largest customers. The loss or significant reduction of orders from any of our large customers could have a
material adverse effect on our business, financial condition and future prospects.

In
addition, several of our largest customers, including our largest customer, have gone through or are currently undertaking significant financial restructurings as a result of large
financial losses incurred in 2009. We expect the financial performance and financial condition of these customers will continue to be challenged due to ongoing excess capacity. A default by any of our
large customers, and especially our largest customer, would have a material adverse effect on our business, financial condition, results of operations and future prospects.

We face extensive competition in the container leasing industry.

We may be unable to compete favorably in the highly competitive container leasing and sales business. We compete with more than ten other major leasing companies,
many smaller lessors, manufacturers of container equipment, companies offering finance leases as distinct from operating leases, promoters of container ownership and leasing as a tax shelter
investment, shipping lines, which sometimes lease their excess container stocks, and suppliers of alternative types of equipment for freight transport. Some of these competitors may have greater
financial resources and access to capital than we do. Additionally, some of these competitors may have large, underutilized inventories of containers, which could lead to significant downward pressure
on lease rates and margins.

Competition
among container leasing companies depends upon many factors, including, among others, lease rates, lease terms (including lease duration, drop-off restrictions
and repair provisions), customer service, and the location, availability, quality and individual characteristics of equipment. New entrants into the leasing business have been attracted by the high
rate of containerized trade growth in recent years, and new entrants have generally been less disciplined than we are in pricing and structuring leases. As a result, the entry of new market
participants together with the already highly competitive nature of our industry, may reduce lease rates and undermine our ability to maintain our current level of container utilization or achieve our
growth plans.

Litigation to enforce our leases and recover our containers has inherent uncertainties that are increased by the location of our containers in jurisdictions that
have less developed legal systems.

While almost all of our lease agreements are governed by New York law and provide for the non-exclusive jurisdiction of the courts located in the
state of New York, our ability to enforce the lessees' obligations under the leases and other arrangements for use of the containers often is subject to applicable laws in the jurisdiction in which
enforcement is sought. It is not possible to predict, with any degree of certainty, the jurisdictions in which enforcement proceedings may be commenced. Our containers are manufactured in Asia,
primarily in China, and a substantial portion of our containers are leased out of Asia, primarily China, and are used by our customers in service between Asia and North America, Europe, Central and
South America, the Middle East, and Africa and in inter-Asia trade.

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Litigation
and enforcement proceedings have inherent uncertainties in any jurisdiction and are expensive. These uncertainties are enhanced in countries that have less developed legal systems where the
interpretation of laws and regulations is not consistent, may be influenced by factors other than legal merits and may be cumbersome, time-consuming and even more expensive. For example,
repossession from defaulting lessees may be difficult and more expensive in jurisdictions whose laws do not confer the same security interests and rights to creditors and lessors as those in the
United States and where the legal system is not as well developed. As a result, the remedies available
and the relative success and expedience of collection and enforcement proceedings with respect to the containers in various jurisdictions cannot be predicted. As more of our business shifts to areas
outside of the United States and Europe, such as China, it may become more difficult and expensive to enforce our rights and recover our containers.

In
2008 and 2009, the success of our recovery efforts for defaulted leases was hampered by undeveloped creditor protections and legal systems in a number of countries. In 2008, we
experienced an increase in average recovery costs per unit and a decrease in the percentage of containers recovered in default situations primarily due to excessive charges applied to our containers
by the depot or terminal facilities that had been storing the containers for the defaulted lessee. In these cases, the payments demanded by the depot or terminal operators often significantly exceeded
the amount of storage costs that we would reasonably expect to pay for the release of the containers. However, our legal remedies were limited in many of the jurisdictions where the containers were
being stored, and we were sometimes forced to accept the excessive storage charges to gain control of our containers. If the number and size of defaults increases in the future, and if a large
percentage of the defaulted containers are being stored in countries with less developed legal systems, losses resulting from recovery payments and unrecovered containers could be large and our
profitability significantly reduced.

The age of our container fleet may become a competitive disadvantage.

As of December 31, 2009, the average age of the containers in our fleet was 7.5 years, and the average age of our fleet increased by
0.4 years in 2009 due to our limited procurement of new equipment. We believe that the average age of most of our competitors' container fleets is lower than the average age of our fleet, and
customers generally have a preference for younger containers. Historically, we have been successful in marketing our older equipment by positioning older containers to areas where demand is very
strong, offering incentives for customers to extend containers on lease, and providing greater drop-off location flexibility for containers approaching sale age. However, our marketing
strategies for older containers may not continue to be successful, particularly if demand for containers continues to decrease.

The age of our fleet may result in an increase in disposals of equipment and result in a reduction of lease revenues if we are unable to purchase and lease
similar volumes of equipment.

As of December 31, 2009, the average age of the containers in our fleet was 7.5 years. A large portion of our fleet was acquired in the
mid-1990's and is on leases which take the units to the end of their serviceable life in marine transport. Upon redelivery, this equipment is likely to be disposed. From 2005 through 2009,
we sold on average approximately 7% of our equipment leasing fleet containers annually. However, the rate of disposals in 2009 did not keep pace with the rate at which older containers were returned
to us, and our disposal rate would have been close to 10% in 2009 if the sale market had been strong enough to allow our sales to keep pace with returns. Due to the significant portion of older
containers in our fleet and the increase in our inventory of containers
available for sale we expect that our disposal rate will increase in 2010 and remain at a historically high level for several years thereafter. If we are unable to purchase and lease the volumes of
equipment necessary to replace the units sold, our revenues and profitability could decrease.

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We may incur future asset impairment charges.

An asset impairment charge may result from the occurrence of unexpected adverse events or management decisions that impact our estimates of expected cash flows
generated from our long-lived assets. We review our long-lived assets, including our container and chassis equipment, goodwill and other intangible assets for impairment,
including when events or changes in circumstances indicate the carrying value of an asset may not be recoverable. We may be required to recognize asset impairment charges in the future as a result of
reductions in demand for specific container and chassis types, a weak economic environment, challenging market conditions, events related to particular customers or asset type, or as a result of asset
or portfolio sale decisions by management.

Changes in market price, availability or transportation costs of containers in China could adversely affect our ability to maintain our supply of containers.

China is currently the largest container producing nation in the world, and we currently purchase substantially all of our dry containers, special containers and
refrigerated containers from manufacturers based in China. In addition, over the last several years, there has been a consolidation in
the container manufacturing industry, resulting in two manufacturers controlling over 65% of the market. In the event that it were to become more expensive for us to procure containers in China or to
transport these containers at a low cost from the factory locations in China to the locations where they are needed by our customers, because of further consolidation among container suppliers, a
dispute with one of our manufacturers, changes in trade patterns, increased tariffs imposed by the United States or other governments or for any other reason, we would have to seek alternative sources
of supply. We may not be able to make alternative arrangements quickly enough to meet our equipment needs, and the alternative arrangements may increase our costs.

We may incur costs associated with relocation of leased equipment.

When lessees return equipment to locations where supply exceeds demand, we routinely reposition containers to higher demand areas. Positioning expenses vary
depending on geographic location, distance, freight rates and other factors, and may not be fully covered by drop-off charges collected from the last lessees of the equipment or
pick-up charges paid by the new lessees. Positioning expenses can be significant if a large portion of our containers are returned to locations with weak demand. For example, prior to the
Asia crisis of the late 1990's containerized trade was relatively evenly balanced globally, and as a result, many of our lease contracts provided extensive drop-off flexibility in North
America and Europe. However, global containerized trade patterns changed dramatically in the aftermath of the Asia crisis, and demand for leased containers in North America and Europe substantially
decreased. We incurred significant positioning expenses from 2000-2003 to shift our inventory of containers from North America and Europe to Asia. Further changes in the pattern of global
containerized trade could force us to incur significant positioning expenses in the future.

We
currently seek to limit the number of containers that can be returned and impose surcharges on containers returned to areas where demand for such containers is not expected to be
strong. However, future market conditions may not enable us to continue such practices. In addition, we cannot assure you that we have accurately anticipated which port locations will be characterized
by weak or strong demand in the future, and our current contracts will not provide much protection against positioning costs if ports that we expect to be strong demand ports turn out to be surplus
container ports at the time leases expire. In particular, we could incur significant positioning costs in the future if trade flows change from net exports to net imports in locations such as the main
ports in China that we currently consider to be high demand locations and where our leases typically allow large numbers of container to be returned to us.

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Our asset backed securities program and our other credit facilities impose significant operating and financial restrictions, which may prevent us from pursuing
certain business opportunities and taking certain actions.

Our asset backed securities program and other credit facilities impose, and the terms of any future indebtedness may impose, significant operating, financial and
other restrictions on us and our subsidiaries. These restrictions will limit or prohibit, among other things, our ability to:



These
restrictions could adversely affect our ability to finance our future operations or capital needs and pursue available business opportunities. A breach of any of these restrictions
could result in a default in respect of the related indebtedness. If a default occurs, the relevant lenders could elect to declare the indebtedness, together with accrued interest and fees, to be
immediately due and payable and proceed against any collateral securing that indebtedness, which will constitute substantially all of our material container assets.

It may become more expensive for us to store our off-hire containers.

We are dependent on third party depot operators to repair and store our equipment in port areas throughout the world. In many locations the land occupied by these
depots is increasingly being considered as prime real estate. Accordingly, local communities are considering increasing restrictions on the depot operations which would increase their costs and in
some cases force depots to relocate to sites further from the port areas. If these changes affect a large number of our depots it could significantly increase the cost of maintaining and storing our
off-hire containers.

Sustained Asian economic instability could reduce demand for leasing.

A number of the shipping lines to which we lease containers are entities domiciled in Asian countries. In addition, many of our customers are substantially
dependent upon shipments of goods exported from Asia. From time to time, there have been economic disruptions, financial turmoil and political instability in this region. If these events were to occur
in the future, they could adversely affect these customers and lead to a reduced demand for leasing of our containers or otherwise adversely affect us.

Manufacturers of our equipment may be unwilling or unable to honor manufacturer warranties covering defects in our equipment.

We obtain warranties from the manufacturers of our equipment. When defects in the containers occur, we work with the manufacturers to identify and rectify the
problem. However, there is no assurance that manufacturers will be willing or able to honor warranty obligations. If defects are discovered in containers that are not covered by manufacturer
warranties we could be required to

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expend
significant amounts of money to repair the containers and/or the useful life of the containers could be shortened and the value of the containers reduced.

We rely on our information technology systems to conduct our business. If these systems fail to adequately perform these functions, or if we experience an
interruption in their operation, our business and financial results could be adversely affected.

The efficient operation of our business is highly dependent on two of our information technology systems: our equipment tracking and billing system and our
customer interface system. For example, these systems allow customers to place pick-up and drop-off orders on the Internet, view current inventory and check contractual terms
in effect with respect to any given container lease agreement. We correspondingly rely on such information systems to track transactions, such as container pick-ups and
drop-offs, repairs, and to bill our customers for the use and damage to our equipment. We also use the information provided by these systems in our day-to-day
business decisions in order to effectively manage our lease portfolio and improve customer service. The failure of these systems to perform as we anticipate could disrupt our business and results of
operation and cause our relationships with our customers to suffer. In addition, our information technology systems are vulnerable to damage or interruption from circumstances beyond our control,
including fire, natural disasters, power loss and computer systems failures and viruses. Any such interruption could have a material adverse effect on our business.

A number of key personnel are critical to the success of our business.

Most of our senior executives and other management-level employees have been with us for over ten years and have significant industry experience. We rely on this
knowledge and experience in our strategic planning and in our day-to-day business operations. Our success depends in large part upon our ability to retain our senior
management, the loss of one or more of whom could have a material adverse effect on our business. Our success also depends on our ability to
retain our experienced sales force and technical personnel as well as recruiting new skilled sales, marketing and technical personnel. Competition for these persons in our industry is intense and we
may not be able to successfully recruit, train or retain qualified personnel. If we fail to retain and recruit the necessary personnel, our business and our ability to retain customers and provide
acceptable levels of customer service could suffer.

The international nature of the container industry exposes us to numerous risks

We are subject to risks inherent in conducting business across national boundaries, any one of which could adversely impact our business. These risks
include:



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

Certain liens may arise on our containers.

Depot operators, repairmen and transporters may come into possession of our containers from time to time and have sums due to them from the lessees or sublessees
of the containers. In the event of nonpayment of those charges by the lessees or sublessees, we may be delayed in, or entirely barred from, repossessing the containers, or be required to make payments
or incur expenses to discharge such liens on the containers.

The lack of an international title registry for containers increases the risk of ownership disputes.

There is no internationally recognized system of recordation or filing to evidence our title to containers nor is there an internationally recognized system for
filing security interest in containers. Although this has not occurred to date, the lack of a title recordation system with respect to containers could result in disputes with lessees,
end-users, or third parties who may improperly claim ownership of the containers.

As a U.S. corporation, we are subject to the Foreign Corrupt Practices Act, and a determination that we violated this act may affect our business and operations
adversely.

As a U.S. corporation, we are subject to the regulations imposed by the Foreign Corrupt Practices Act (FCPA), which generally prohibits U.S. companies and their
intermediaries from making improper payments to foreign officials for the purpose of obtaining or keeping business. Any determination that we have violated the FCPA could have a material adverse
effect on our business, financial condition, results of operations and cash flows.

As a U.S. corporation, we are subject to U.S. Executive Orders and U.S. Treasury Sanctions Regulations regarding doing business in or with certain nations and
specially designated nationals (SDNs).

As a U.S. corporation, we are subject to U.S. Executive Orders and U.S. Treasury sanctions regulations restricting or prohibiting business dealings in or with
certain nations and with certain specially designated nationals (individuals and legal entities). Any determination that we have violated such Executive Orders and U.S. Treasury sanctions regulations
could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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We may incur increased costs associated with the implementation of new security regulations, which could have a material adverse effect on our business, financial
condition, results of operations and cash flows.

We may be subject to regulations promulgated in various countries, including the United States, seeking to protect the integrity of international commerce and
prevent the use of containers for international terrorism or other illicit activities. For example, the Container Safety Initiative, the Customs-Trade Partnership Against Terrorism and Operation Safe
Commerce are among the programs administered by the U.S. Department of Homeland Security that are designed to enhance security for cargo moving throughout the international transportation system by
identifying existing vulnerabilities in the supply chain and developing improved methods for ensuring the security of containerized cargo entering and leaving the United States. Moreover, the
International Convention for Safe Containers, 1972 (CSC), as amended, adopted by the International Maritime Organization, applies to containers and seeks to maintain a high level of safety of human
life in the transport and handling of containers by providing uniform international safety regulations. As these regulations develop and change, we may incur increased compliance costs due to the
acquisition of new, compliant containers and/or the adaptation of existing containers to meet any new requirements imposed by such regulations. Additionally, certain companies are currently developing
or may in the future develop products designed to enhance the
security of containers transported in international commerce. Regardless of the existence of current or future government regulations mandating the safety standards of intermodal shipping containers,
our competitors may adopt such products or our customers may require that we adopt such products in the conduct of our container leasing business. In responding to such market pressures, we may incur
increased costs, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Terrorist attacks could negatively impact our operations and our profitability and may expose us to liability and reputational damage.

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

It
is also possible that one of our containers could be involved in a terrorist attack. Although our lease agreements require our lessees to indemnify us against all damages arising out
of the use of our containers, and we carry insurance to potentially offset any costs in the event that our customer indemnifications prove to be insufficient, our insurance does not cover certain
types of terrorist attacks, and we may not be fully protected from liability or the reputational damage that could arise from a terrorist attack which utilizes one of our containers.

Environmental liability may adversely affect our business and financial situation.

We are subject to federal, state, local and foreign laws and regulations relating to the protection of the environment, including those governing the discharge of
pollutants to air and water, the management and disposal of hazardous substances and wastes and the cleanup of contaminated sites. We could incur substantial costs, including cleanup costs, fines and
third-party claims for property damage and personal injury, as a result of violations of or liabilities under environmental laws and regulations in connection with our current or historical
operations. Under some environmental laws in the United States and certain other countries, the owner of a leased container may be liable for

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environmental
damage, cleanup or other costs in the event of a spill or discharge of material from a container without regard to the owner's fault. We have not yet experienced any such claims,
although we cannot assure you that we will not be subject to such claims in the future. Liability insurance policies, including ours, usually exclude claims for environmental damage. Some of our
lessees may have separate insurance coverage for environmental damage, but we cannot assure you that any such policies would cover or otherwise offset any liability we may have as the owner of a
leased container. Our standard master tank container lease agreement insurance clause requires our tank container lessees to provide pollution liability insurance. Such insurance or indemnities may
not fully protect us against damages arising from environmental damage.

Many
countries, including the United States, restrict, prohibit or otherwise regulate the use of chlorofluorocarbon compounds ("CFCs") due to their ozone depleting and global warming
effects. Over 99% of our refrigerated containers currently use R134A or 404A refrigerant. While R134A and 404A do not contain CFC's, the European Union has instituted regulations to phase out the use
of R134A in automobile air conditioning systems beginning in 2011 due to concern that the release of R134A into the atmosphere may contribute to global warming. While the European Union regulations do
not currently restrict the use of 134A in refrigerated containers or trailers, it is possible that the phase out of R134A in automobile air conditioning systems will be extended to intermodal
containers in the future. If future regulations prohibit the use or servicing of containers using R134A or 404A refrigerants, we could be forced to incur large retrofitting expenses. In addition,
refrigerated containers that are not retrofitted may become difficult to lease and command lower prices in the market for used containers once we retire these containers from our fleet.

An
additional environmental concern affecting our operations relates to the construction materials used in our dry containers. The floors of dry containers are plywood usually made from
tropical hardwoods. Due to concerns regarding de-forestation of tropical rain forests and climate change, many countries which have been the source of these hardwoods have implemented
severe restrictions on the cutting and export of these woods. Accordingly, container manufacturers have switched a significant portion of production to more readily available alternatives such as
birch, bamboo, and other farm grown wood species. Container users are also evaluating alternative designs that would limit the amount of plywood required and are also considering possible synthetic
materials to replace the plywood. These new woods or other alternatives have not proven their durability over the
13-15 year life of a dry container and if they cannot perform as well as the hardwoods have historically the future repair and operating costs for these containers could be
significantly higher.

Fluctuations in foreign exchange rates could reduce our profitability.

The majority of our revenues and costs are billed in U.S. dollars. Most of our non-U.S. dollar transactions are individually of small amounts and in
various denominations and thus are not suitable for cost-effective hedging. In addition, almost all of our container purchases are paid for in U.S. dollars.

Our
operations and used container sales in locations outside of the U.S. have some exposure to foreign currency fluctuations, and trade growth and the direction of trade flows can be
influenced by large changes in relative currency values. Adverse or large exchange rate fluctuations may negatively affect our results of operations and financial condition.

Most
of our equipment fleet is manufactured in China. Although the purchase price is in U.S. dollars, our manufacturers pay labor and other costs in the local currency, the Chinese Yuan.
To the extent that our manufacturers' costs increase due to changes in the valuation of the Chinese Yuan, the dollar price we pay for equipment could be affected.

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

Our lessees and depots are required to maintain all risks physical damage insurance, comprehensive general liability insurance and to indemnify us against loss.
We also maintain our own contingent liability insurance and off-hire physical damage insurance. Nevertheless, lessees' and depots' insurance or indemnities and our insurance may not fully
protect us. The cost of such insurance may increase or become prohibitively expensive for us and our customers and such insurance may not continue to be available.

We
also maintain director and officer liability insurance. Potential new accounting standards and new corporate governance regulations may make it more difficult and more expensive for
us to obtain
director and officer liability insurance, and we may be required to incur substantial costs to maintain increased levels of coverage or it may not continue to be available.

We could become subject to additional risks associated with financing of port equipment, which could have a material adverse effect on our business, financial
condition, results of operations or cash flows.

The financing of port equipment such as container cranes involves additional risks such as the additional maintenance requirements for the equipment which if not
followed could reduce the value of the equipment, the risk of personal injury inherent in operating this equipment, the limited remarketing opportunities for such equipment, the increased risk of
technical obsolescence of such equipment and the high cost of transporting the equipment should it need to be repositioned.

We are a "controlled company" within the meaning established by the New York Stock Exchange and, as a result, qualify for, and intend to rely on, exemptions from
certain corporate governance requirements.

The Resolute Fund, L.P., its affiliated funds and the other parties to a shareholders agreement among the investors who acquired our company in November
2004, management and certain of our other shareholders, as a group, control a majority of our outstanding common stock, and, as a result, we are considered a "controlled company" within the meaning of
the corporate governance standards of the New York Stock Exchange. Under these rules, a "controlled company" is exempt from complying with certain corporate governance requirements, including
(1) the requirement that a majority of the board of directors consist of independent directors, (2) the requirement that we have a nominating/corporate governance committee that is
composed entirely of independent directors and (3) the requirement that we have a compensation committee that is composed entirely of independent directors. As a result, our board of directors
does not consist of a majority of independent directors nor does our board of directors have compensation and nominating/corporate governance committees consisting entirely of independent directors.
Accordingly, investors do not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the New York Stock Exchange.

Our strategy to selectively pursue complementary acquisitions and joint ventures may present unforeseen integration obstacles or costs.

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



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

The price of our common stock may be highly volatile and may decline regardless of our operating performance.

The trading price of our common shares is likely to be subject to wide fluctuations. Factors affecting the trading price of our common shares may
include:



In
addition, if the market for intermodal equipment leasing company stocks or the stock market in general experiences loss of investor confidence, the trading price of our common shares
could decline for reasons unrelated to our business or financial results. The trading price of our common shares might also decline in reaction to events that affect other companies in our industry
even if these events do not directly affect us.

If securities analysts do not publish research or reports about our business or if they downgrade our stock, the price of our stock could decline.

The trading market for our common shares relies in part on the research and reports that industry or financial analysts publish about us or our business or our
industry. We have no influence or control over these analysts. Furthermore, if one or more of the analysts who do cover us downgrades our stock, the price of our stock could decline. If one or more of
these analysts ceases coverage of our company, we could lose visibility in the market, which in turn could cause our stock price to decline.

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Our failure to comply with required public company corporate governance and financial reporting practices and regulations could materially
and adversely impact our financial condition, operating results and the price of our common stock.

The Sarbanes-Oxley Act of 2002 requires that we maintain effective internal controls for financial reporting and disclosure controls and procedures. If we do not
maintain compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or if we or our independent registered public accounting firm identify deficiencies in our internal
controls over financial reporting that are deemed to be material weaknesses, we could suffer a loss of investor confidence in the reliability of our financial statements, which could cause the market
price of our stock to decline. We can also be subject to sanctions or investigations by the New York Stock Exchange, the Securities and Exchange Commission or other regulatory authorities for failure
to comply with public company corporate governance and financial reporting practices and regulations.

Our internal controls over financial reporting may not detect all errors or omissions in the financial statements.

Section 404 of the Sarbanes-Oxley Act requires an annual management assessment of the effectiveness of internal controls over financial reporting and a
report by our independent registered public accounting firm. If we fail to maintain the adequacy of internal controls over financial accounting, we may not be able to conclude on an ongoing basis that
we have effective internal controls over financial reporting in accordance with the Sarbanes-Oxley Act of 2002 and related regulations. Although our management has concluded that adequate internal
control procedures are currently in place, no system of internal controls can provide absolute assurance that the financial statements are accurate and free of material errors. As a result, the risk
exists that our internal controls may not detect all errors or omissions in the financial statements.

Adverse changes in business conditions could negatively impact our income tax provision or cash payments.

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

In
addition, under certain conditions, if our future investment in new container and chassis operating leases is significantly less than estimated, we may fail to benefit from future
accelerated depreciation for income tax purposes. If this occurs we could pay significant income taxes sooner than we currently project.

ITEM 1B.    UNRESOLVED STAFF COMMENTS



ITEM 2.    PROPERTIES

Office Locations.As of December 31, 2009, our employees are located in 18 offices in 11 different countries. We have 7 offices in
the U.S.
including our headquarters in Purchase, New York. We have 11 offices outside the U.S. We lease all of our office space.

ITEM 3.    LEGAL PROCEEDINGS

From time to time we are a party to litigation matters arising in connection with the normal course of our business. While we cannot
predict the outcome of these matters, in the opinion of our

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management,
any liability arising from these matters will not have a material adverse effect on our business. Nevertheless, unexpected adverse future events, such as an unforeseen development in our
existing proceedings, a significant increase in the number of new cases or changes in our current insurance arrangements could result in liabilities that have a material adverse impact on our
business.

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

No matters were submitted to a vote of security holders of TAL International Group, Inc. during the fourth quarter of 2009.

PART II

ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock has been traded on the New York Stock Exchange under the symbol "TAL" since October 12, 2005.
Prior to that time, there was no public market for our common stock.

The
following table reflects the range of high and low sales prices, as reported on the New York Stock Exchange, for our common stock in each quarter of the years ended
December 31, 2009 and 2008.

High

Low2009:Fourth Quarter

$
15.19

$
11.10Third Quarter

$
14.65

$
8.81Second Quarter

$
11.46

$
5.96First Quarter

$
14.40

$
5.512008:Fourth Quarter

$
20.82

$
8.00Third Quarter

$
26.96

$
20.06Second Quarter

$
28.35

$
22.51First Quarter

$
25.26

$
19.78


On
February 19, 2010, the closing price of a share of our common stock was $15.90, as reported on the New York Stock Exchange. On that date, there were approximately 50 holders of
record of the common stock and approximately 3,021 beneficial holders, based on information obtained from our transfer agent.

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PERFORMANCE GRAPH

The graph below compares our cumulative shareholder returns with the S&P 500 Stock Index and the Russell 2000 Stock Index for
the period from October 12, 2005 (the date our common stock began trading) to December 31, 2009. The graph assumes the investment of $100 as of October 12, 2005 and the
reinvestment of all dividends.

Comparison of Cumulative Five Year Total Return

GRAPHIC

INDEXED RETURNS
Years EndingBase
Period
10/12/05Company / Index

12/31/05

12/31/06

12/31/07

12/31/08

12/31/09TAL International Group, Inc.


100


114.72


151.18


136.68


92.01


86.66S&P 500 Index


100


106.52


123.34


130.12


81.98


103.67Russell 2000 Index


100


108.62


128.58


126.56


83.80


107.94


Dividends

We paid the following quarterly dividends during the years ended December 31, 2009 and 2008 on our issued and outstanding common
stock:

Record Date

Payment Date

Aggregate Payment

Per Share PaymentDecember 1, 2009


December 22, 2009

$
0.3 million

$
0.01September 3, 2009


September 24, 2009

$
0.3 million

$
0.01June 2, 2009


June 23, 2009

$
0.3 million

$
0.01March 12, 2009


March 26, 2009

$
0.3 million

$
0.01November 19, 2008


December 10, 2008

$
13.4 million

$
0.4125August 21, 2008


September 12, 2008

$
13.5 million

$
0.4125May 22, 2008


June 12, 2008

$
13.4 million

$
0.4125March 20, 2008


April 10, 2008

$
12.2 million

$
0.3750


Beginning
in the first quarter of 2010, we increased our quarterly cash dividend to $0.25 per share. We cannot provide any assurance as to future dividends because they depend on our
future earnings, capital requirements, and financial condition.

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Stock Repurchase Program

On March 13, 2006, our Board of Directors authorized a stock repurchase program for the repurchase of our common stock. The
stock repurchase program, as now amended, authorizes us to repurchase up to 4.0 million shares of our common stock.

Our
share purchase activity during the fourth quarter ended December 31, 2009 is summarized in the following table:

Period

Total Number of
Shares Purchased

Average Price
Paid per Share

Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs

Maximum Number of
Shares that May Yet
Be Purchased Under
the Plans or
ProgramsOctober 1  31, 2009











1,094,619November 1  30, 2009


103,790

$
12.10


103,790


990,829December 1  31, 2009











990,829


Stock
repurchases under this program may be made through open market and/or privately negotiated transactions at such times and in such amounts as a committee of our Board of Directors
deems appropriate. The timing and actual number of shares repurchased will depend on a variety of factors including price, corporate and regulatory requirements, restrictions regarding a repurchase
program included in our credit facilities and other market conditions. The stock repurchase program does not have an expiration date and may be limited or terminated by the Board of Directors at any
time without prior notice.

Recent Sales of Unregistered Securities; Use of Proceeds From Registered Securities

None.

Securities Authorized for Issuance Under Equity Compensation Plans

The information required by this Item is incorporated herein by reference from our proxy statement to be issued in connection with the
Annual Meeting of our Stockholders to be held on April 29, 2010, which proxy statement will be filed with the SEC within 120 days of the close of our fiscal year ended
December 31, 2009.

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ITEM 6.    SELECTED FINANCIAL DATA

The following table sets forth certain selected historical financial, operating and other data of TAL International Group, Inc.
The selected historical consolidated statement of operations data, balance sheet data and other financial data for the fiscal years ended December 31, 2009, 2008, 2007, 2006 and 2005 were
derived from the Company's audited consolidated financial statements and related notes. The data below should be read in conjunction with, and is qualified by reference to, our Management's Discussion
and Analysis and our consolidated financial statements and notes thereto contained elsewhere in this report. The historical results are not necessarily indicative of the results to be expected in any
future period.

All
actual common share and per share data have been adjusted to retroactively reflect the 101.5052-to-1 stock split that occurred on October 5, 2005.

Year Ended
December 31,
2009

Year Ended
December 31,
2008

Year Ended
December 31,
2007

Year Ended
December 31,
2006

Year Ended
December 31,
2005Statement of Operations Data:Leasing revenues

$
309,261

$
319,292

$
286,273

$
273,157

$
287,218Equipment trading revenues


39,693


95,394


49,214


23,665


24,244Management fee income


2,629


3,136


5,475


6,454


6,482Other revenues


954


2,170


2,303


2,301


2,383Total revenues


352,537


419,992


343,265


305,577


320,327Operating expenses (income):Equipment trading expenses


37,538


84,216


43,920


21,863


21,715Direct operating expenses


36,942


28,246


28,552


25,938


27,635Administrative expenses


40,908


46,154


39,843


36,950


39,428Depreciation and amortization


115,688


110,450


101,670


103,849


115,138Provision (reversal) for doubtful accounts


545


4,878


792


(529
)

697Net (gain) on sale of leasing equipment


(9,278
)

(23,534
)

(12,119
)

(6,242
)

(9,665
)Net (gain) on sale of container portfolios


(185
)

(2,789
)







Total operating expenses


222,158


247,621


202,658


181,829


194,948Operating income


130,379


172,371


140,607


123,748


125,379Other expenses (income):Interest and debt expense(1)


68,807


64,983


52,129


47,578


72,379Write-off of deferred financing costs(2)





250


204


2,367


43,503(Gain) on debt extinguishment(3)


(14,130
)

(23,772
)







Unrealized (gain) loss on interest rate swaps(4)


(35,152
)

76,047


27,883


8,282


(12,499
)Management fees(5)














4,878Total other expenses


19,525


117,508


80,216


58,227


108,261Income before income taxes


110,854


54,863


60,391


65,521


17,118Income tax expense


39,268


19,067


21,600


23,388


7,446Net income


71,586


35,796


38,791


42,133


9,672Preferred stock dividends and accretion to redemption value














(19,868
)Net income (loss) applicable to common stockholders

$
71,586

$
35,796

$
38,791

$
42,133

$
(10,196
)Earnings (Loss) Per Share Data:Basic income (loss) per share applicable to common stockholders

$
2.31

$
1.10

$
1.17

$
1.28

$
(0.68
)Diluted income (loss) per share applicable to common stockholders

$
2.30

$
1.09

$
1.16

$
1.26

$
(0.68
)Weighted average common shares outstanding:Basic


31,021,339


32,572,901


33,183,252


32,987,077


14,912,242Diluted


31,072,265


32,693,320


33,369,958


33,430,438


14,912,242Cash dividends paid per common share

$
0.04

$
1.61

$
1.43

$
0.45





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Table of Contents

Year Ended
December 31,
2009

Year Ended
December 31,
2008

Year Ended
December 31,
2007

Year Ended
December 31,
2006

Year Ended
December 31,
2005Balance Sheet Data (end of period):Cash and cash equivalents (including restricted cash)

$
73,604

$
56,958

$
70,695

$
58,167

$
27,259Accounts receivable, net


33,086


42,335


41,637


39,318


36,470Revenue earning assets, net


1,603,819


1,764,522


1,500,056


1,253,877


1,135,026Total assets


1,800,978


1,955,498


1,705,887


1,455,663


1,304,268Total debt


1,161,298


1,351,036


1,174,654


958,317


872,627Stockholders' equity


418,829


364,471


393,477


398,750


379,967Other Financial Data:Capital expenditures

$
57,957

$
492,635

$
392,883

$
253,340

$
186,133Proceeds from sale of equipment leasing fleet, net of selling costs


69,473


83,956


63,006


58,462


90,481Selected Fleet Data(1):Dry container units(2)


592,953


640,838


576,887


547,172


523,533Refrigerated container units(2)


36,061


37,740


37,511


35,038


35,631Special container units(2)


47,857


50,893


45,668


42,183


43,414Trader(2)


14,947


16,735


14,583


8,815


10,123Chassis(2)


8,778


8,796


7,955


6,579


1,210Tank container units(2)


1,350


1,319


110





Total container units/chassis(2)


701,946


756,321


682,714


639,787


613,911Total containers/chassis in TEU(2)


1,139,523


1,224,452


1,111,164


1,037,323


988,295Average utilization %(3)


88.0
%

94.4
%

94.9
%

92.6
%

93.2
%


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Table of Contents

ITEM 7:    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The statements in this discussion regarding industry outlook, our expectations regarding our future
performance, liquidity and capital resources and other non-historical statements are subject to numerous risks and uncertainties, including, but not limited to, the risks and uncertainties
described under "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" as discussed elsewhere in this Form 10-K. Our actual results may differ materially from
those contained in or implied by any forward-looking statements.

Our Company

We are one of the world's largest and oldest lessors of intermodal containers and chassis. Intermodal containers are large,
standardized steel boxes used to transport freight by ship, rail or truck. Because of the handling efficiencies they provide, intermodal containers are the primary means by which many goods and
materials are shipped internationally. Chassis are used for the transportation of containers domestically.

We
operate our business in one industry, intermodal transportation equipment, and have two business segments:



Operations

Our consolidated operations include the acquisition, leasing, re-leasing and subsequent sale of multiple types of
intermodal containers and chassis. As of December 31, 2009, our total fleet consisted of 701,946 containers and chassis, including 31,137 containers under management for third parties,
representing 1,139,523 twenty-foot equivalent units (TEU). We have an extensive global presence, offering leasing services through 18 offices in 11 countries and 199 third party container
depot facilities in 37 countries as of December 31, 2009. Our customers are among the world's largest shipping lines and include, among others, APL-NOL, CMA CGM, Maersk Line,
Mediterranean Shipping Company and NYK Line. For the year ended December 31, 2009, our twenty largest customers accounted for 77% of our leasing revenues, our five largest customers accounted
for 52% of our leasing revenues, and our largest customer accounted for 17% of our leasing revenues.

We
primarily lease three principal types of equipment: (1) dry freight containers, which are used for general cargo such as manufactured component parts, consumer staples,
electronics and apparel, (2) refrigerated containers, which are used for perishable items such as fresh and frozen foods, and (3) special containers, which are used for heavy and
oversized cargo such as marble slabs, building products and machinery. We also lease chassis, which are used for the transportation of containers domestically, and tank containers, which are used to
transport bulk liquid products such as chemicals. We also finance port equipment, which includes container cranes, reach stackers and other related equipment. Our in-house equipment sales
group manages the sale process for our used containers and chassis from our equipment leasing fleet and buys and sells used and new containers and chassis acquired from third parties.

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As
of December 31, 2009, the percentages of our equipment fleet and leasing revenues by equipment type are as follows:

Equipment Type

Percent of total
fleet units

Percent of
leasing revenueDry


85
%

59
%Refrigerated


5


25Special


7


12Chassis


1


3Tank





1Equipment leasing fleet


98


100Equipment trading fleet


2


Total


100
%

100
%


The
following tables provide the composition of our equipment fleet as of the dates indicated below (in both units and TEU's):

Equipment Fleet in UnitsDecember 31, 2009

December 31, 2008

December 31, 2007Owned

Managed

Total

Owned

Managed

Total

Owned

Managed

TotalDry


564,885


28,068


592,953


610,759


30,079


640,838


549,800


27,087


576,887Refrigerated


35,611


450


36,061


37,119


621


37,740


36,650


861


37,511Special


45,238


2,619


47,857


48,054


2,839


50,893


42,049


3,619


45,668Tank


1,350





1,350


1,319





1,319


110





110Chassis


8,778





8,778


8,796





8,796


7,955





7,955Equipment leasing fleet


655,862


31,137


686,999


706,047


33,539


739,586


636,564


31,567


668,131Equipment trading fleet


14,947





14,947


16,735





16,735


14,583





14,583Total


670,809


31,137


701,946


722,782


33,539


756,321


651,147


31,567


682,714Percentage


95.6
%

4.4
%

100.0
%

95.6
%

4.4
%

100.0
%

95.4
%

4.6
%

100.0
%




Equipment Fleet in TEU'sDecember 31, 2009

December 31, 2008

December 31, 2007Owned

Managed

Total

Owned

Managed

Total

Owned

Managed

TotalDry


899,599


50,426


950,025


968,772


53,692


1,022,464


886,816


47,315


934,131Refrigerated


65,971


758


66,729


68,270


1,022


69,292


66,625


1,436


68,061Special


77,617


4,255


81,872


82,322


4,624


86,946


69,544


6,023


75,567Tank


1,400





1,400


1,369





1,369


110





110Chassis


15,612





15,612


15,645





15,645


13,924





13,924Equipment leasing fleet


1,060,199


55,439


1,115,638


1,136,378


59,338


1,195,716


1,037,019


54,774


1,091,793Equipment trading fleet


23,885





23,885


28,736





28,736


19,371





19,371Total


1,084,084


55,439


1,139,523


1,165,114


59,338


1,224,452


1,056,390


54,774


1,111,164Percentage


95.1
%

4.9
%

100.0
%

95.2
%

4.8
%

100.0
%

95.1
%

4.9
%

100.0
%


We generally lease our equipment on a per diem basis to our customers under three types of leases: long-term leases, finance leases
and service leases. Long-term leases, typically with initial contractual terms ranging from three to eight years, provide us with stable cash flow and low transaction costs by requiring
customers to maintain specific units on-hire for the duration of the lease. Finance leases, which are typically structured as full payout leases, provide for a predictable recurring
revenue stream with the lowest daily cost to the customer because customers are generally required to retain the equipment for the duration of its useful life. Service leases command a premium per
diem

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rate
in exchange for providing customers with a greater level of operational flexibility by allowing the pick-up and drop-off of units during the lease term. We also have
expired long-term leases whose fixed terms have ended but for which the related units remain on-hire and for which we continue to receive rental payments pursuant to the terms
of the initial contract. Some leases have contractual terms that have features reflective of both long-term and service leases and we classify such leases as either long-term
or service leases, depending upon which features we believe are more predominant.

The
following table provides a summary of our lease portfolio by lease type, based on total on-hire units as of the dates indicated below:

Lease Portfolio

December 31,
2009

December 31,
2008

December 31,
2007Long-term leases


67.7
%

60.3
%

59.0
%Finance leases


11.5


9.9


10.9Service leases


16.5


20.3


23.5Expired long-term leases (units on hire)


4.3


9.5


6.6Total


100.0
%

100.0
%

100.0
%


During
2009, we reached agreements with several of our customers that limit the total number of containers that could be returned from expired leases. We have included the maximum number
of containers that can be returned during the limitation periods as expired term leases, while the balance
of the affected units are included in current term leases. As of December 31, 2009, our long-term leases had an average remaining contract term of approximately 43 months,
assuming no leases are renewed.

Operating Performance

Our profitability is primarily determined by the extent to which our leasing and other revenues exceed our ownership, operating and
administrative expenses. Our profitability is also impacted by the gain or loss that we realize on the sale of our used equipment and the net sales margins on our equipment trading activities.

Our
leasing revenues are primarily driven by our owned fleet size, utilization and average rental rates. In 2009, our leasing revenues decreased throughout the year due to a shrinking
fleet size, a drop in utilization and decreasing leasing rates.

As
of December 31, 2009, our owned fleet included 1,084,084 TEUs, a decrease of 7.0% from December 31, 2008. The decrease in fleet size during 2009 was mainly due to the
small amount of new containers purchased in 2009 combined with our normal disposal of used containers. According to Clarkson Research Services ("Clarkson"), global containerized trade volumes
decreased by approximately 10% in 2009, and our shipping line customers aggressively decreased the number of containers in their fleets, especially in the first two quarters of the year. As a result,
the size of our idle container inventory rapidly increased during the first half of 2009, and we significantly reduced our level of fleet investment. Container trade volumes and related container
lease demand began to recover during the second half of 2009. This improvement in demand has reduced the number of our idle containers, and we have re-started fleet investment in the first
quarter of 2010.

In
2009, we sold approximately 79,000 TEUs of our owned containers, or 7.0% of our owned equipment leasing fleet as of the beginning of the year. This annual disposal rate is in line
with the 6 to 8% annual disposal rate we have been experiencing for the last several years, and is generally consistent with our expected long-term average disposal rate given the
12  14 year expected useful life of our containers. However, the rate of our disposals in 2009 did not keep pace with the rate at which older units were returned off lease,
and the portion of our fleet designated as available for sale

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increased
from 3.2% as of December 31, 2008 to 4.2% as of December 31, 2009. Based on our increased inventory of containers available for sale, the age profile of our leasing fleet and
scheduled lease expirations, we expect that our rate of disposals will increase when the market for used container disposals improves and then remain at an above-average level for several years before
decreasing
significantly for several years thereafter. During years of above-average disposals, our TEU growth rate and leasing revenues may be constrained if we are unable to generate a sufficient number of
attractive lease transactions for an expanded level of new container investment.

Our
average utilization was 88.0% in the year ended December 31, 2009, a decrease of 6.4% from the year ended December 31, 2008. Ending utilization decreased 2.1% from
92.4% as of December 31, 2008 to 90.3% as of December 31, 2009. The decrease in our utilization during 2009 was mainly due to the decrease in global containerized trade volumes and the
resulting weak demand for leased containers, especially for leased dry containers. During 2009, dry container drop-offs were high and pick-ups exceptionally low for the first
half of the year as our shipping line customers reacted to reduced trade volumes by decreasing the size of their operated containers fleets. In the second half of the year, a partial recovery of trade
volumes led to reduced dry container drop off volumes, improved container pick-ups and a partial recovery in our utilization. The improved market conditions have continued into 2010, and
we expect our utilization to continue to trend up in the first quarter of 2010.

Utilization
and leasing demand for our refrigerated containers remained solid in 2009 despite the weak economic environment. The utilization of our refrigerated containers does not
heavily influence our overall utilization since they represent only 5% of the units in our fleet. However, these container types are significantly more expensive than dry containers, generate higher
per diem lease rates and currently represent approximately 25% of our leasing revenues.

Utilization
of our special containers also remained relatively healthy in 2009, though we are seeing signs that leasing demand for special containers is weakening. Leasing demand for our
chassis product line remained weak during 2009 due to ongoing weakness in U.S. containerized imports and an oversupply of chassis in the marketplace.

The
following tables set forth our equipment fleet utilization(1) for the periods indicated below:

Average Utilization

Year Ended
December 31,

Quarter Ended
December 31,

Quarter Ended
September 30,

Quarter Ended
June 30,

Quarter Ended
March 31,2009


88.0
%

88.7
%

86.2
%

87.0
%

90.1
%2008


94.4
%

94.0
%

95.5
%

94.3
%

93.8
%2007


94.9
%

94.9
%

95.1
%

94.6
%

94.8
%




Ending Utilization

December 31,

September 30,

June 30,

March 31,2009


90.3
%

87.6
%

85.9
%

88.5
%2008


92.4
%

95.8
%

95.4
%

94.0
%2007


94.4
%

95.5
%

94.8
%

93.9
%


---

Average
lease rates for our dry container product line in 2009 were 5.4% lower compared to the average level in 2008. The decrease in average lease rates in 2009 primarily reflects the
impact of lease extension transactions and other incentives provided to our customers, such as free or discounted usage periods, to encourage them to keep or pick-up containers. In
addition, lease rates for containers placed on hire in 2009 were much lower than our portfolio average, while a significant portion of the containers returned to us have been from our higher per diem
short-term leases. We expect our average lease rates for dry containers to gradually improve in 2010 if the recent improvement in market

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Table of Contents

conditions
is sustained, as discount periods expire and as containers are supplied to leases at higher rates.

Average
lease rates for refrigerated containers in 2009 were 4.6% lower compared to 2008, while average rental rates for our special containers were 1.1% lower during 2009 compared to 2008. The
decrease in average lease rates for our refrigerated containers was primarily due to lease rate concessions provided to certain customers for lease extension transactions. In addition, market leasing
rates for new refrigerated containers are still below our portfolio average rates due to lower container prices, so we generally expect our average rates for refrigerated containers to continue to
trend down. The decrease in average leasing rates for special containers was primarily due to discounts associated with lease extension transactions and weaker demand.

During
2009, we recognized a $9.3 million gain on the sale of our used containers compared to a $23.5 million gain in 2008. The decrease compared to 2008 mainly resulted
from a decrease in selling prices for our used containers. Used container selling prices decreased this year due to weak demand for used containers as well as the slowdown in global containerized
trade and the resulting increase in worldwide idle container inventories. In addition, in 2009 we recorded a $1.5 million loss on new factory units placed on a finance lease. These units were
purchased in 2008 when equipment prices were historically high and we leased them out in 2009 at a lower implied price per container. We recognize an up-front gain or loss when we place
existing equipment on finance leases and the market value of the equipment is different from our net book value. We do not incur up-front gains or losses when we place existing equipment
on operating leases.

During
2009, we recognized a net equipment trading margin of $2.2 million on the sale of equipment purchased for resale, compared to an $11.2 million margin in 2008. In
2009, our trading volume was considerably lower than in 2008 due to the weaker disposal environment and our decision to reduce our purchases of trading equipment in order to focus our efforts on the
sale of our owned equipment. In addition, our per unit trading margin was pressured by decreasing used container selling prices in 2009.

Our
ownership expenses, principally depreciation and interest expense, increased by $8.8 million, or 5% in 2009 as compared to 2008. Although we purchased very few new containers
during 2009 we invested heavily in containers during 2008 and this resulted in the average book value of our revenue earning assets increasing 3.2% in 2009 as compared to 2008.

Depreciation
increased 4.7% in 2009 compared to 2008, primarily due to new equipment purchases made throughout 2008 which had a full year's depreciation in 2009. Interest expense
increased 5.5% in 2009 compared to 2008 primarily due to an increase in our effective interest rate.

For
2009, our provision for doubtful accounts was $0.5 million, down from a provision of $4.9 million in 2008. During 2009, we experienced several small customer defaults
which were largely offset by a partial reversal of provisions made in 2008 due to better than expected container recoveries. During the third and fourth quarters of 2008, we recorded sizable credit
provisions primarily due to the default on a finance lease by one of our customers, and we recorded additional provisions to increase the loss reserves for the remaining leases in the finance lease
portfolio.

While
our provisions for doubtful accounts were limited in 2009, we remain concerned that we may see an increase in the number and size of customer defaults due to the ongoing severe
market conditions our customers are facing. Many of our customers were in the middle of major expansion programs when trade volumes collapsed at the end of 2008, and vessel capacity is expected to
increase for the next several years despite the recent reduction in trade volume growth. The combination of reduced trade volumes and increasing vessel capacity has led to substantial decreases in
freight rates on the major trade lanes, and many shipping lines reported large losses during 2009. While our collections performance in 2009 was solid and the average number of days outstanding for
our receivables

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remained
close to where it was at the beginning of the year, several of our customers, including a few major shipping lines, missed contractual payment dates during the year. In addition, several
major shipping lines, including our largest customer, are currently involved in comprehensive financial restructuring negotiations with their major creditors.

If
one of our major customers defaulted on our leases and ceased operations because of deterioration in its financial performance, we would face reduced revenues and we would likely
incur significant write-offs due to lost units and recovery expenses. We do not maintain an equipment reserve for units on lease to performing customers, so a major customer default would
have a significant impact on our financial statements at the time the major customer defaulted. To mitigate this impact from potential defaults, we entered into a credit insurance policy in the third
quarter of 2009 that in certain circumstances covers losses and costs incurred in default situations. However, this policy has significant deductibles, exclusions and payment and other limitations,
and therefore may not protect us from losses arising from customer defaults.

Our
direct operating expenses were $36.9 million in 2009, compared to $28.2 million in 2008. We incurred significantly more repair and storage costs in 2009 due to the
increased level of drop-offs and idle containers.

Dividends

We paid the following quarterly dividends during the years ended December 31, 2009 and 2008 on our issued and outstanding common
stock:

Record Date

Payment Date

Aggregate Payment

Per Share PaymentDecember 1, 2009


December 22, 2009

$
0.3 million

$
0.01September 3, 2009


September 24, 2009

$
0.3 million

$
0.01June 2, 2009


June 23, 2009

$
0.3 million

$
0.01March 12, 2009


March 26, 2009

$
0.3 million

$
0.01November 19, 2008


December 10, 2008

$
13.4 million

$
0.4125August 21, 2008


September 12, 2008

$
13.5 million

$
0.4125May 22, 2008


June 12, 2008

$
13.4 million

$
0.4125March 20, 2008


April 10, 2008

$
12.2 million

$
0.3750


Treasury Stock

We repurchased the following amounts of Treasury shares:

Year

Shares Purchased

Amount Paid2009


1,953,692

$
17.4 million2008


643,200

$
10.9 million2007


276,029

$
6.3 million


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Table of Contents

Results of Operations

The following table summarizes our results of operations for the three years ended December 31, 2009, 2008 and 2007 in dollars
(in thousands) and as a percentage of total revenues.

Year Ended December 31,2009

2008

2007Dollars

Percent

Dollars

Percent

Dollars

PercentLeasing revenues

$
309,261


87.7
%
$
319,292


76.0
%
$
286,273


83.4
%Equipment trading revenues


39,693


11.2


95,394


22.7


49,214


14.3Management fee income


2,629


0.8


3,136


0.8


5,475


1.6Other revenues


954


0.3


2,170


0.5


2,303


0.7Total revenues


352,537


100.0


419,992


100.0


343,265


100.0Operating expenses (income):Equipment trading expenses


37,538


10.6


84,216


20.1


43,920


12.8Direct operating expenses


36,942


10.5


28,246


6.7


28,552


8.3Administrative expenses


40,908


11.6


46,154


11.0


39,843


11.6Depreciation and amortization


115,688


32.8


110,450


26.3


101,670


29.6Provision for doubtful accounts


545


0.2


4,878


1.2


792


0.3Net (gain) on sale of leasing equipment


(9,278
)

(2.6
)

(23,534
)

(5.6
)

(12,119
)

(3.6
)Net (gain) on sale of container portfolios


(185
)

(0.1
)

(2,789
)

(0.7
)




Total operating expenses


222,158


63.0


247,621


59.0


202,658


59.0Operating income


130,379


37.0


172,371


41.0


140,607


41.0Other expenses (income):Interest and debt expense (including write-off of deferred financing costs of $0, $250, and $204)


68,807


19.5


65,233


15.6


52,333


15.3(Gain) on debt extinguishment


(14,130
)

(4.0
)

(23,772
)

(5.7
)




Unrealized (gain) loss on interest rate swaps


(35,152
)

(10.0
)

76,047


18.1


27,883


8.1Total other expenses


19,525


5.5


117,508


28.0


80,216


23.4Income before income taxes


110,854


31.5


54,863


13.0


60,391


17.6Income tax expense


39,268


11.2


19,067


4.5


21,600


6.3Net income

$
71,586


20.3
%
$
35,796


8.5
%
$
38,791


11.3
%


Comparison of Year Ended December 31, 2009 to Year Ended December 31, 2008

Leasing revenues.The principal components of our leasing revenues are presented in the following table. Per diem revenue
represents revenue earned
under operating lease contracts; fee and ancillary lease revenue represent fees billed for the pick-up and drop-off of containers in certain geographic

41

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locations
and billings of certain reimbursable operating costs such as repair and handling expenses; and finance lease revenue represents interest income earned under finance lease contracts.

Year Ended
December 31,2009

2008(Dollars in thousands)Leasing revenues:Operating lease revenues:Per diem revenue

$
256,879

$
266,978Fee and ancillary lease revenue


31,880


31,935Total operating lease revenue


288,759


298,913Finance lease revenues


20,502


20,379Total leasing revenues

$
309,261

$
319,292


Total
leasing revenues were $309.3 million for 2009, compared to $319.3 million for 2008, a decrease of $10.0 million, or 3.1%.

Per
diem revenue decreased by $10.1 million compared to 2008. The primary reasons for the decrease are as follows:



Fee
and ancillary lease revenue as well as finance lease revenue remained relatively unchanged from the 2008 level.

Equipment trading activities.Equipment trading revenues represent the proceeds on the sale of equipment purchased for resale.
Equipment trading
expenses represent the cost of equipment sold, including costs associated with the acquisition, maintenance and selling of trading inventory, such as positioning, repairs, handling and storage costs,
and estimated direct selling and administrative costs.

Year Ended December 31,2009

2008(Dollars in thousands)Equipment trading revenues

$
39,693

$
95,394Equipment trading expenses


(37,538
)

(84,216
)Equipment trading margin

$
2,155

$
11,178


The
equipment trading margin decreased $9.0 million compared to 2008. The trading margin decreased by $6.6 million due to a lower per unit trading margin and by
$2.7 million due to a lower volume of units sold. These decreases were partially offset by a decrease in selling costs and administrative expenses related to the volume of units sold. We
typically experience a lag of several

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months
between the time that we buy and sell used containers, and in periods of falling prices inventory losses reduce our sales margins.

Direct operating expenses.Direct operating expenses primarily consist of our costs to repair equipment returned off lease, to
store the equipment
when it is not on lease, and to reposition equipment that has been returned to locations with weak leasing demand.

Direct
operating expenses were $36.9 million for 2009, compared to $28.2 million for 2008, an increase of $8.7 million. The primary reasons for the increase are
outlined below:



Administrative expenses.Administrative expenses were $40.9 million for 2009, compared to $46.2 million for 2008, a
decrease of
$5.3 million, or 13.0%. This decrease was mainly due to lower employee incentive costs of $3.0 million, lower foreign exchange losses of $0.8 million, lower travel expenses of
$0.7 million, and lower consulting fees of $0.7 million.

Depreciation and amortization.Depreciation and amortization was $115.7 million for 2009, compared to $110.5 million
for 2008, an
increase of $5.2 million, or 4.7%. Depreciation increased by $18.5 million due to a larger depreciable fleet, resulting from our large investment in equipment in 2008. This increase was
partially offset by a $9.3 million decrease due to another vintage year of older equipment becoming fully depreciated in the fourth quarter of 2008 and a $3.7 million decrease due to
disposals.

Provision for doubtful accounts.There was a provision for doubtful accounts of $0.5 million for 2009, compared to
$4.9 million for
2008, a decrease of $4.4 million. In 2008, a $2.7 million reserve was established for amounts estimated to be uncollectible under a finance lease receivable for one of our customers, as
well as an additional provision of $1.4 million against our finance lease portfolio for expected uncollectible accounts. In 2009, the provision for several small customer defaults was largely
off-set by the reversal of certain provisions recorded in 2008 due to better than expected container recoveries.

Net (gain) on sale of leasing equipment.Gain on sale of equipment was $9.3 million for 2009, compared to a gain of
$23.5 million for
2008, a decrease of $14.2 million. Gain on sale decreased $12.8 million due to lower selling prices and higher selling costs. In addition, in 2009 we recorded a $1.5 million loss
on new factory units placed on a finance lease. These units were purchased in 2008 when equipment prices were historically high and we leased them out in 2009 at a lower implied price per container.
We recognize an up-front gain or loss when we place existing equipment on finance leases and the market value of the equipment is different from our net book value. We do not incur
up-front gains or losses when we place existing equipment on operating leases.

Net (gain) on sale of container portfolios.Gain on sale of container portfolios was $0.2 million for 2009, and
$2.8 million for 2008.
In the third quarter of 2009 we sold container portfolios for total proceeds of $8.5 million, while in the third quarter of 2008 we sold container portfolios for total proceeds of
$40.5 million.

Interest and debt expense.Interest and debt expense was $68.8 million for 2009, compared to $65.2 million for 2008, an
increase of
$3.6 million. The increase was primarily due to a higher effective interest rate on the Company's consolidated debt balances.

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(Gain) on debt extinguishment.Gain on debt extinguishment of $14.1 million (net of the write-off of deferred financing
costs of
approximately $0.2 million) for 2009 was due to the repurchase of a portion of the Series 2006-1 Term Notes. Gain on debt extinguishment of $23.8 million (net of the
write-off of deferred financing costs of $0.3 million) for 2008 was due to the repurchase of a portion of the Series 2006-1 Term Notes.

Unrealized (gain) loss on interest rate swaps.Unrealized gain on interest rate swaps was $35.2 million for 2009, compared
to an unrealized
loss $76.0 million for 2008. The net fair value of the interest rate swap contracts was a net liability of $59.6 million at December 31, 2009, compared to net liability of
$95.2 million at December 31, 2008. The decrease in the liability resulted from an increase in long-term interest rates during 2009.

Income tax expense.Income tax expense was $39.3 million for 2009, compared to $19.1 million for 2008, and the
effective tax rates were
35.4% in 2009 and 34.8% in 2008. The 2008 effective tax rate was lower than 2009 primarily due to a decrease in the required state rate in 2008.

The
Company records income tax expense, with the majority of the expense recorded as a deferred income tax liability on the balance sheet. We expect this deferred liability to increase
for the foreseeable future. Due to the availability of net operating loss carryovers and continued accelerated tax depreciation for our equipment, the Company currently does not pay any significant
federal, state or foreign income taxes.

Comparison of Year Ended December 31, 2008 to Year Ended December 31, 2007

Leasing revenues.The principal components of our leasing revenues are presented in the following table. Per diem revenue
represents revenue earned
under operating lease contracts; fee and ancillary lease revenue represent fees billed for the pick-up and drop-off of containers in certain geographic locations and billings
of certain reimbursable operating costs such as repair and handling expenses; and finance lease revenues represents interest income earned under finance lease contracts.

Year Ended
December 31,2008

2007(Dollars in thousands)Leasing revenues:Operating lease revenues:Per diem revenue

$
266,978

$
240,409Fee and ancillary lease revenue


31,935


27,596Total operating lease revenues


298,913


268,005Finance lease revenues


20,379


18,268Total leasing revenues

$
319,292

$
286,273


Total
leasing revenues were $319.3 million for 2008, compared to $286.3 million for 2007, an increase of $33.0 million, or 11.5%.

Per
diem revenue increased by $26.6 million from 2007 primarily due to an increase in fleet size, partially offset by a decrease in per diem rates. Below outlines the primary
reasons for the increase:



44

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Fee
and ancillary lease revenue increased by $4.3 million as compared to the prior year primarily due to an increase in drop off volume.

Finance
lease revenues increased by $2.1 million in 2008, primarily due to an increase in the average size of our finance lease portfolio.

Equipment trading activities.Equipment trading revenues represent the proceeds on the sale of equipment purchased for resale.
Equipment trading
expenses represent the cost of equipment sold, including costs associated with the acquisition, maintenance and selling of trading inventory, such as positioning, repairs, handling and storage costs,
and estimated direct selling and administrative costs.

Year Ended
December 31,2008

2007(Dollars in thousands)Equipment trading revenues

$
95,394

$
49,214Equipment trading expenses


(84,216
)

(43,920
)Equipment trading margin

$
11,178

$
5,294


The
equipment trading margin increased $5.9 million for 2008 compared to 2007. The trading margin increased by $7.2 million due to a higher volume of units sold and by
$1.8 million due to a higher per unit trading margin. These increases were partially offset by an increase of $3.1 million in selling costs and administrative expenses related to the
volume of units sold. Equipment trading margins were higher in 2008 partially due to the upward trend in used container selling prices in 2008. We typically experience a lag of several months between
the time that we buy and sell used containers, so that we benefit from inventory profits in addition to our target sales margins when prices are increasing.

Direct operating expenses.Direct operating expenses primarily consist of our costs to repair equipment returned off lease, to
store the equipment
when it is not on lease, and to reposition equipment that has been returned to locations with weak leasing demand.

Direct
operating expenses were $28.2 million for 2008, compared to $28.6 million for 2007, a decrease of $0.4 million. Below outlines the primary reasons for the
decrease:



Administrative expenses.Administrative expenses were $46.2 million for 2008, compared to $39.8 million for 2007, an
increase of
$6.4 million, or 16.1%. This increase was mainly due to higher employee incentive and compensation costs of $4.2 million related to our high level of profitability growth in 2008 and
$1.8 million in foreign exchanges losses in 2008 versus foreign exchange gains in 2007.

Depreciation and amortization.Depreciation and amortization was $110.5 million for 2008, compared to $101.7 million
for 2007, an
increase of $8.8 million, or 8.6%. Depreciation expense

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increased
by $12.1 million due to new equipment added to the fleet and placed in service in 2008, and increased by $5.6 million due to the purchase of 57,000 TEU of older managed units
in the fourth quarter of 2007. The increase in depreciation expense in 2008 was partially offset by a decrease of $9.0 million due to certain equipment becoming fully depreciated in the fourth
quarter of 2007 and 2008.

Provision for doubtful accounts.There was a provision for doubtful accounts for $4.9 million for 2008, compared to
$0.8 million for
2007, an increase of $4.1 million. The increase was primarily due to a $2.7 million reserve established for amounts estimated to be uncollectible under a finance lease receivable for one
of our customers, as well as an additional provision of $1.4 million against our finance lease portfolio for expected uncollectible accounts.

Net (gain) on sale of leasing equipment.Gain on sale of equipment was $23.5 million for 2008, compared to a gain of
$12.1 million for
2007, an increase of $11.4 million. Gain on sale of equipment increased by $8.5 million due to higher selling prices for used containers, and increased by $2.9 million primarily
due to higher volume of units sold.

Net (gain) on sale of container portfolios.Gain on the sale of container portfolios was $2.8 million for 2008. There were
no sales of
container portfolios for the year ended December 31, 2007. In the third quarter of 2008 we sold several container portfolios for total proceeds of $40.5 million.

Interest and debt expense.Interest and debt expense was $65.0 million for 2008, compared to $52.1 million for 2007, an
increase of
$12.9 million. The increase was primarily due to an increase in the average debt balance driven by the increase in the average size of our fleet. Our average effective interest rate was
slightly lower during 2008 as compared to 2007.

(Gain) on debt extinguishment.Gain on debt extinguishment of $23.8 million (net of the write-off of deferred financing
costs of
$0.3 million) for 2008 was due to the repurchase of a portion of the Series 2006-1 Term Notes. There were no gains on debt extinguishment for 2007.

Unrealized loss on interest rate swaps.Unrealized loss on interest rate swaps was $76.0 million for 2008, compared to
$27.9 million
for 2007. The net fair value of the interest rate swap contracts was a net liability of $95.2 million at December 31, 2008, compared to net liability of $17.9 million at
December 31, 2007, with the decrease in fair value due to the decrease in long-term interest rates during 2008.

Income tax expense.Income tax expense was $19.1 million for 2008, compared to $21.6 million for 2007, and the
effective tax rate was
34.8% in 2008 compared to 35.8% in 2007. The decrease in our effective rate is primarily due to a decrease in our state tax rate.

While
we record income tax expense, we do not currently pay any significant federal, state or foreign income taxes due to the availability of net operating loss carryovers and
accelerated tax depreciation for our equipment. The vast majority of the expense recorded for income taxes is recorded as a deferred income tax liability on the balance sheet. We expect the deferred
income tax liability balance to grow for the foreseeable future.

Business Segments

We operate our business in one industry, intermodal transportation equipment, and in two business segments, Equipment leasing and
Equipment trading.

Equipment leasing

We own, lease and ultimately dispose of containers and chassis from our lease fleet, as well as manage containers owned by third parties. Equipment leasing
segment revenues represent leasing

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revenues
from operating and finance leases, fees earned on managed container leasing activities, as well as other revenues. Expenses related to equipment leasing include direct operating expenses,
administrative expenses, depreciation expense, and interest expense. The Equipment leasing segment also includes gains and losses on the sale of owned leasing equipment.

The
following table lists selected revenue and expense items for our Equipment leasing segment for the years ended December 31, 2009, 2008 and 2007:

Year Ended December 31,2009

2008

2007(Dollars in thousands)Equipment leasing segment:Total revenues

$
311,875

$
324,083

$
293,062Depreciation expense


115,429


110,400


101,670Interest expense


68,004


63,797


51,656Net (gain) on sale of leasing equipment


(9,278
)

(23,534
)

(12,119
)Pre-tax income(1)


60,691


98,724


83,753


---

Segment Comparison of Year Ended December 31, 2009 to Year Ended December 31, 2008

Equipment leasing revenues.Total revenues for the Equipment leasing segment were $311.9 million in 2009 compared to
$324.1 million in
2008, a decrease of $12.2 million, or 3.8%. The primary changes are as follows:



Fee
and ancillary lease revenue as well as finance lease revenues remained relatively unchanged in 2009 from the 2008 level.

Equipment leasing pretax income.Pretax income for the Equipment leasing segment was $60.7 million in 2009 compared to
$98.7 million in
2008, a decrease of $38.0 million, or 38.5%. The primary reasons for the decrease in pretax income are as follows:



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Segment Comparison of Year Ended December 31, 2008 to Year Ended December 31, 2007

Equipment leasing revenues.Total revenues for the Equipment leasing segment were $324.1 million in 2008 compared to
$293.1 million in
2007, an increase of $31.0 million, or 10.6%. In 2008, leasing revenues increased by $24.5 million due to a larger fleet size and by $1.8 million due to higher utilization of our
leasing equipment. Fee and ancillary lease revenue increased by $4.3 million as compared to the prior year. These increases were partially offset by a $0.5 million reduction in leasing
revenues from lower per diem rates.

Equipment leasing pretax income.Pretax income for the Equipment leasing segment was $98.7 million in 2008 compared to
$83.8 million in
2007, an increase of $14.9 million, or 17.8%. Equipment leasing revenues increased by $31.0 million in 2008, and the gain on the sale of leasing equipment increased by
$11.4 million primarily due to higher selling prices for used containers in 2008 compared to 2007.

The
increase in revenue and gain on sale of leasing equipment were partially offset by an $8.7 million increase in depreciation expense, a $12.4 million increase in
interest expense, and a $5.6 million increase in administrative expenses.

Equipment trading

We purchase containers from shipping line customers and other sellers of containers, and resell these containers to container traders and users of containers for
storage or one-way shipment. Equipment trading segment revenues represent the proceeds on the sale of containers purchased for resale. Expenses related to equipment trading include the
cost of containers purchased for resale that were sold and related selling costs, as well as direct operating expenses, administrative expenses and interest expense.

The
following table lists selected revenue and expense items for our Equipment trading segment for the years ended December 31, 2009, 2008 and 2007:

Year Ended December 31,2009

2008

2007(Dollars in thousands)Equipment trading segment:Equipment trading revenues

$
39,693

$
95,394

$
49,214Equipment trading expense


(37,538
)

(84,216
)

(43,920
)Equipment trading margin


2,155


11,178


5,294Interest expense


803


1,186


473Pre-tax income(1)


881


8,414


4,521


---

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Segment Comparison of Year Ended December 31, 2009 to Year Ended December 31, 2008

Equipment trading margin.The Equipment trading margin, the difference between Equipment trading revenues and expenses, decreased
$9.0 million
in 2009 compared to 2008. The trading margin decreased by $6.6 million due to a lower per unit trading margin and by $2.7 million due to a lower volume of units sold. These decreases
were partially offset by a decrease in selling costs and administrative expenses related to the volume of units sold.

Equipment trading pretax income.Pretax income for the Equipment trading segment was $0.9 million in 2009 compared to
$8.4 million in
2008, a decrease of $7.5 million, or 89.3%. which was primarily due to the Equipment trading margin decrease of $9.0 million. The decrease in administrative expenses was primarily due to
lower allocated corporate expenses. Corporate expenses are allocated to the
equipment trading segment primarily based on the volume of units sold in the equipment trading fleet relative to total units sold from both the equipment trading and equipment leasing fleets.

Segment Comparison of Year Ended December 31, 2008 to Year Ended December 31, 2007

Equipment trading margin.Equipment trading revenues and Equipment trading expenses increased significantly in 2008 compared to 2007
primarily due to
an increase in the number of units purchased and sold. The equipment trading margin, the difference between Equipment trading revenues and expenses, increased $5.9 million in 2008 compared to
2007. The trading margin increased by $7.2 million due to a higher volume of units sold and by $1.8 million due to a higher per unit trading margin. These increases were partially offset
by an increase in selling costs and administrative expenses related to the volume of units sold.

Equipment trading pretax income.Pretax income for the Equipment trading segment was $8.4 million in 2008 compared to
$4.5 million in
2007, an increase of $3.9 million, or 86.7%. The Equipment trading margin increased by $5.9 million in 2008. The increase in Equipment trading margin was partially offset by a
$0.7 million increase in administrative expenses and $0.7 million increase in interest expense. The increase in administrative expenses was primarily due to higher allocated corporate
expenses. Corporate expenses are allocated to the equipment trading segment primarily based on the volume of units sold in the equipment trading fleet relative to total units sold from both the
equipment trading and equipment leasing fleets.

Liquidity and Capital Resources

Our principal sources of liquidity are cash flows provided by operating activities, proceeds from the sale of our leasing equipment,
principal payments on finance lease receivables and borrowings under our credit facilities. Our cash in-flows and borrowings are used to finance capital expenditures, meet debt service
requirements, and pay dividends.

We
continue to have sizable cash in-flows. For 2009, cash provided by operating activities, together with the proceeds from the sale of our leasing equipment and principal
payments on our finance leases, was $263.7 million. In addition, as of December 31, 2009 we had $59.9 million of unrestricted cash and $165.5 million of additional
borrowing capacity under our current credit facilities.

As
of December 31, 2009, major committed cash outflows in the next 12 months include $91.4 million of committed but unpaid capital expenditures and
$164.9 million of scheduled principal payments on our existing debt facilities.

We
believe that cash provided by operating activities and existing cash, proceeds from the sale of our leasing equipment and principal payments on our finance lease receivables will be
sufficient to meet our committed obligations over the next 12 months. In addition, we were successful in securing new financing commitments in 2009 despite the challenging market for equipment
financing. During

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2009,
we entered into a $75 million asset backed credit facility, which was increased to $100 million in December, we entered into other term loans totaling $32.5 million, and we
entered into a capital lease for $10.0 million. We expect that we will be able to secure additional financing in 2010 to support investment in our fleet.

At
December 31, 2009, our outstanding indebtedness was comprised of the following (amounts in millions):

Current
Amount
Outstanding

Current
Maximum
Borrowing
LevelAsset backed securitization (ABS)Term notes  Series 2006-1

$
357.8

$
357.8Term notes  Series 2005-1


342.4


342.42008 Asset backed credit facility


209.5


225.02009 Asset backed credit facility


50.0


100.0Revolving credit facility





100.0Finance lease facility


38.5


38.52007 Term loan facility


26.7


26.72009 Term loan facilities


32.2


32.2Port equipment facility


10.6


10.6Capital lease obligations


93.6


93.6Total Debt

$
1,161.3

$
1,326.8


The
maximum commitment levels depicted in the chart above may not reflect the actual availability under all of the credit facilities. Certain of these facilities are governed by
borrowing bases that limit borrowing capacity to an established percentage of relevant assets.

Interest
rates on the majority of our debt obligations are based on floating rate indices (such as LIBOR). We economically hedge the risks associated with fluctuations in interest rates
on our long-term borrowings by entering into interest rate swap contracts.

Asset Backed Securitization Term Notes

Our Asset Backed Securitization program was the primary funding source used to finance our existing container fleet and new container purchases from the program's
inception in April of 2006 through the conversion of the Term Note Series 2005-1 to a term loan in April 2008. The Term Note Series 2006-1 issued in April 2006
was used to finance the majority of the containers in our fleet at that time, and the Term Notes Series 2005-1 was primarily used to finance our new container purchases between
April 2006 and April 2008. The Term Note Series 2005-1 automatically converted to a nine year amortizing term loan as of April 12, 2008.

The
borrowing capacity under the ABS program is determined by applying the advance rate of 82% against the net book values of designated eligible containers plus accounts receivable for
sold containers not outstanding more than 60 days plus restricted cash. The net book value for purposes of calculating our borrowing capacity is the original equipment cost depreciated over
12 years to a range of 20% to 32% of original equipment cost depending on equipment type. Under the ABS program, we
are required to maintain restricted cash balances on deposit in a designated bank account equal to five months of interest expense.

During
the second quarter of 2009, we repurchased approximately $35.0 million of our Series 2006-1 Term Notes and recorded a gain on debt extinguishment of
$14.1 million, net of the write-off of deferred financing costs of $0.2 million. During the fourth quarter of 2008, we repurchased

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approximately
$48.2 million of our Series 2006-1 Term Notes and recorded a gain on debt extinguishment of $23.8 million, net of the write-off of deferred
financing costs of $0.3 million.

2008 Asset Backed Credit Facility

On March 27, 2008, we entered into an Asset Backed Credit Facility. The facility has a revolving credit period and the current borrowing capacity under
this facility is $225 million. The revolving period ends June 30, 2010, on which date the facility will convert to a term loan and amortize in equal monthly installments through June
2018. The interest rate margin will increase by 75 basis points when this facility is converted to a term loan.

The
borrowing capacity under the Asset Backed Credit Facility is determined by applying the advance rate of 82% against the net book values of designated eligible containers plus
accounts receivable for sold containers not outstanding more than 60 days. The net book value for purposes of calculating our borrowing capacity is the original equipment cost depreciated over
12 years to a range of 20% to 32% of original equipment cost depending on equipment type.

2009 Asset Backed Credit Facility

On October 26, 2009, we entered into a $75 million Asset Backed Credit Facility, which was increased to $100 million on December 21,
2009. The facility initially has a 24 month revolving credit period, commencing on the date of the facility, followed by a four year term period. The term notes amortize on a level basis over
the four year period to 60% of the outstanding balance. The interest rate margin will increase by 150 basis points if the facility is converted to a term loan at the end of the revolving credit
period.

The
borrowing capacity under the Asset Backed Credit Facility is determined by applying the advance rate of 75% against the net book values of designated eligible containers plus
accounts receivable for sold containers not outstanding more than 60 days. The net book value for purposes of calculating our borrowing capacity is the original equipment cost depreciated over
12 years to a range of 20% to 32% of original equipment cost depending on equipment type. Under the 2009 Asset Backed Credit Facility, we are required to maintain restricted cash balances on
deposit in a designated bank account equal to three months of interest expense.

Revolving Credit Facility

On August 15, 2007, we entered into a Revolving Credit Agreement. The current commitment under the Revolving Credit Facility is $100.0 million and
the maturity date is August 15, 2012. We are required to maintain unencumbered assets equivalent to 50% of the maximum commitment.

Finance Lease Facility

On July 31, 2006, we entered into a $50 million credit facility to support the growth of our finance lease business (the "Finance Lease Facility").
The Finance Lease Facility had a two year revolving period which preceded a ten year term in which the outstanding balance, as of the term conversion date, amortizes in monthly installments. The
Finance Lease Facility is secured by the finance lease receivables associated with certain containers. The Finance Lease Facility has a final maturity of July 2018.

The
borrowing capacity under the Finance Lease Facility is determined by applying the advance rate of 90% against the lesser of the original equipment cost or the net present value of
the minimum lease payments discounted using the facility rate at the time of borrowing.

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2007 Term Loan Facility

On November 19, 2007, we entered into a three year term loan, which is secured by approximately 57,000 TEU of previously managed dry and special containers
that we purchased on October 1, 2007. The final maturity date of the loan is November 19, 2010. Our initial borrowing under this facility of $20.0 million was made on
November 19, 2007. We made an additional borrowing under this facility of $19.9 million on January 2, 2008 pursuant to a lender commitment dated December 20, 2007.

The
borrowing capacity under the 2007 Term Loan Facility is determined by applying the advance rate of 80% against the net book values of designated eligible containers plus accounts
receivable for sold containers not outstanding more than 90 days. The net book value for purposes of the borrowing base calculation is the equipment acquisition cost depreciated at an annual
rate of 8%.

2009 Term Loan Facilities

On July 31, 2009, we entered into a six year $7.5 million term loan which is secured by certain containers on lease to a single customer.

On
December 24, 2009, we entered into a five year $25 million term loan which is secured by certain containers on lease to various customers.

Port Equipment Facility

On December 28, 2006, we entered into a Euro denominated credit facility to support a port equipment financing transaction (the "Port Equipment Facility").
The Port Equipment Facility has an eight year term and amortizes in equal monthly installments.

Capital Lease Obligations

We have entered into a series of capital leases with various financial institutions to finance the purchase of chassis. The lease agreements have been structured
as ten year Terminal Rental Adjustment Clause ("TRAC") leases with purchase options at the end of the lease terms equal to the
TRAC amount as defined in each lease. For income tax purposes, these leases are treated as operating leases.

In
August 2008 and December 2008, we entered into sale-leaseback transactions for approximately 12,500 and 2,250 of containers for net proceeds of $33.9 million and
$10.5 million, respectively. The leases were accounted for as capital leases with interest expense recognized on a level yield basis over seven years, at which point there are early purchase
options.

In
March 2009, we entered into a sale-leaseback transaction for approximately 2,800 containers for net proceeds of $10.0 million. The lease was accounted for as a
capital lease with interest expense recognized on a level yield basis over five years, at which point there is an early purchase option.

Debt Covenants

We are subject to certain financial covenants under our debt facilities. At December 31, 2009, we were in compliance with all such covenants. Below are the
primary financial covenants to which we are subject:



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Non-GAAP Measures

We rely primarily on our results measured in accordance with generally accepted accounting principles ("GAAP") in evaluating our business. EBIT, Cash Interest,
TNW, and Indebtedness are non-GAAP financial measures used to determine our compliance with certain covenants contained in our debt agreements and should not be used as a substitute for
analysis of our results as reported under GAAP. However, we believe that the inclusion of this non-GAAP information provides additional information to investors regarding our debt covenant
compliance.

Minimum EBIT to Cash Interest Expense

For the purpose of this covenant, EBIT is calculated based on the cumulative sum of our earnings for the last four quarters (excluding income taxes, interest
expense, amortization / write off of deferred financing charges, unrealized gain or loss on interest rate swaps and certain non-cash charges). Cash Interest Expense is calculated based on
interest expense adjusted to exclude interest income, amortization of deferred financing costs, and the difference between current and prior period interest expense accruals.

Minimum
EBIT to Cash Interest Expense is calculated at the consolidated level and for TAL Advantage I LLC and TAL Advantage II LLC, wholly owned special purpose entities
whose primary activity is to issue asset backed notes. The Consolidated Minimum EBIT to Cash Interest Expense ratio is fixed at 1.10 to 1.00 for our Asset backed securitization (ABS), 2008 Asset
backed facility and Revolving credit facility. The TAL Advantage I LLC and the TAL Advantage II LLC Minimum EBIT to Cash Interest Expense ratio is fixed at 1.10 to 1.00 for the Asset
backed securitization and the Asset backed credit facilities. The Finance lease facility Consolidated Minimum EBIT to Cash Interest Expense ratio is fixed at 1.05 to 1.00.

TAL
Advantage III LLC is a wholly owned special purpose entity whose primary activity is to issue asset backed notes for the 2009 Asset Backed Credit Facility. TAL Advantage
III LLC must maintain a Minimum EBIT to Cash Interest Expense ratio of 1.30 to 1.00. The first compliance date for this covenant under the 2009 Asset Backed Credit Facility is March 31,
2010.

Below
is the calculation of EBIT to Cash Interest Expense (based on the last four quarters) as of December 31, 2009 (in thousands):

EBIT to Cash Interest Expense:

Consolidated(1)

TAL Adv I

TAL Adv IINet income

$
71,586

$
37,810

$
9,239Plus: Income tax expense


39,268


20,892


5,103Interest expense including write-off of deferred financing costs


68,807


38,781


13,175Unrealized (gains) on interest rate swaps


(35,152
)

(17,746
)

(10,608
)All non-cash expenses attributable to incentive arrangements


1,717





EBIT

$
146,226

$
79,737

$
16,909Interest expense (excluding interest income of $185, $120, and $6 respectively)

$
68,992

$
38,901

$
13,181Amortization and write-off of deferred financing costs


(1,170
)

(607
)

(294
)Accrued interest (represents 2009 interest expense not paid)


(4,213
)

(1,078
)

(403
)Cash payments of prior period accrued interest


3,160


1,121


347Cash Interest Expense

$
66,769

$
38,337

$
12,831EBIT to Cash Interest Expense Ratio


2.19


2.08


1.32Required Minimum EBIT to Cash Interest Expense Ratio


1.10


1.10


1.10


(1)The
consolidated amounts shown above include all consolidated subsidiaries of TAL International Group, Inc., including TAL Advantage I, LLC,
TAL Advantage II, LLC and TAL Advantage III, LLC.


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Minimum TNW and Maximum Indebtedness to TNW Covenants

We are required to meet consolidated Minimum TNW and Maximum Indebtedness to TNW covenants. For the purposes of calculating these covenants, all amounts are based
on the consolidated balance sheet of TAL International Group, Inc.

For
the ABS and Asset backed credit facilities, the required minimum TNW is calculated as $321.4 million plus 50% of cumulative net income or loss since January 1, 2006. At
December 31, 2009, the required minimum TNW for the ABS facilities was $415.5 million. For the Finance lease facility the required minimum TNW is fixed at $300 million.

The
Maximum Indebtedness to TNW ratio is fixed at 4.75 to 1.00 for the ABS, 2008 Asset backed, 2007 Term loan and Revolving credit facilities and 5.00 to 1.00 for the Finance lease and
Port equipment facilities.

Below
is the calculation of the covenant compliance for the consolidated Minimum TNW and consolidated Maximum Indebtedness to TNW as of December 31, 2009 for the ABS, Asset backed
credit facility and other facilities (in thousands):

Other Facilities*

ABS

2008/2009 Asset Backed
Credit FacilitiesMinimum TNW:Tangible AssetsTotal Assets

$
1,800,978

$
1,800,978

$
1,800,978Deferred Financing Costs


(8,882
)

(8,882
)

(8,882
)Goodwill


(71,898
)

(71,898
)

(71,898
)Intangibles


(1,868
)

(1,868
)

(1,868
)Fair value of derivative instruments (asset)


(2,674
)

(2,674
)

(2,674
)Total Tangible Assets

$
1,715,656

$
1,715,656

$
1,715,656All indebtedness:Total debt

$
1,161,298

$
1,161,298

$
1,161,298Accrued interest


4,213


4,213


4,213Fair value of derivative instruments (liability)


61,799


N/A


N/AEquipment purchases payable


3,312


3,312


3,312Total Indebtedness

$
1,230,622

$
1,168,823

$
1,168,823TNW (Total Tangible Assets less Total Indebtedness)

$
485,034

$
546,833

$
546,833Required Minimum TNW

$
300,000

$
415,504

$
415,504Maximum Indebtedness to TNW:Total Indebtedness

$
1,230,622

$
1,168,823

$
1,168,823Fair value of derivative instruments (liability)


N/A


61,799


N/ATotal Indebtedness for Maximum Indebtedness to TNW

$
1,230,622

$
1,230,622

$
1,168,823TNW

$
485,034

$
546,833

$
546,833Total Indebtedness / TNW


2.54


2.25


2.14Maximum Allowable Indebtedness to TNW


4.75 / 5.00


4.75


4.75


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Failure
to comply with these covenants would result in a default under the related credit agreements and could result in the acceleration of our outstanding debt if we
were unable to obtain a waiver from the creditors.

Dividends Paid

We paid the following quarterly dividends during the years ended December 31, 2009 and 2008 on our issued and outstanding common stock:

Record Date

Payment Date

Aggregate Payment

Per Share PaymentDecember 1, 2009


December 22, 2009

$
0.3 million

$
0.01September 3, 2009


September 24, 2009

$
0.3 million

$
0.01June 2, 2009


June 23, 2009

$
0.3 million

$
0.01March 12, 2009


March 26, 2009

$
0.3 million

$
0.01November 19, 2008


December 10, 2008

$
13.4 million

$
0.4125August 21, 2008


September 12, 2008

$
13.5 million

$
0.4125May 22, 2008


June 12, 2008

$
13.4 million

$
0.4125March 20, 2008


April 10, 2008

$
12.2 million

$
0.3750


Treasury Stock

On March 13, 2006, our Board of Directors authorized a stock buyback program for the repurchase of our common stock. The stock repurchase program, as now
amended, authorizes us to repurchase up to 4.0 million shares of our common stock.

We
repurchased the following amounts of Treasury shares:

Year

Shares Purchased

Amount Paid2009


1,953,692

$
17.4 million2008


643,200

$
10.9 million2007


276,029

$
6.3 million


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Cash Flow

The following table sets forth certain cash flow information for the three years ended December 31, 2009, 2008 and 2007 (dollars
in thousands):

Year Ended
December 31,
2009

Year Ended
December 31,
2008

Year Ended
December 31,
2007Net cash provided by operating activities

$
162,686

$
201,013

$
166,404Purchases of leasing equipment

$
(30,859
)
$
(450,902
)
$
(334,476
)Investments in finance leases


(27,098
)

(41,733
)

(58,407
)Proceeds from sale of equipment, net of selling costs


69,473


83,956


63,006Proceeds from sale of container portfolios


8,532


40,539


Cash collections on finance lease receivables, net of income earned


31,533


28,232


24,791Other


(151
)

134


92Net cash provided by (used in) investing activities

$
51,430

$
(339,774
)
$
(304,994
)Net cash (used in) provided by financing activities

$
(195,024
)
$
126,923

$
147,585


Operating Activities

Net cash provided by operating activities decreased by $38.3 million to $162.7 million in 2009 compared to $201.0 million in 2008 primarily
due to a decrease in the level of operating profitability.

Net
cash provided by operating activities increased by $34.6 million to $201.0 million in 2008 compared to $166.4 million in 2007 primarily due to an increase in our
level of operating profitability.

Investing Activities

Net cash provided by investing activities was $51.4 million in 2009, compared to net cash used in investing activities of $339.8 million in 2008.
The major changes were as follows:



Net
cash used in investing activities increased by $34.8 million to $339.8 million for 2008 compared to $305.0 million in 2007. Major reasons for the increase were
as follows:



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Financing Activities

Net cash used in financing activities was $195.0 million for 2009 compared to net cash provided by financing activities of $126.9 million for 2008.
The major changes were as follows:



Net
cash provided by financing activities was $126.9 million for 2008 compared to $147.6 million for 2007. The major changes were as follows:



We
entered into capital leases in 2008 and 2007 for $9.4 million and $9.7 million, respectively, to finance the acquisition of chassis equipment, which is considered a
non-cash financing activity.

Contractual Obligations

We are party to various operating leases and are obligated to make payments related to our long term borrowings. We are also obligated
under various commercial commitments, including obligations to our equipment manufacturers. Our equipment purchase obligations are in the form of conventional accounts payable, and are satisfied from
cash flows from operating and/or long term financing activities.

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The
following table summarizes our contractual obligations and commercial commitments as of December 31, 2009: (does not include amounts potentially due under guarantees, as
amounts, if any, are indeterminable)

Contractual Obligations by Twelve Month Period Ending December 31,Contractual Obligations:

Total

2010

2011

2012

2013

2014 and
thereafter(Dollars in millions)Total debt obligations(1)

$
1,300.0

$
218.2

$
197.2

$
189.7

$
175.2

$
519.7Capital lease obligations(2)


114.9


12.7


13.0


13.2


11.2


64.8Operating leases (mainly facilities)


5.6


2.7


2.0


0.8


0.1


Purchase obligations:Equipment purchases payable


3.3


3.3











Equipment purchase commitments


88.1


88.1











Total contractual obligations

$
1,511.9

$
325.0

$
212.2

$
203.7

$
186.5

$
584.5


---

Off-Balance Sheet Arrangements

At December 31, 2009, we did not have any relationships with unconsolidated entities or financial partnerships, which are often
referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We are, therefore, not
exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

Critical Accounting Policies

Our consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United
States, which require us to make estimates and assumptions that affect the amounts and disclosures reported in the consolidated financial statements and accompanying notes. Our estimates are based on
historical experience and currently available information. Actual results could differ from such estimates. The following paragraphs summarize our critical accounting policies. Additional accounting
policies are discussed in the notes to our historical financial statements contained elsewhere in this Form 10-K.

Revenue Recognition

Operating Leases with Customers

We enter into long-term leases and service leases with ocean carriers, principally as lessor in operating leases, for marine cargo equipment.
Long-term leases provide our customers with specified equipment for a specified term. Our leasing revenues are based upon the number of equipment units leased, 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 the
respective lease. Advanced billings are deferred and recognized in the period earned. Service leases do not specify the exact number of equipment units to be leased or the term that each unit will
remain on-hire but allow the lessee to pick up and drop off units at various locations specified in the lease agreement. Under a service lease, rental revenue is based on the number of
equipment units on hire

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for
a given period. Revenue for customers where collection is not reasonably assured is deferred and recognized when the amounts are received.

In
accordance with the Financial Accounting Standards Board ("FASB") Accounting Standards Codification No. 605 "Revenue Recognition" (ASC 605), we recognize billings to customers
for damages and certain other operating costs as leasing revenue as it is earned based on the terms of the contractual agreements with the customer. As principal, we are responsible for fulfillment of
the services, supplier selection and service specifications, and we have ultimate responsibility to pay the supplier for the services whether or not we collect the amount billed to the lessee.

Finance Leases with Customers

We enter into finance leases as lessor for some of the equipment in our fleet. The net investment in finance leases represents the receivables due from lessees,
net of unearned income. Unearned income is recognized on a level yield basis over the lease term and is recorded as leasing revenue. Finance leases are usually long-term in nature,
typically ranging for a period of five to ten years and typically include a bargain purchase option that enables the lessee to purchase the equipment at the end of the lease term.

Equipment Trading Revenues and Expense

Equipment trading revenues represent the proceeds from the sale of equipment purchased for resale and is recognized as units are sold and delivered to the
customer. The related expenses represent the cost of equipment sold as well as other selling costs that are recognized as incurred and are reflected as equipment trading expense in the consolidated
statements of operations.

Management Fee Income

We manage equipment which is owned by third parties and we earn management fees based on the income earned by the leasing and sales of such equipment. Management
fees are recognized as services are provided. We collect amounts billed and pay operating costs as agent on behalf of the third parties that own such equipment. These billings and operating costs are
not included in revenue and expense; instead, the net amounts owed to these equipment owners are reflected as accrued expenses in our financial statements until paid as required by our contracts.

Other Revenues

Other revenues include fee income for third party positioning of equipment.

Leasing Equipment

In general, we purchase new equipment from equipment manufacturers for the purpose of leasing such equipment to our customers. Occasionally, we may also purchase
used equipment with the intention of leasing such equipment. Used units are typically purchased with an existing lease in place or were previously owned by one of our third party owner investors.

Leasing
equipment is recorded at cost and depreciated to an estimated residual value on a straight-line basis over the estimated useful life. We will continue to review our
depreciation policies on a regular basis to determine whether changes have taken place that would suggest that a change in our depreciation policies, useful lives of our equipment or the assigned
residual values is warranted. If indicators of impairment are present, a determination is made as to whether the carrying value of our fleet exceeds its estimated future undiscounted cash flows.
Leasing equipment is tested for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recovered. Key indicators of impairment on leasing equipment
include, among other factors, a sustained decrease

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in
operating profitability, a sustained decrease in utilization, or indications of technological obsolescence.

When
testing for impairment, leasing equipment is generally grouped by equipment type, and is tested separately from other groups of assets and liabilities. Some of the significant
estimates and assumptions used to determine future undiscounted cash flows and the measurement for impairment are the remaining useful life, expected utilization, expected future lease rates, and
expected disposal prices of the equipment. We consider the assumptions on expected utilization and the remaining useful life to have the greatest impact on our estimated future undiscounted cash
flows. These estimates are principally based on historical experience and management's judgment of market conditions.

Estimated
useful lives and residual values have been principally determined based on our historical disposal experience. The estimated useful lives and residual values for our leasing
equipment from the date of manufacture are currently as follows:

Useful
Lives
(Years)

Residual Values ($)Dry container units


13

$750 to $900Refrigerated container units


12

$2,200 to $2,700Special container units


14

$600 to $1,200Tank container units


20

$3,000Chassis


20

$1,200


Costs
incurred to place new equipment into service, including costs to transport the equipment to its initial on-hire location, are capitalized. We charge to expense
inspection costs on new equipment and repair and maintenance costs that do not extend the lives of the assets at the time the costs are incurred, and include these costs in direct operating expenses.

An
allowance is provided through provision for doubtful accounts based on the net book value of a percentage of the units on lease to certain customers that are considered to be
non-performing which we believe we will not ultimately recover. The percentage is developed based on our historical experience.

Equipment Held For Sale

When leasing equipment is returned off lease, we make a determination of whether to repair and re-lease the equipment or sell the equipment. At the
time we determine that equipment will be sold, we reclassify the appropriate amounts previously recorded as leasing equipment to equipment held for sale. In accordance with FASB Accounting Standards
Codification No. 360 "Property, Plant and Equipment (ASC 360), equipment held for sale is carried at the lower of its estimated fair value, based on current transactions, less costs to sell, or
carrying value; depreciation on such assets is halted and disposals generally occur within 90 days. Subsequent changes to the asset's fair value, either increases or decreases, are recorded as
adjustments to the carrying value of the equipment held for sale; however, any such adjustments may not exceed the equipment's carrying value at the time it was initially classified as held for sale.
Initial write-downs of assets held for sale are recorded as an impairment charge and are included in net (gain) loss on sale of leasing equipment. Realized gains and losses resulting from the sale of
equipment held for sale are recorded as a (gain) loss on sale of leasing equipment, and cash flows associated with the disposal of equipment held for sale are classified as cash flows from investing
activities.

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Equipment Held For Resale  Trading Activity

On an opportunistic basis, we purchase used equipment with markings or specifications different from our own equipment for purposes of reselling it within a short
time frame for a net profit.

Equipment
purchased for resale is reported as equipment held for sale due to the short timeframe, generally less than one year, between the time the equipment is purchased and the time
the equipment is sold. Due to this short expected holding period, cash flows associated with equipment held for resale are classified as operating cash flows. Equipment trading revenues represent the
proceeds from the sale of this equipment, while Equipment trading expense includes the cost of equipment sold, any costs to sell such equipment, including administrative costs, and costs associated
with the inventory such as storage and handling charges.

Allowance for Doubtful Accounts

Our allowance for doubtful accounts is updated on a regular basis and is based upon a review of the collectability of our receivables. This review considers the
risk profile of the customer, credit quality indicators such as the level of past-due amounts and economic conditions. An account is considered past due when a payment has not been
received in accordance with the contractual terms. Accounts are generally charged off after an analysis is completed which indicates that collection of the full principal balance is in doubt. Changes
in economic conditions or other events may necessitate additions or deductions to the allowance for doubtful accounts. The allowance for doubtful accounts is intended to provide for losses inherent in
our receivables, and requires the application of estimates and judgments as to the outcome of collection efforts and the realization of collateral, among other things. We believe our allowance for
doubtful accounts is adequate to provide for credit losses inherent in our existing receivables. However, actual losses could exceed the amounts provided for in certain periods.

Income Taxes

We account for income taxes using the asset and liability method, which requires recognition of deferred tax assets and liabilities for expected future tax
consequences of temporary differences that currently exist between tax bases and financial reporting bases of our assets and liabilities. Deferred tax assets and liabilities are measured using enacted
tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. In assessing the ability to realize deferred tax assets, we consider whether it is more
likely than not that some portion or all of the deferred tax assets will not be realized.

If
applicable, we accrue income tax liabilities for unrecognized tax benefits resulting from uncertain tax positions by evaluating whether the weight of available evidence indicates that
it is more likely than not that the position will be sustained on audit and then measures the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.
Potential interest and penalties associated with such uncertain tax positions are recorded as a component of income tax expense.

Goodwill

We account for goodwill in accordance with FASB Accounting Standards Codification No. 350, "Intangibles  Goodwill and Other" (ASC 350).
ASC 350 requires goodwill and other intangible assets with indefinite lives to be reviewed for impairment annually or more frequently if circumstances indicate a possible impairment. In connection
with the Acquisition, we recorded $71.9 million of goodwill. Management determined that the Company has two reporting units, Equipment leasing and Equipment trading, and allocated
$70.9 million and $1.0 million, respectively, to each reporting unit. The annual impairment test is conducted by comparing the Company's carrying amount, to the fair value of the Company
using a market capitalization approach. Market capitalization of the entity is compared to the carrying value of the entity since virtually all of the goodwill is allocated to, and nearly

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all
of the market capitalization is attributable to, the Equipment leasing reporting unit. If the carrying value of the entity exceeds its market capitalization, then a second step would be performed
that compares the implied fair value of goodwill with the carrying amount of goodwill. The determination of implied fair value of goodwill would require management to compare the estimated fair value
of the reporting units to the estimated fair value of the assets and liabilities of the reporting units. Any excess fair value represents the implied fair value of goodwill. To the extent that the
carrying amount of the goodwill exceeds its implied fair value, an impairment loss would be recorded. Our annual review of goodwill, conducted in the fourth quarter of 2009, indicated that no
impairment of goodwill existed.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DICLOSURES ABOUT MARKET RISK

Market risk represents the risk of changes in value of a financial instrument, derivative or non-derivative, caused by
fluctuations in interest rates, foreign exchange rates and equity prices. Changes in these factors could cause fluctuations in results of our operations and cash flows. In the ordinary course of
business, we are exposed to interest rate and foreign currency exchange rate risks.

Interest Rate Risk

We enter into interest rate swap contracts to fix the interest rates on a portion of our debt. We assess and manage the external and
internal risk associated with these derivative instruments in accordance with our overall operating goals. External risk is defined as those risks outside of our direct control, including counterparty
credit risk, liquidity risk, systemic risk and legal risk. Internal risk relates to those operational risks within the management oversight structure and includes actions taken in contravention of our
policy.

The
primary external risk of our interest rate swap contracts is in derivative asset positions counterparty credit exposure, which is defined as the ability of a counterparty to perform
its financial obligations under a derivative contract. All derivative agreements are with highly rated financial institutions. Credit exposures are measured based on the market value of outstanding
derivative instruments. Both current exposures and potential exposures are calculated for each derivative contract to monitor counterparty credit exposure.

As
of December 31, 2009, we had in place total interest rate swap contracts to fix the floating interest rates on a portion of the borrowings under our debt facilities as
summarized below:

Total Notional Amount at
December 31, 2009

Weighted Average
Fixed Leg
Interest Rate at
December 31, 2009

Weighted Average
Remaining Term$1,183 million


4.17
%

3.5 years


Changes
in the fair value on these interest rate swap contracts will be recognized in the consolidated statements of operations as unrealized gains or losses on interest rate swaps.

Since
100% of our debt is hedged using interest rate swaps, our interest expense is not significantly affected by changes in interest rates. However, our earnings are impacted by changes
in interest rate swap valuations which cause gains or losses to be recorded. During the year ended December 31, 2009, unrealized gains on interest rate swaps totaled $35.2 million,
compared to unrealized losses on interest rate swaps of $76.0 million for the year ended December 31, 2008.

Foreign Currency Exchange Rate Risk

Although we have significant foreign-based operations, the U.S. dollar is the operating currency for the large majority of our leases
(and company obligations), and most of our revenues and expenses in 2009 and 2008 were denominated in U.S. dollars. However we pay our non-U.S. staff in local

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currencies,
and our direct operating expenses and disposal transactions for our older containers are often structured in foreign currencies. We recorded $0.2 million of unrealized foreign
currency exchange losses in the year ended December 31, 2009 and $1.1 million of unrealized foreign currency exchange
losses in the year ended December 31, 2008, which resulted primarily from fluctuations in exchange rates related to our Euro and Pound Sterling transactions and related assets.

In
April 2008, we entered into a foreign currency rate swap agreement to exchange Euros for U.S. Dollars based on expected payments under its Euro denominated finance lease receivables.
The foreign currency rate swap agreement expires in April 2015. The fair value of this derivative contract was approximately $0.5 million at December 31, 2009, and is reported as an
asset in Fair Value of Derivative Instruments on the consolidated balance sheet.

ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The consolidated financial statements and financial statement schedule listed under Item 15  Exhibits and
Financial Statement Schedules are filed as a part of this Item 8. Supplementary financial information may be found in Note 13 to the consolidated financial statements.

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

None.

ITEM 9A.    CONTROLS AND PROCEDURES

MANAGEMENT'S REPORT REGARDING THE EFFECTIVENESS OF DISCLOSURE CONTROLS AND PROCEDURES

We carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief
Executive Officer along with our Senior Vice President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the
period covered by this Annual Report on Form 10-K. Based upon their evaluation of these disclosure controls and procedures, our President and Chief Executive Officer along with the
Senior Vice President and Chief Financial Officer concluded, as of the end of the period covered by this Annual Report on Form 10-K, that our disclosure controls and procedures were
effective.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Our internal control over financial reporting is a process designed with the participation of our principal
executive officer and principal financial officer or persons performing similar functions to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our
financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles.

Our
internal control over financial reporting includes policies and procedures that: (a) pertain to the maintenance of records that, in reasonable detail, accurately and fairly
reflect our transactions and dispositions of assets; (b) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance
with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and Board of Directors; and
(c) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial
statements.

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Because
of its inherent limitations, our internal controls and procedures may not prevent or detect misstatements. A control system, no matter how well conceived and operated, can only
provide reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide
absolute assurance that all control issues and instances of fraud, if any, have been detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

As
of December 31, 2009, our management, with the participation of our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, conducted
an evaluation of the effectiveness of our internal control over financial reporting based on the framework established in Internal Control  Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on this evaluation, management has determined that TAL International Group, Inc.'s internal control over
financial reporting is effective as of December 31, 2009.

Ernst &
Young LLP, the independent registered public accounting firm that audited our 2009 consolidated financial statements included in this Annual Report on
Form 10-K, has issued an attestation report on our internal control over financial reporting. The report appears elsewhere in this Annual Report on Form 10-K.

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Report of Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders of
TAL International Group, Inc.

We
have audited TAL International Group, Inc.'s internal control over financial reporting as of December 31, 2009, based on criteria established in Internal
Control  Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). TAL International Group, Inc.'s management
is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the
accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company's internal control over financial reporting based on our
audit.

We
conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and
performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A
company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because
of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In
our opinion, TAL International Group, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on
the COSO criteria.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of TAL International
Group, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholders' equity and comprehensive income, and cash flows for each of the three
years in the period ended December 31, 2009 of TAL International Group, Inc. and our report dated March 1, 2010 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP


New
York, New York
March 1, 2010

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Changes in Internal Controls

There were no changes in our internal controls over financial reporting (as such term is defined in Rule 13a-15(f)
and 15d-15(f) under the Exchange Act) during the period covered by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially
affect, our internal controls over financial reporting.

ITEM 9B.    OTHER INFORMATION

Not applicable.

PART III

ITEM 10.    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required by this Item is incorporated herein by reference from the sections captioned "Election of Directors,"
"Occupations of Directors and Executive Officers," and "Section 16(a) Beneficial Ownership Reporting Compliance" in our proxy statement to be issued in connection with the Annual Meeting of
Stockholders to be held on April 29, 2010 (the "2010 Proxy Statement"), which will be filed with the SEC within 120 days after the close of our fiscal year ended December 31,
2009.

ITEM 11.    EXECUTIVE COMPENSATION

The information required by this Item is incorporated herein by reference from the section captioned "Compensation and Other
Information Concerning Directors and Officers" in the 2010 Proxy Statement, which will be filed with the SEC within 120 days after the close of our fiscal year ended December 31, 2009.

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

The information required by this Item is incorporated herein by reference from the section captioned "Management and Principal Holders
of Voting Securities" in the 2010 Proxy Statement, which will be filed with the SEC within 120 days after the close of our fiscal year ended December 31, 2009.

ITEM 13.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information required by this Item is incorporated herein by reference from the section captioned "Certain Relationships and Related
Transactions" in the 2010 Proxy Statement, which will be filed with the SEC within 120 days after the close of our fiscal year ended December 31, 2009.

ITEM 14.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item is incorporated herein by reference from the section captioned "Auditor Fees" in the 2010 Proxy
Statement, which will be filed with the SEC within 120 days after the close of our fiscal year ended December 31, 2009.

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PART IV

ITEM 15.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1)Financial Statements.

The
following financial statements are included in Item 8 of this report:

PageReport of Independent Registered Public Accounting Firm

F-2Consolidated Balance Sheets at December 31, 2009 and December 31, 2008

F-3Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007

F-4Consolidated Statements of Stockholders' Equity and Comprehensive Income for the years ended December 31, 2009, 2008 and
2007

F-5Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007

F-6Notes to Consolidated Financial Statements

F-7


(a)(2)Financial Statement Schedules

The
following financial statement schedule for the Company is filed as part of this report:

Schedule II  Valuation and Qualifying Accounts

S-1


Schedules
not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the accompanying Consolidated Financial Statements
or notes thereto.

(a)(3)List of Exhibits.

The
following exhibits are filed as part of and incorporated by reference into this Annual Report on Form 10-K:

Exhibit
No.

Description2.1

Stock Purchase Agreement, dated July 10, 2004, by and between TA Leasing Holding Co, Inc. and Klesch & Company Limited (incorporated by reference from exhibit number 2.1 to TAL International Group,
 Inc.'s Form S-1 filed on June 30, 2005, file number 333-126317)2.2

First Amendment to Stock Purchase Agreement, dated August 10, 2004, by and among TA Leasing Holding Co, Inc., Klesch & Company Limited and Transamerica Corporation (incorporated by reference from
exhibit number 2.2 to Amendment No. 1 to TAL International Group, Inc.'s Form S-1 filed on August 26, 2005, file number 333-126317)2.3

Second Amendment to Stock Purchase Agreement, dated September 30, 2004, by and among TA Leasing Holding Co, Inc., Klesch & Company Limited and Transamerica Corporation (incorporated by reference from
exhibit number 2.3 to Amendment No. 1 to TAL International Group, Inc.'s Form S-1 filed on August 26, 2005, file number 333-126317)2.4

Third Amendment to Stock Purchase Agreement, dated November 3, 2004, by and among TA Leasing Holding Co, Inc., Klesch & Company Limited, TAL International Group, Inc. and Transamerica Corporation
(incorporated by reference from exhibit number 2.4 to Amendment No. 1 to TAL International Group, Inc.'s Form S-1 filed on August 26, 2005, file number 333-126317)


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Exhibit
No.

Description2.5

Fourth Amendment to Stock Purchase Agreement, dated January 3, 2005, by and among TA Leasing Holding Co, Inc., Klesch & Company Limited, TAL International Group, Inc. and Transamerica Corporation
(incorporated by reference from exhibit number 2.5 to Amendment No. 1 to TAL International Group, Inc.'s Form S-1 filed on August 26, 2005, file number 333-126317)2.6

Fifth Amendment to Stock Purchase Agreement, dated March 31, 2005, by and among TA Leasing Holding Co, Inc., Klesch & Company Limited, TAL International Group, Inc. and Transamerica Corporation
(incorporated by reference from exhibit number 2.6 to Amendment No. 1 to TAL International Group, Inc.'s Form S-1 filed on August 26, 2005, file number 333-126317)3.1

Second Amended and Restated Certificate of Incorporation of TAL International Group, Inc. (incorporated by reference from Exhibit 3.1 to TAL International Group, Inc.'s Form 10-K filed on March 20,
 2006)3.2

Amended and Restated Bylaws of TAL International Group, Inc. (incorporated by reference from Exhibit 3.2 to TAL International Group, Inc.'s Form 10-K filed on March 20, 2006)4.1

Form of Common Stock Certificate (incorporated by reference from exhibit number 4.1 to Amendment No. 3 to TAL International Group, Inc.'s Form S-1 filed on October 5, 2005, file
number 333-126317)4.2

Amended and Restated Indenture dated as of April 12, 2006 by and between TAL Advantage I LLC and U. S. Bank National Association (incorporated by reference from Exhibit 10.35 to TAL International Group,
 Inc.'s Form 10-Q filed on May 12, 2006)4.3

First Supplemental Indenture between TAL Advantage I LLC and U.S. Bank National Association dated June 26, 2007 to the Amended and Restated Indenture dated as of April 12, 2006 (incorporated by reference
from Exhibit 10.58 to TAL International Group, Inc.'s Form 10-Q filed on August 8, 2008)4.4

Second Supplemental Indenture between TAL Advantage I LLC and U.S. Bank National Association dated November 19, 2007 to the Amended and Restated Indenture dated as of April 12, 2006 (incorporated by
reference from Exhibit 10.59 to TAL International Group, Inc.'s Form 10-Q filed on August 8, 2008)4.5

Amended and Restated Series 2005-1 Supplement dated as of April 12, 2006 between Advantage I LLC and U. S. Bank National Association (incorporated by reference from Exhibit 10.40 to TAL International
Group, Inc.'s Form 10-Q filed on May 12, 2006)4.6

Amended and Restated Management Agreement dated as of April 12, 2006 by and between TAL International Container Corporation and TAL Advantage I LLC (incorporated by reference from Exhibit 10.36 to TAL
International Group, Inc.'s Form 10-Q filed on May 12, 2006)4.7

Amended and Restated Contribution and Sale Agreement dated as of April 12, 2006 by and between TAL International Container Corporation and TAL Advantage I LLC (incorporated by reference from Exhibit 10.37
to TAL International Group, Inc.'s Form 10-Q filed on May 12, 2006)4.8

Amended and Restated Series 2005-1 Note Purchase Agreement dated as of April 7, 2006 by and between TAL Advantage I LLC, the Noteholders from time to time party thereto and the other financial institutions
from time to time party thereto (incorporated by reference from Exhibit 10.41 to TAL International Group, Inc.'s Form 10-Q filed on May 12, 2006)


68

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Table of Contents

Exhibit
No.

Description4.9

Series 2006-1 Supplement dated as of April 12, 2006 by and between TAL Advantage I LLC and U. S. Bank National Association (incorporated by reference from Exhibit 10.38 to TAL International Group,
 Inc.'s Form 10-Q filed on May 12, 2006)4.10

Series 2006-1 Note Purchase Agreement dated as of April 7, 2006 by and between TAL Advantage I LLC, TAL International Container Corporation, and Fortis Securities LLC and Credit Suisse Securities
(USA) LLC (incorporated by reference from Exhibit 10.39 to TAL International Group, Inc.'s Form 10-Q filed on May 12, 2006)4.11

Intercreditor Agreement Dated April 12, 2006 by and among TAL International Container Corporation, TAL Advantage I LLC, U. S. Bank National Association and Fortis Capital Corp. (incorporated by reference from
Exhibit 4.11 to TAL International Group, Inc.'s Form 10-K filed on March 3, 2009)4.12

Omnibus Amendment No. 2, dated June 1, 2006 (incorporated by reference from exhibit 10.42 to TAL International Group, Inc.'s Form 8-K filed on June 6, 2006)4.13

Credit Agreement, dated as of July 31, 2006, by and among TAL International Container Corporation, Fortis Capital Corp. and the Lenders party thereto (incorporated by reference from Exhibit 10.43 to TAL
International Group, Inc.'s Form 8-K filed on August 4, 2006)4.14

Amendment No. 1 dated July 13, 2007 to Credit Agreement, dated as of July 31, 2006, by and among TAL International Container Corporation, Fortis Capital Corp. and the Lenders party thereto (incorporated by
reference from Exhibit 10.47 to TAL International Group, Inc.'s Form 8-K filed on July 17, 2007)4.15

Security Agreement, dated as of July 31, 2006, by and among TAL International Container Corporation and Fortis Capital Corp. (incorporated by reference from Exhibit 10.44 to TAL International Group, Inc.'s
Form 8-K filed on August 4, 2006)4.16

Pledge Agreement, dated as of July 31, 2006, by and among TAL International Container Corporation and Fortis Capital Corp. (incorporated by reference from Exhibit 10.45 to TAL International Group, Inc.'s
Form 8-K filed on August 4, 2006)4.17

Guaranty, dated as of July 31, 2006, made by TAL International Group, Inc. (incorporated by reference from Exhibit 10.46 to TAL International Group, Inc.'s Form 8-K filed on August 4,
2006)4.18

Credit Agreement, dated as of August 15, 2007, by and among TAL International Container Corporation, National City Bank, as Administrative Agent and Collateral Agent, and the Lenders party thereto (incorporated by
reference from Exhibit 10.48 to TAL International Group, Inc.'s Form 8-K filed August 16, 2007)4.19

Security Agreement, dated as of August 15, 2007, by and among TAL International Container Corporation and National City Bank, as Collateral Agent (incorporated by reference from Exhibit 10.49 to TAL
International Group, Inc.'s Form 8-K filed on August 16, 2007)4.20

Pledge Agreement, dated as of August 15, 2007, by and among TAL International Container Corporation and National City Bank, as Collateral Agent (incorporated by reference from Exhibit 10.50 to TAL International
Group, Inc.'s Form 8-K filed on August 16, 2007)4.21

Guaranty, dated as of August 15, 2007, made by TAL International Group, Inc. (incorporated by reference from Exhibit 10.51 to TAL International Group, Inc.'s Form 8-K filed on August 16,
2007)4.22

Indenture, dated as of March 27, 2008, by and between TAL Advantage II LLC and U. S. Bank National Association (incorporated by reference from Exhibit 10.52 to TAL International Group, Inc.'s
Form 10-Q filed on May 9, 2008)


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Table of Contents

Exhibit
No.

Description4.23

First Supplemental Indenture between TAL Advantage II LLC and U.S. Bank National Association dated June 20, 2008 to the Indenture dated March 27, 2008 (incorporated by reference from Exhibit 10.60 to
TAL International Group, Inc.'s Form 10-Q filed on August 8, 2008)4.24

Third Supplemental Indenture between TAL Advantage I LLC and U.S. Bank National Association dated June 23, 2008 to the Amended and Restated Indenture dated as of April 12, 2006 (incorporated by reference
from Exhibit 10.61 to TAL International Group, Inc.'s Form 10-Q filed on August 8, 2008)4.25

Series 2008-1 Supplement, dated as of March 27, 2008, by and between TAL Advantage II LLC and U. S. Bank National Association (incorporated by reference from Exhibit 10.53 to TAL International Group,
 Inc.'s Form 10-Q filed on May 9, 2008)4.26

Management Agreement dated as of March 27, 2008, by and between TAL Advantage II LLC and TAL International Container Corporation (incorporated by reference from Exhibit 10.54 to TAL International Group,
 Inc.'s Form 10-Q filed on May 9, 2008)4.27

Contribution and Sale Agreement, dated as of March 27, 2008, by and between TAL Advantage II LLC and TAL International Container Corporation (incorporated by reference from Exhibit 10.55 to TAL
International Group, Inc.'s Form 10-Q filed on May 9, 2008)4.28

Series 2008-1 Note Purchase Agreement, dated as of March 27, 2008, by and among TAL Advantage II LLC, Fortis Capital Corp., the other purchasers party thereto from time to time and the other parties named
therein (incorporated by reference from Exhibit 10.56 to TAL International Group, Inc.'s Form 10-Q filed on May 9, 2008)4.29

Guaranty dated March 27, 2008 made by TAL International Group, Inc. (incorporated by reference from Exhibit 10.57 to TAL International Group, Inc.'s Form 10-Q filed on May 9, 2008)4.30*

Appendix A dated as of March 27, 2009 to Indenture dated as of March 27, 2008 by and between TAL Advantage II LLC and U. S. Bank National Association4.31*

Indenture, dated as of October 23, 2009, between TAL Advantage III LLC and Wells Fargo Bank, National Association4.32*

Series 2009-1 Supplement dated as of October 23, 2009 between TAL Advantage III LLC and Wells Fargo Bank, National Association4.33*

Management Agreement dated as of October 23, 2009 between TAL International Container Corporation and TAL Advantage III LLC4.34*

Contribution and Sale Agreement dated as of October 23, 2009 between TAL International Container Corporation and TAL Advantage III LLC4.35*

Series 2009-1 Note Purchase Agreement dated as of October 23, 2009 between TAL Advantage III LLC, Wells Fargo Securities, LLC, Wachovia Bank, National Association, the other Noteholders from time to
time party thereto and the other financial institutions from time to time party thereto.4.36*

Amendment No. 1 dated December 21, 2009 to Series 2009-1 Note Purchase Agreement dated as of October 23, 2009 between TAL Advantage III LLC, Wells Fargo Securities, LLC, Wachovia Bank,
National Association, the other Noteholders from time to time party thereto and the other financial institutions from time to time party thereto.4.37*

Amendment No. 1 dated February 16, 2010 to Series 2009-1 Supplement dated as of October 23, 2009 between TAL Advantage III LLC and Wells Fargo Bank, National Association.


70

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Table of Contents

Exhibit
No.

Description4.38*

Amendment No. 2 dated February 16, 2010 to Series 2009-1 Note Purchase Agreement dated as of October 23, 2009 between TAL Advantage III LLC, Wells Fargo Securities, LLC, Wachovia Bank,
National Association, the other Noteholders from time to time party thereto and the other financial institutions from time to time party thereto.10.1

Amended and Restated Shareholders Agreement, dated as of October 11, 2005, by and among TAL International Group, Inc. and certain of its stockholders (incorporated by reference from Exhibit 10.7 to TAL
International Group, Inc.'s Form 10-K filed on March 20, 2006)10.2

Investor Subscription Agreement, dated as of November 3, 2004, by and among TAL International Group, Inc., The Resolute Fund, L.P., The Resolute Fund Singapore PV, L.P., The Resolute Fund Netherlands
PV I, L.P., The Resolute Fund Netherlands PV II, L.P., The Resolute Fund NQP, L.P., JZ Equity 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 Holdings Limited (incorporated by reference from exhibit number 10.8 to TAL International Group, Inc.'s Form S-1 filed on June 30, 2005, file
number 333-126317)10.3

Amendment No. 1 to Investor Subscription Agreement, dated as of October 11, 2005, by and among TAL International Group, Inc., The Resolute Fund, L.P., The Resolute Fund Singapore PV, L.P., The
Resolute Fund Netherlands PV I, L.P., The Resolute Fund Netherlands PV II, L.P., The Resolute Fund NQP, L.P., JZ Equity 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 Holdings Limited (incorporated by reference from Exhibit 10.32 to TAL International Group, Inc.'s Form 10-K filed on March 20,
2006)10.4

Amended and Restated Management Subscription Agreement, dated as of October 11, 2005, by and among TAL International Group, Inc., Brian M. Sondey, Chand Khan, Frederico Baptista, Adrian Dunner, John C. Burns,
Bernd Schackier and John Pearson (incorporated by reference from Exhibit 10.9 to TAL International Group, Inc.'s Form 10-K filed on March 20, 2006)10.5

Amended and Restated Tax Sharing Agreement, dated as of August 1, 2005, by and among TAL International Group, Inc. and its subsidiaries named therein (incorporated by reference from exhibit number 10.12 to
Amendment No. 1 to TAL International Group, Inc.'s Form S-1 filed on August 26, 2005, file number 333-126317)10.6+

Employment Agreement, dated as of November 3, 2004, by and between TAL International Group, Inc. and Brian M. Sondey (incorporated by reference from exhibit number 10.13 to TAL International Group,
 Inc.'s Form S-1 filed on June 30, 2005, file number 333-126317)10.7+

2004 Management Stock Plan (incorporated by reference from exhibit number 10.14 to TAL International Group, Inc.'s Form S-1 filed on June 30, 2005, file number 333-126317)10.8+

First Amendment to 2004 Management Stock Plan (incorporated by reference from Exhibit 10.34 to TAL International Group, Inc.'s Form 10-K filed on March 20, 2006)10.9+

Stock Option Agreement, dated November 3, 2004, by and between TAL International Group, Inc. and Brian M. Sondey (incorporated by reference from exhibit number 10.15 to TAL International Group, Inc.'s
Form S-1 filed on June 30, 2005, file number 333-126317)10.10+

Stock Option Agreement, dated November 3, 2004, by and between TAL International Group, Inc. and Chand Khan (incorporated by reference from exhibit number 10.16 to TAL International Group, Inc.'s
Form S-1 filed on June 30, 2005, file number 333-126317)


71

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Table of Contents

Exhibit
No.

Description10.11+

Stock Option Agreement, dated November 3, 2004, by and between TAL International Group, Inc. and Frederico Baptista (incorporated by reference from exhibit number 10.17 to TAL International Group,
 Inc.'s Form S-1 filed on June 30, 2005, file number 333-126317)10.12+

Stock Option Agreement, dated November 3, 2004, by and between TAL International Group, Inc. and John C. Burns (incorporated by reference from exhibit number 10.18 to TAL International Group, Inc.'s
Form S-1 filed on June 30, 2005, file number 333-126317)10.13+

Stock Option Agreement, dated November 3, 2004, by and between TAL International Group, Inc. and Adrian Dunner (incorporated by reference from exhibit number 10.21 to TAL International Group, Inc.'s
Form S-1 filed on June 30, 2005, file number 333-126317)10.14+

Form of Indemnity Agreement between TAL International Group, Inc., certain of its subsidiaries, each of their respective current directors and certain of their respective current officers (incorporated by reference
from exhibit number 10.22 to Amendment No. 2 to TAL International Group, Inc.'s Form S-1 filed on September 20, 2005, file number 333-126317)10.15+

2005 Management Omnibus Incentive Plan (incorporated by reference from Exhibit 10.33 to TAL International Group, Inc.'s Form 10-K filed on March 20, 2006)14.1

Code of Ethics (incorporated by reference from Exhibit 14.1 to the TAL International Group, Inc.'s Form 8-K filed on April 3, 2006)21.1*

List of Subsidiaries23.1*

Consent of Independent Registered Public Accounting Firm24.1*

Powers of Attorney (included on the signature page to this Annual Report on Form 10-K)31.1*

Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended31.2*

Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of the Securities Exchange Act of 1934, as amended32.1**

Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 135032.2**

Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350


+Indicates
a management contract or compensatory plan or arrangement.*Filed
herewith.**Furnished
herewith.


(b)Exhibits.

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

(c)Financial Statement Schedules

The
Company hereby files as part of this Annual Report on Form 10-K the financial statement schedule listed in Item 15(a)(2) set forth above.

72

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Table of Contents

SIGNATURES

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

TAL International Group, Inc.Date: March 1, 2010

By:

/s/ Brian M. Sondey Brian M. Sondey
President and Chief Executive Officer


POWER OF ATTORNEY AND SIGNATURES

We, the undersigned officers and directors of TAL International Group, Inc. hereby severally constitute and appoint Brian M.
Sondey and John Burns 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 in our names in the capacities indicated below, any
amendments to this Annual Report on Form 10-K, and generally to do all things in our names and on our behalf in such capacities to enable TAL International Group, Inc. to
comply with the provisions of the Securities Exchange Act of 1934, as amended, and all the requirements of the Securities and Exchange Commission.

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant, in the capacities indicated,
on the 1st day of March 2010.

Signature

Title(s)/s/ Brian M. Sondey Brian M. Sondey

President and Chief Executive Officer
(Principal Executive Officer), Director/s/ John Burns John Burns

Senior Vice President, Chief Financial Officer
(Principal Financial Officer)/s/ Malcolm P. Baker Malcolm P. Baker

Director/s/ A. Richard Caputo, Jr. A. Richard Caputo, Jr.

Director/s/ Claude Germain Claude Germain

Director/s/ Brian J. Higgins Brian J. Higgins

Director/s/ John W. Jordan II John W. Jordan II

Director/s/ Frederic H. Lindeberg Frederic H. Lindeberg

Director/s/ David W. Zalaznick David W. Zalaznick

Director/s/ Douglas J. Zych Douglas J. Zych

Director


73

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Table of Contents

INDEX TO FINANCIAL STATEMENTS



PageCONSOLIDATED FINANCIAL STATEMENTS  DECEMBER 31, 2009, 2008 AND 2007Report of Independent Registered Public Accounting Firm

F-2Consolidated Balance Sheets at December 31, 2009 and December 31, 2008

F-3Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007

F-4Consolidated Statements of Stockholders' Equity and Comprehensive Income for the years ended December 31,
2009, 2008 and 2007

F-5Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007

F-6Notes to Consolidated Financial Statements

F-7Schedule II  Valuation and Qualifying Accounts

S-1


F-1

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Table of Contents

Report of Independent Registered Public Accounting Firm

The
Board of Directors and Stockholders of
TAL International Group, Inc.

We
have audited the accompanying consolidated balance sheets of TAL International Group, Inc. as of December 31, 2009 and 2008, and the related consolidated statements of
operations, stockholders' equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2009. Our audits also included the financial statement
schedule listed in the Index Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

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

In
our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of TAL International Group, Inc. at
December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S.
generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.

We
also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), TAL International Group, Inc's internal control over financial
reporting as of December 31, 2009, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our
report dated March 1, 2010 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP


New
York, New York
March 1, 2010

F-2

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Table of Contents

TAL INTERNATIONAL GROUP, INC.        Consolidated Balance Sheets  (Dollars in thousands, except share data)

December 31,
2009

December 31,
2008ASSETS:Leasing equipment, net of accumulated depreciation and allowances of $420,517 and $352,089

$
1,357,539

$
1,535,483Net investment in finance leases, net of allowances of $1,618 and $1,420


199,989


196,490Equipment held for sale


46,291


32,549Revenue earning assets


1,603,819


1,764,522Cash and cash equivalents (including restricted cash of $13,714 and $16,160)


73,604


56,958Accounts receivable, net of allowances of $757 and $807


33,086


42,335Leasehold improvements and other fixed assets, net of accumulated depreciation and amortization of $5,142 and $4,181


972


1,832Goodwill


71,898


71,898Deferred financing costs


8,882


8,462Other assets


6,043


8,540Fair value of derivative instruments


2,674


951Total assets

$
1,800,978

$
1,955,498LIABILITIES AND STOCKHOLDERS' EQUITY:Equipment purchases payable

$
3,312

$
27,224Fair value of derivative instruments


61,799


95,224Accounts payable and other accrued expenses


42,845


43,978Net deferred income tax liability


112,895


73,565Debt


1,161,298


1,351,036Total liabilities


1,382,149


1,591,027Stockholders' equity:Preferred stock, $.001 par value, 500,000 shares authorized, none issued





Common stock, $.001 par value, 100,000,000 shares authorized, 33,592,066 and 33,485,816 shares issued respectively


33


33Treasury stock, at cost, 3,009,171 and 1,055,479 shares, respectively


(37,489
)

(20,126
)Additional paid-in capital


398,016


396,478Accumulated earnings (deficit)


58,253


(12,090
)Accumulated other comprehensive income


16


176Total stockholders' equity


418,829


364,471Total liabilities and stockholders' equity

$
1,800,978

$
1,955,498


The
accompanying notes to consolidated financial statements are an integral part of these statements.

F-3

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Table of Contents

TAL INTERNATIONAL GROUP, INC.        Consolidated Statements of Operations  (Dollars in thousands, except share data)

Year Ended
December 31,
2009

Year Ended
December 31,
2008

Year Ended
December 31,
2007Revenues:Leasing revenues:Operating leases

$
288,759

$
298,913

$
268,005Finance leases


20,502


20,379


18,268Total leasing revenues


309,261


319,292


286,273Equipment trading revenues


39,693


95,394


49,214Management fee income


2,629


3,136


5,475Other revenues


954


2,170


2,303Total revenues


352,537


419,992


343,265Operating expenses (income):Equipment trading expenses


37,538


84,216


43,920Direct operating expenses


36,942


28,246


28,552Administrative expenses


40,908


46,154


39,843Depreciation and amortization


115,688


110,450


101,670Provision for doubtful accounts


545


4,878


792Net (gain) on sale of leasing equipment


(9,278
)

(23,534
)

(12,119
)Net (gain) on sale of container portfolios


(185
)

(2,789
)

Total operating expenses


222,158


247,621


202,658Operating income


130,379


172,371


140,607Other expenses (income):Interest and debt expense (including write-off of deferred financing costs of $0, $250 and $204


68,807


65,233


52,333(Gain) on debt extinguishment


(14,130
)

(23,772
)

Unrealized (gain) loss on interest rate swaps


(35,152
)

76,047


27,883Total other expenses:


19,525


117,508


80,216Income before income taxes


110,854


54,863


60,391Income tax expense


39,268


19,067


21,600Net income

$
71,586

$
35,796

$
38,791Net income per common share:Basic

$
2.31

$
1.10

$
1.17Diluted

$
2.30

$
1.09

$
1.16Weighted average number of common shares outstanding  Basic


31,021,339


32,572,901


33,183,252Weighted average number of common shares outstanding  Diluted


31,072,265


32,693,320


33,369,958Cash dividends paid per common share

$
0.04

$
1.61

$
1.43


The
accompanying notes to consolidated financial statements are an integral part of these statements.

F-4

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Table of Contents

TAL INTERNATIONAL GROUP, INC.        Consolidated Statements of Stockholders' Equity and Comprehensive Income  (Dollars in thousands, except share amounts)

Accumulated
Other
Comprehensive
IncomeCommon Stock

Treasury Stock

Additional
Paid-in
Capital

Accumulated
Earnings
(Deficit)

Comprehensive
IncomeShares

Amount

Shares

AmountBalance at December 31, 2006


33,303,031

$
33


136,250

$
(2,862
)
$
394,440

$
3,476

$
3,663Stock compensation  issuance of stock options














18





Stock options exercised


47,285











233





Stock compensation  issuance of restricted stock


132,000











539





Treasury stock acquired








276,029


(6,309
)







Comprehensive income:Net income

















38,791




$
38,791Foreign currency translation adjustment




















91


91Amortization of cash flow hedges, net of income taxes of $(679)




















(1,227
)

(1,227
)Comprehensive income






















$
37,655Common stock dividends declared

















(37,409
)

Balance at December 31, 2007


33,482,316


33


412,279


(9,171
)

395,230


4,858


2,527Stock compensation  issuance of stock options














22





Stock options exercised


2,500











45





Stock compensation  issuance of restricted stock


1,000











1,181





Treasury stock acquired








643,200


(10,955
)







Comprehensive income:Net income

















35,796





35,796Foreign currency translation adjustment




















(1,556
)

(1,556
)Amortization of cash flow hedges, net of income taxes of $(439)




















(795
)

(795
)Comprehensive income






















$
33,445Common stock dividends declared

















(52,744
)

Balance at December 31, 2008


33,485,816


33


1,055,479


(20,126
)

396,478


(12,090
)

176Stock compensation  issuance of stock options / modification














125





Stock compensation  restricted stock activity


106,250











1,413





Treasury stock acquired








1,953,692


(17,363
)







Comprehensive income:Net income

















71,586





71,586Foreign currency translation adjustment




















415


415Amortization of cash flow hedges, net of income taxes of $(320)




















(575
)

(575
)Comprehensive income






















$
71,426Common stock dividends declared

















(1,243
)

Balance at December 31, 2009


33,592,066

$
33


3,009,171

$
(37,489
)
$
398,016

$
58,253

$
16


The accompanying notes to consolidated financial statements are an integral part of these statements.

F-5

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Table of Contents

TAL INTERNATIONAL GROUP, INC.        Consolidated Statements of Cash Flows  (Dollars in thousands)

Year Ended
December 31,
2009

Year Ended
December 31,
2008

Year Ended
December 31,
2007Cash flows from operating activities:Net income

$
71,586

$
35,796

$
38,791Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization


115,688


110,450


101,670Net (gain) on sale of leasing equipment


(9,278
)

(23,534
)

(12,119
)Net (gain) on sale of container portfolios


(185
)

(2,789
)

Deferred income taxes


39,248


18,039


20,904(Gain) on debt extinguishment


(14,130
)

(23,772
)

Unrealized (gain) loss on interest rate swaps


(35,152
)

76,047


27,883Amortization of deferred financing costs


1,170


1,046


903Stock compensation charge


1,538


1,203


557Changes in operating assets and liabilities:Accounts receivable


687


(126
)

(2,319
)Accounts payable


(792
)

2,046


(328
)Accrued expenses


(5,809
)

2,865


(3,205
)Income taxes payable


82


(41
)

(207
)Other assets


(789
)

361


169Net equipment purchased for resale activity


(2,368
)

716


(7,644
)Other, net


1,190


2,706


1,349Net cash provided by operating activities


162,686


201,013


166,404Cash flows from investing activities:Purchases of leasing equipment


(30,859
)

(450,902
)

(334,476
)Investments in finance leases


(27,098
)

(41,733
)

(58,407
)Proceeds from sale of equipment leasing fleet, net of selling costs


69,473


83,956


63,006Proceeds from sale of container portfolios


8,532


40,539


Cash collections on finance lease receivables, net of income earned


31,533


28,232


24,791Other


(151
)

134


92Net cash provided by (used in) investing activities


51,430


(339,774
)

(304,994
)Cash flows from financing activities:Stock options exercised





45


233Financing fees paid under debt facilities


(3,310
)

(3,210
)

(1,030
)Borrowings under debt facilities


104,153


452,983


565,106Payments under debt facilities


(260,788
)

(274,445
)

(357,338
)Payment to extinguish debt due to repurchase


(20,650
)

(24,104
)

Proceeds received from capital leases


10,000


44,366


Payments under capital lease obligations


(8,274
)

(7,122
)

(2,649
)Purchases of treasury stock


(17,363
)

(10,955
)

(5,891
)Decrease (increase) in restricted cash


2,446


1,899


(3,533
)Common stock dividends paid


(1,238
)

(52,534
)

(47,313
)Net cash (used in) provided by financing activities


(195,024
)

126,923


147,585Net increase (decrease) in cash and cash equivalents


19,092


(11,838
)

8,995Unrestricted cash and cash equivalents, beginning of period


40,798


52,636


43,641Unrestricted cash and cash equivalents, end of period

$
59,890

$
40,798

$
52,636Supplemental disclosures:Interest paid

$
66,769

$
64,388

$
52,425Income taxes (refunded) paid

$
(218
)
$
313

$
262Supplemental non-cash financing activities:Accrued and unpaid purchases of equipment

$
3,312

$
27,224

$
26,994Purchases of leasing equipment financed through capital lease obligations

$


$
9,375

$
9,653


The accompanying notes to consolidated financial statements are an integral part of these statements.

F-6

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Table of Contents

TAL INTERNATIONAL GROUP, INC.        NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1  Description of the Business and Basis of Presentation

TAL International Group, Inc. ("TAL"or the "Company") was formed on October 26, 2004 and commenced
operations on November 4, 2004, when it acquired all of the outstanding capital stock of TAL International Container Corporation ("the Acquisition").

The
Company leases intermodal transportation equipment, primarily maritime containers, and provides maritime container management services through a worldwide network of offices, third
party depots and other facilities. The Company operates in both international and domestic markets. The majority of the Company's business is derived from leasing its containers to shipping line
customers through a variety of long-term and short-term contractual lease arrangements. The Company also sells its own containers and containers purchased from third parties
for resale. TAL also enters into management agreements with third party container owners under which the Company manages the leasing and selling of containers on behalf of the third party owners.

Note 2  Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the respective entities and their subsidiaries. All intercompany transactions and balances have been
eliminated in consolidation. Certain reclassifications have been made to the accompanying prior period financial statements and notes to conform with the current year's presentation.

Cash and Cash Equivalents

Cash and cash equivalents, which includes restricted cash, consists of all cash balances and highly liquid investments having original maturities of three months
or less at the time of purchase.

Allowance for Doubtful Accounts

The Company's allowance for doubtful accounts is provided based upon a review of the collectability of its receivables. This review is based on the risk profile
of the receivables, credit quality indicators such as the level of past-due amounts and economic conditions. Generally, the Company does not require collateral on accounts receivable
balances. An account is considered past due when a payment has not been received in accordance with the contractual terms. Accounts are generally charged off after an analysis is completed which
indicates that collection of the full principal balance is in doubt. Changes in economic conditions or other events may necessitate additions or deductions to the allowance for doubtful accounts. The
allowance for doubtful accounts is intended to provide for losses inherent in the receivables, and requires the application of estimates and judgments as to the outcome of collection efforts and the
realization of collateral, among other things. The Company believes its allowance for doubtful accounts is adequate to provide for credit losses inherent in its existing receivables.

Concentration of Credit Risk

The equipment leases and trade receivables subject the Company to potential credit risk. The Company extends credit to its customers based upon an evaluation of
the customer's financial condition and credit history. One customer accounted for approximately 17% of the Company's leasing revenues in 2009 and 12% in 2008. Another customer accounted for
approximately 12% of the Company's

F-7

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

leasing
revenues in 2009, 15% in 2008 and 18% in 2007. Another customer accounted for approximately 10% of the Company's leasing revenues in 2009. No other customer exceeded 10% of leasing revenues in
2009, 2008 or 2007. For the years ended December 31, 2009, 2008, and 2007, one customer accounted for 48%, 41%, and 46%, respectively, of net investment in finance leases. For the year ended
December 31, 2007 another customer accounted for 11% of net investment in finance leases.

Net Investment in Finance Leases

The amounts reported as net investment in finance leases are recorded at the aggregate future lease payments, including any purchase options granted to customers,
less allowances for uncollectible amounts and unearned income. Allowances are provided based upon a review of the collectability of gross finance lease receivables, and considers the risk profile of
the receivables, credit quality indicators such as the level of past due amounts, if any, and economic conditions. Interest from these leases is recognized over the term of the lease using the
effective interest method as a component of leasing revenues.

Leasing Equipment

In general, the Company purchases new equipment from equipment manufacturers for the purpose of leasing such equipment to our customers. Occasionally, the Company
may also purchase used equipment with the intention of leasing such equipment. Used units are typically purchased with an existing lease in place or were previously owned by one of the Company's third
party owner investors.

Leasing
equipment is recorded at cost and depreciated to an estimated residual value on a straight-line basis over the estimated useful life. The Company will continue to
review its depreciation policies on a regular basis to determine whether changes have taken place that would suggest that a change in its depreciation policies, useful lives of its equipment or the
assigned residual values is warranted. If indicators of impairment are present, a determination is made as to whether the carrying value of the Company's fleet exceeds its estimated future
undiscounted cash flows. Leasing equipment is tested for impairment whenever events or changes in circumstances indicate that its carrying amount may not be recovered. Key indicators of impairment on
leasing equipment include, among other factors, a sustained decrease in operating profitability, a sustained decrease in utilization, or indications of technological obsolescence.

When
testing for impairment, leasing equipment is generally grouped by equipment type, and is tested separately from other groups of assets and liabilities. Some of the significant
estimates and assumptions used to determine future undiscounted cash flows and the measurement for impairment are the remaining useful life, expected utilization, expected future lease rates, and
expected disposal prices of the equipment. The Company considers the assumptions on expected utilization and the remaining useful life to have the greatest impact on our estimate of future
undiscounted cash flows. These estimates are principally based on the Company's historical experience and management's judgment of market conditions.

F-8

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Estimated
useful lives and residual values have been principally determined based on the Company's historical disposal experience. The estimated useful lives and residual values for the
Company's leasing equipment from the date of manufacture are as follows:

Useful
Lives
(Years)

Residual Values ($)Dry container units


13

$750 to $900Refrigerated container units


12

$2,200 to $2,700Special container units


14

$600 to $1,200Tank container units


20

$3,000Chassis


20

$1,200


Costs
incurred to place new equipment into service, including costs to transport the equipment to its initial on-hire location, are capitalized. The Company charges to
expense inspection costs on new equipment and repair and maintenance costs that do not extend the lives of the assets at the time the costs are incurred, and include these costs in direct operating
expenses.

The
net book value of the leasing equipment by principal equipment type at December 31, 2009 and 2008 was (in thousands):

2009

2008Dry container units

$
870,446

$
999,085Refrigerated container units


274,889


307,986Special container units


119,075


134,868Tank container units


33,885


32,577Chassis


59,244


60,967$
1,357,539

$
1,535,483


Included
in the amounts above are units not on lease at December 31, 2009 and 2008 with a total net book value of $93.5 million and $146.0 million, respectively.
Amortization on equipment purchased under capital lease obligations is included in depreciation and amortization expenses in the consolidated statements of operations.

An
allowance is provided through provision for doubtful accounts based on the net book value of a percentage of the units on lease to certain customers that are considered to be
non-performing which the Company believes it will not ultimately recover. The percentage is developed based on historical experience.

Leasehold Improvements and Other Fixed Assets

Leasehold improvements are recorded at cost and amortized on a straight-line basis over the shorter of the initial term of the respective lease or the
estimated useful life of the improvement. 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 on a straight-line basis over their respective estimated useful lives, which
range from three to seven years.

F-9

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Equipment Held For Sale

When leasing equipment is returned off lease, the Company makes a determination of whether to repair and re-lease the equipment or sell the equipment.
At the time the Company determines that equipment will be sold, it reclassifies the appropriate amounts previously recorded as leasing equipment to equipment held for sale. In accordance with the
Financial Accounting Standards Board ("FASB") Accounting Standards Codification No. 360 "Property, Plant and Equipment (ASC 360), equipment held for sale is carried at the lower of its
estimated fair value, based on current transactions, less costs to sell, or carrying value; depreciation on such assets is halted and disposals generally occur within 90 days. Subsequent
changes to the asset's fair value, either increases or decreases, are recorded as adjustments to the carrying value of the equipment held for sale; however, any such adjustments may not exceed the
equipment's carrying value at the time it was initially classified as held for sale. Initial write-downs of assets held for sale are recorded as an impairment charge and are included in net (gain) on
sale of leasing equipment. Realized gains and losses resulting from the sale of equipment held for sale are recorded as a net (gain) on sale of leasing equipment, and cash flows associated with the
disposal of equipment held for sale are classified as cash flows from investing activities.

Equipment Held For Resale  Trading Activity

On an opportunistic basis, the Company purchases used equipment with markings or specifications different from its own equipment for purposes of reselling it
within a short time frame for a net profit.

Equipment
purchased for resale is reported as equipment held for sale due to the short timeframe, generally less than one year, between the time the equipment is purchased and the time
the equipment is sold. Due to this short expected holding period, cash flows associated with equipment held for resale are classified as operating cash flows. Equipment trading revenues represent the
proceeds from the sale of this equipment, while Equipment trading expense includes the cost of equipment sold, any costs to sell such equipment, including administrative costs, and costs associated
with the inventory such as storage and handling charges.

Goodwill

The Company accounts for goodwill in accordance with FASB Accounting Standards Codification No. 350, "Intangibles  Goodwill and Other"
(ASC 350). ASC 350 requires goodwill and other intangible assets with indefinite lives to be reviewed for impairment annually or more frequently if circumstances indicate a possible impairment. In
connection with the Acquisition, the Company recorded $71.9 million of goodwill. Management determined that the Company has two reporting units, Equipment leasing and Equipment trading, and
allocated $70.9 million and $1.0 million, respectively, to each reporting unit. The annual impairment test is conducted by comparing the Company's carrying amount, to the fair value of
the Company using a market capitalization approach. Market capitalization of the entity is compared to the carrying value of the entity since virtually all of the goodwill is allocated to, and nearly
all of the market capitalization is attributable to, the Equipment leasing reporting unit. If the carrying value of the entity exceeds its market capitalization, then a second step would be performed
that compares the implied fair value of goodwill with the carrying amount of goodwill. The determination of implied fair value of goodwill would require management to compare the estimated fair value
of the reporting units to the estimated fair value of the assets and liabilities of the reporting units. Any excess fair value represents the implied fair value of goodwill. To the extent that the
carrying amount of the goodwill exceeds its implied fair value, an impairment loss would be

F-10

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

recorded.
The Company's annual review of goodwill, conducted in the fourth quarter of 2009, indicated that no impairment of goodwill existed.

Deferred Financing Costs

Deferred financing costs represent the fees incurred in connection with the financing of the Company's debt obligations and are amortized on a straight line basis
over the estimated term of the obligations.

Unamortized
deferred financing costs are written off when the related debt obligations are refinanced or extinguished prior to maturity and are determined to be an extinguishment of
debt.

Intangibles

As a result of the Acquisition, the Company recorded intangible assets related to the fair value of its lease relationships, which are included in other assets at
December 31, 2009 and 2008. The fair value of the assets on the date of the Acquisition was $4.8 million, which is being amortized over three to seven years. Accumulated amortization was
$3.8 million and $3.2 million as of December 31, 2009 and 2008, respectively. Estimated amortization for each of the next two years will be approximately $0.6 million and
$0.4 million, respectively.

In
October 2007 and May 2008, as the result of a purchase of managed containers, the Company recorded intangible assets related to the fair value of the lease relationships, which are
included in other assets at December 31, 2009 and 2008. The fair value of the assets on the date of purchase was $4.1 million, which is being amortized over one to seven years.
Accumulated amortization was $3.2 million and $1.9 million as of December 31, 2009 and 2008, respectively. Estimated amortization for each of the next four years will be
approximately $0.5 million, $0.2 million, $0.1 million and $0.1 million, respectively.

Fair Value of Financial Instruments

The Company believes the carrying amounts of cash and cash equivalents, accounts receivable and other assets approximated fair value at December 31, 2009
and 2008.

The
interest rates charged on the majority of the Company's various credit facilities are based on variable interest rates. The Company estimates that at December 31, 2009 and
December 31, 2008, the carrying value of the Company's debt instruments was approximately $116.4 and $52.6 million higher, respectively, than its fair value. The Company estimated the
fair value of its debt instruments based on the net present value of its future debt payments, using a discount rate which reflected the Company's estimate of current market interest rate spreads at
that time.

Revenue Recognition

Operating Leases with Customers

The Company enters into long-term leases and service leases with ocean carriers, principally as lessor in operating leases, for marine cargo
equipment. Long-term leases provide our customers with specified equipment for a specified term. The Company's leasing revenues are based upon the number of equipment units leased, 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 the respective lease. Advanced billings are deferred and recognized in the period

F-11

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

earned.
Service leases do not specify the exact number of equipment units to be leased or the term that each unit will remain on-hire but allow the lessee to pick up and drop off units at
various locations specified in the lease agreement. Under a service lease, rental revenue is based on the number of equipment units on hire for a given period. Revenue for customers where collection
is not reasonably assured is deferred and recognized when the amounts are received.

In
accordance with FASB Accounting Standards Codification No. 605 "Revenue Recognition"(ASC 605), the Company recognizes billings to customers for damages and certain other
operating costs as leasing revenue as it is earned based on the terms of the contractual agreements with the customer. As principal, the Company is responsible for fulfillment of the services,
supplier selection and service specifications, and has ultimate responsibility to pay the supplier for the services whether or not it collects the amount billed to the lessee.

Finance Leases with Customers

The Company enters into finance leases as lessor for some of the equipment in the Company's fleet. The net investment in finance leases represents the receivables
due from lessees, net of unearned income. Unearned income is recognized on a level yield basis over the lease term and is recorded as leasing revenue. Financing leases are usually
long-term in nature, typically ranging for a period of five to ten years and typically include a bargain purchase option to purchase the equipment at the end of the lease term.

Equipment Trading Revenues and Expense

Equipment trading revenues represent the proceeds from the sale of equipment purchased for resale and are recognized as units are sold and delivered to the
customer. The related expenses represent the cost of equipment sold as well as other selling costs that are recognized as incurred and are reflected as equipment trading expenses in the consolidated
statements of operations.

Management Fee Income

The Company manages equipment which is owned by third parties and it earns management fees based on the income earned by the leasing and sales of such equipment.
Management fees are recognized as services are provided. We collect amounts billed and pay operating costs as agent on behalf of the third parties that own such equipment. These billings and operating
costs are not included in revenue and expense; instead, the net amounts owed to these equipment owners are reflected as accrued expenses in the Company's financial statements until paid as required by
our contracts. As of December 31, 2009 and December 31, 2008, approximately $3.6 million and $4.6 million, respectively, was reflected in accounts payable and other accrued
expenses, which represents unpaid net earnings owed to third party owners of managed equipment.

Other Revenues

Other revenues principally include fee income for third party positioning of equipment.

Direct Operating Expenses

Direct operating expenses are directly related to the Company's equipment under and available for lease. These expenses primarily consist of the Company's costs
to repair and maintain the equipment, to reposition the equipment, to store the equipment when it is not on lease and to inspect newly

F-12

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

manufactured
equipment. These costs are recognized when incurred. In limited situations, certain positioning costs may be capitalized.

Derivative Instruments

The Company uses derivatives in the management of its interest rate exposure on its long-term borrowings and its foreign currency rate exposure. The
Company accounts for derivative instruments in accordance with FASB Accounting Standards Codification No. 815 "Derivatives and Hedging" (ASC 815). ASC 815 requires that all
derivative instruments be recorded on the balance sheet at their fair value and established criteria for both the designation and effectiveness of hedging activities. Effective April 12, 2006,
the Company de-designated its existing hedging agreements (see Note 4).

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires recognition of deferred tax assets and liabilities for expected future
tax consequences of temporary differences that currently exist between tax bases and financial reporting bases of the Company's assets and liabilities. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary differences are expected to be recovered or settled. In assessing the ability to realize deferred tax assets, the Company
considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

If
applicable, the Company accrues income tax liabilities for unrecognized tax benefits resulting from uncertain tax positions by evaluating whether the weight of available evidence
indicates that it is more likely than not that the position will be sustained on audit and then measures the tax benefit as the largest amount that is more than 50% likely of being realized upon
ultimate settlement. Potential interest and penalties associated with such uncertain tax positions are recorded as a component of income tax expense(see Note 10).

Foreign Currency Translation and Remeasurement

The net assets and operations of foreign subsidiaries included in the consolidated financial statements are attributable primarily to the Company's UK subsidiary.
The accounts of this subsidiary have been converted at rates of exchange in effect at year-end as to balance sheet accounts and at a weighted average of exchange rates for the year as to
income statement accounts. The effects of changes in exchange rates in translating foreign subsidiaries' financial statements are included in stockholders' equity as accumulated other comprehensive
income.

The
Company also has certain cash accounts and certain finance lease receivables that are denominated in a currency other than the functional currency of the Company. These assets are
generally denominated in Euros or British Pounds, and are remeasured at each balance sheet date at rates of exchange in effect at that date.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with FASB Accounting Standards Codification No. 718 "Compensation 
Stock Compensation" (ASC 718) which requires that compensation cost relating to share-based payment transactions be recognized in the financial statements. The cost is measured at the grant date,
based on the calculated fair value of the award, and

F-13

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

is
recognized as an expense over the employee's requisite service period (generally the vesting period of the equity award).

Comprehensive Income

Comprehensive income includes net income, unrealized gains and losses and related amortization, net of income taxes on derivative instruments designated as cash
flow hedges and foreign currency translation adjustments. No other elements of comprehensive income exist.

Earnings Per Share

Basic earnings per share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflect the potential dilution that would occur if securities or other contracts to issue common stock were exercised or converted into common stock, utilizing the
treasury stock method.

Use of Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported
amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates.

Note 3  Debt

Debt consisted of the following (amounts in thousands):

December 31,
2009

December 31,
2008Asset backed securitization (ABS)Term notes  Series 2006-1

$
357,833

$
451,000Term notes  Series 2005-1


342,361


389,5832008 Asset backed credit facility


209,500


225,0002009 Asset backed credit facility


50,000


Revolving credit facility





100,000Finance lease facility


38,505


47,4062007 Term loan facility


26,688


33,6582009 Term loan facilities


32,175


Port equipment facility


10,547


12,326Capital lease obligations


93,689


92,063Total

$
1,161,298

$
1,351,036


Debt
maturities (excluding capital lease obligations) amounts in thousands:

Fiscal years ending December 31,2010

$
156,4462011


142,8222012


146,2252013


145,2582014


161,7492015 and thereafter


315,109Total

$
1,067,609


F-14

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Interest rates on the majority of the Company's debt obligations are based on floating rate indices (such as LIBOR). The Company economically hedges the risks
associated with fluctuations in interest rates on its long-term borrowings by entering into interest rate swap contracts.

Asset Backed Securitization

On April 12, 2006, TAL Advantage I LLC, a special purpose entity (the "SPE") which is a wholly-owned consolidated subsidiary of the Company, whose
primary business activity is to issue asset backed notes issued two series of floating rate secured notes under its Asset Backed Securitization ("ABS") program designed to reduce borrowing costs and
enhance financing resources for the Company's container fleet. Included in the issuance was $680.0 million of floating rate secured term notes (the "Term Notes
Series 2006-1"). The Term Notes Series 2006-1 amortize in equal monthly installments and have a final maturity of April 2021. At December 31, 2009, the
outstanding balance under the Term Notes Series 2006-1 was $357.8 million. The 2009 weighted average interest rate on the Term Notes Series 2006-1 was
0.8%. At December 31, 2008, the outstanding balance under the Term Notes Series 2006-1 was $451.0 million and the 2008 weighted average interest rate was 3.4%.

During
the second quarter of 2009, the Company repurchased approximately $35.0 million of the Term Notes Series 2006-1 and recorded a gain on debt
extinguishment of $14.1 million, net of the write-off of deferred financing costs of $0.2 million.

During
the fourth quarter of 2008, the Company repurchased approximately $48.2 million of the Term Notes Series 2006-1 and recorded a gain on debt
extinguishment of $23.8 million, net of the write-off of deferred financing costs of $0.3 million.

On
April 12, 2006, the SPE entered into a floating rate revolving facility (the "Term Notes Series 2005-1") under the ABS program. The Term Notes
Series 2005-1 had a two year revolving period that preceded the term period in which the outstanding balance amortizes in equal monthly installments over nine years. At
December 31, 2009, the outstanding balance under the Term Notes Series 2005-1 was $342.4 million and the 2009 weighted average interest rate was 1.3%. At
December 31, 2008, the outstanding balance under the Term Notes Series 2005-1 was $389.6 million and the 2008 weighted average interest rate was 3.8%.

The
borrowing capacity under the ABS program is determined by applying the advance rate of 82% against the net book values of designated eligible containers plus accounts receivable for
sold containers not outstanding more than 60 days plus restricted cash. The net book value for purposes of calculating the borrowing capacity is the original equipment cost depreciated over
12 years to a range of 20% to 32% of original equipment cost depending on equipment type. Under the ABS program, the borrower is required to maintain restricted cash balances on deposit in a
designated bank account equal to five months of interest expense.

2008 Asset Backed Credit Facility

On March 27, 2008, TAL Advantage II, LLC, an indirect wholly-owned subsidiary of TAL International Group, Inc., entered into an Asset Backed
Credit Facility. TAL has guaranteed the obligations of TAL Advantage II, LLC under the facility. The borrowing capacity under the 2008 Asset Backed Credit Facility is $225 million and
the revolving credit period is through June 30, 2010, on which date the facility will convert to a term loan and amortize in equal monthly installments through June 2018. The interest rate
margin will increase by 75 basis points when converted to a term loan. At December 31, 2009, the outstanding balance under the 2008 Asset Backed Credit Facility was

F-15

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

$209.5 million
and the 2009 weighted average rate was 1.8%. At December 31, 2008, the outstanding balance under the 2008 Asset Backed Credit Facility was $225.0 million and the
weighted average interest rate was 4.4% for the period from March 27, 2008  December 31, 2008.

The
borrowing capacity under the Asset Backed Credit Facility is determined by applying the advance rate of 82% against the net book values of designated eligible containers plus
accounts receivable for sold containers not outstanding more than 60 days. The net book value for purposes of calculating the
borrowing capacity is the original equipment cost depreciated over 12 years to a range of 20% to 32% of original equipment cost depending on equipment type.

2009 Asset Backed Credit Facility

On October 26, 2009, TAL Advantage III, LLC, an indirect wholly-owned subsidiary of TAL International Group, Inc. entered into a
$75 million Asset Backed Credit Facility, which was increased to $100 million on December 21, 2009. The facility initially has a 24 month revolving credit period,
commencing on the date of the facility, followed by a four year term period. The term notes amortize on a level basis over the four year period to 60% of the outstanding balance. The interest rate
margin will increase by 150 basis points when converted to a term loan.

At
December 31, 2009, the outstanding balance under the 2009 Asset Backed Credit Facility was $50.0 million and the weighted average interest rate was 4.5% for the period
from October 26, 2009  December 31, 2009.

The
borrowing capacity under the 2009 Asset Backed Credit Facility is determined by applying the advance rate of 75% against the net book values of designated eligible containers plus
accounts receivable for sold containers not outstanding more than 60 days. The net book value for purposes of calculating our borrowing capacity is the original equipment cost depreciated over
12 years to a range of 20% to 32% of original equipment cost depending on equipment type. Under the 2009 Asset backed Credit Facility, the borrower is required to maintain restricted cash
balances on deposit in a designated bank account equal to three months of interest expense.

Revolving Credit Facility

On August 15, 2007, the Company entered into a Revolving Credit Facility. The borrowing capacity under the Revolving Credit Facility is
$100.0 million, which matures on August 15, 2012. The outstanding balance under the facility was $0 at December 31, 2009 and $100.0 million at December 31, 2008. The
weighted average interest rate on the Revolving Credit Facility was 1.2% for the year ended December 31, 2009 and 3.8% for the year ended December 31, 2008. The Company is required to
maintain unencumbered assets equivalent to 50% of the maximum commitment.

Finance Lease Facility

On July 31, 2006, the Company entered into a credit facility to support the growth of its finance lease business (the "Finance
Lease Facility"). The Company's borrowing capacity under this facility is based upon a 90% advance rate on the net present values of finance lease receivables on certain containers. The Finance Lease
Facility had a two year revolving period that preceded a 10 year term in which the outstanding balance, as of the term conversion date, amortizes in monthly installments. The outstanding
balance under the facility was $38.5 million at December 31, 2009 and $47.4 million at December 31, 2008. The weighted average interest rate on the Finance Lease Facility
was 1.3% for the year ended December 31, 2009 and 3.9% for the year ended December 31, 2008. The borrowing

F-16

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

capacity
under the Finance Lease Facility is determined by applying the advance rate of 90% against the lesser of the original equipment cost or the net present value of the minimum lease payments
discounted using the facility rate at the time of borrowing.

2007 Term Loan Facility

On November 19, 2007, the Company entered into a three year term loan (the "2007 Term Loan"), which is secured by approximately 57,000 TEU of previously
managed dry and special containers that the Company purchased on October 1, 2007. The final maturity date of the loan is November 19, 2010. The outstanding balance under the facility was
$26.7 million at December 31, 2009 and $33.7 million at December 31, 2008. The weighted average interest rate on the 2007 Term Loan was 1.4% for the year ended
December 31, 2009 and 3.5% for the year ended December 31, 2008. The borrowing capacity under the 2007 Term Loan is determined by applying the advance rate of 80% against the net book
values of designated eligible containers plus accounts receivable for sold containers not outstanding more than 90 days. The net book value for purposes of the borrowing base calculation is the
equipment acquisition cost depreciated at an annual rate of 8%.

2009 Term Loan Facilities

On July 31, 2009, the Company entered into a $7.5 million term loan which is secured by certain containers on lease to a single customer. The loan
amortizes over six years, with 71 monthly installments and a final installment payment due on August 1, 2015. The interest rate on the term loan is a fixed rate of 6.95%. The outstanding
balance under the facility was $7.2 million at December 31, 2009.

On
December 24, 2009, the Company entered into a $25 million term loan which is secured by certain containers on lease to various customers. The loan amortizes over five
years, with 19 quarterly installments and a final installment payment due on December 24, 2014. The weighted average interest rate on the term loan in December 2009 was 6.0%. The outstanding
balance under the facility was $25.0 million at December 31, 2009.

Port Equipment Facility

On December 28, 2006, the Company entered into a Euro denominated credit facility to support its financing of port equipment (the "Port Equipment
Facility"). The Port Equipment Facility has an eight year term, which amortizes on a monthly basis. The outstanding balance under the facility was $10.5 million (Euro 7.4 million)
at December 31, 2009 and $12.3 million (Euro 8.8 million) at December 31, 2008. The weighted average interest rate on the Port Equipment Facility was 2.0% for the
year ended December 31, 2009 and 5.3% for the year ended December 31, 2008.

Capital Lease Obligations

The Company has entered into a series of capital leases with various financial institutions to finance the purchase of chassis. The lease agreements are
structured as ten year Terminal Rental Adjustment Clause ("TRAC") leases with purchase options at the end of the lease terms equal to the TRAC amount as defined in each lease. The TRAC payment is a
stated amount that represents a percentage of the lessor's cost of the equipment and is included in the minimum lease payments. The minimum lease payments are amortized over the lease term based on
the interest method to produce a constant periodic rate of interest on the remaining balance of the obligation. For income tax purposes, these leases are treated as operating leases.

F-17

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

In
August 2008 and December 2008, the Company entered into sale-leaseback transactions for approximately 12,500 and 2,250 of new containers for net proceeds of
$33.9 million and $10.5 million, respectively. The leases were accounted for as capital leases with interest expense recognized on a level yield basis over seven years, at which point
there are early purchase options. As the estimated fair value of the assets sold exceeded their carrying value, in the August 2008 transaction, the excess of the carrying value over the proceeds
resulted in a loss of $0.4 million, which was deferred and will be recognized over the estimated life of the leased assets, which is twelve years. The December
2008 transaction resulted in a gain of $0.7 million, which was deferred and will be recognized over the estimated life of the leased assets, which is twelve years.

In
March 2009, the Company entered into a sale-leaseback transaction for approximately 2,800 containers for net proceeds of $10.0 million. The lease was accounted for
as a capital lease with interest expense recognized on a level yield basis over five years, at which point there is an early purchase option.

The
weighted average interest rate for these leases as of December 31, 2009 and 2008 was 4.7% and 4.6%, respectively. The total lease obligation was $93.7 million as of
December 31, 2009, and was $92.1 million as of December 31, 2008.

At
December 31, 2009, future lease payments under these capital leases are as follows (in thousands):

2010

$
12,7262011


12,9972012


13,1622013


11,1812014


14,1902015 and thereafter


50,610114,866Less: amount representing interest


(21,177
)Capital lease obligation

$
93,689


Note 4  Derivative Instruments

Interest Rate Swaps

The Company has entered into interest rate swap agreements to manage interest rate risk exposure. The interest rate swap agreements
utilized by the Company effectively modify the Company's exposure to interest rate risk by converting its floating rate debt to a fixed rate
basis, thus reducing the impact of interest rate changes on future interest expense. These agreements involve the receipt of floating rate amounts in exchange for fixed rate interest payments over the
lives of the agreements without an exchange of the underlying principal amounts. The counterparties to these agreements are highly rated financial institutions. In the unlikely event that the
counterparties fail to meet the terms of the interest rate swap agreements, the Company's exposure is limited to the interest rate differential on the notional amount at each monthly settlement period
over the life of the agreements. The Company does not anticipate any non-performance by the counterparties. Substantially all of the assets of TAL Advantage I LLC, TAL Advantage II LLC and
TAL Advantage III LLC are pledged as collateral for the underlying indebtedness and the amounts payable under the interest rate swap agreements for each of these entities.

F-18

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

In
addition, certain assets of TAL International Container Corporation, a wholly owned subsidiary of TAL International Group, Inc. are pledged as collateral for the Revolving Credit
Facility and the amounts payable under certain interest rate swap agreements.

As
of December 31, 2009, the Company had in place total interest rate swap contracts to fix the floating interest rates on a portion of the borrowings under its debt facilities as
summarized below:

Total Notional
Amount at
December 31, 2009

Weighted Average
Fixed Leg
Interest Rate at
December 31, 2009

Weighted Average Remaining Term$1,183 million


4.17
%
3.5 years


Prior
to April 12, 2006, the Company had designated all existing interest rate swap contracts as cash flow hedges, in accordance with FASB ASC 815. On April 12, 2006, the
Company de-designated its existing interest rate swap contracts, and the balance reflected in accumulated other comprehensive income due to changes in the fair value of the existing
interest rate swap contracts was $7.5 million. This amount is being recognized in income as unrealized (gain) loss on interest rate swaps using the interest method over the remaining life of
the contracts. As of December 31, 2009, the unamortized pre-tax balance of the change in fair value reflected in accumulated other comprehensive income was approximately
$1.2 million. The amount of other comprehensive income which will be amortized to income over the next 12 months is approximately $0.7 million. Amounts recorded in accumulated
other comprehensive income would be reclassified into earnings upon termination of these interest rate swap contracts prior to their contractual maturity. All interest rate swap contracts entered into
since April 12, 2006 are not accounted for as hedging instruments under ASC 815, and changes in the fair value of the interest rate swap contracts are reflected in the statements of operations
as unrealized (gains)/ losses on interest rate swaps.

Under
the criteria established by FASB Accounting Standards Codification No.820 "Fair Value Measurements and Disclosures" (ASC 820) the fair value measurements of the interest rate swap
contracts are based on significant other observable inputs other than quoted prices, either on a direct or indirect basis (Level 2), using valuation techniques the Company believes are
appropriate.

Foreign Currency Rate Swaps

In April 2008, the Company entered into foreign currency rate swap agreements to manage foreign currency rate risk exposure by
exchanging Euros for U.S. Dollars based
on expected payments under its Euro denominated finance lease receivables. The Company will pay a total of approximately 6.0 million Euros and receive approximately $9.1 million over the
remaining term of foreign currency rate swap agreements which expire in April 2015. The Company does not account for the foreign currency rate swap agreements as hedging instruments under ASC 815, and
therefore changes in the fair value of the foreign currency rate swap agreements are reflected in the statements of operations in administrative expenses.

Under
the criteria established by ASC 820, the fair value measurement of the foreign currency rate swap contracts are based on significant other observable inputs other than quoted
prices, either on a direct or indirect basis (Level 2), using valuation techniques the Company believes are appropriate.

F-19

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Location of Derivative Instruments in Financial Statements

Fair Value of Derivative Instruments  Derivatives Not Designated as Hedging Instruments  $ in Millions

Asset Derivatives

Liability DerivativesDecember 31, 2009

December 31, 2008

December 31, 2009

December 31, 2008Derivative
Instrument

Balance
Sheet
Location

Fair
Value

Balance
Sheet
Location

Fair
Value

Balance
Sheet
Location

Fair
Value

Balance Sheet Location

Fair ValueInterest rate contracts

Fair value of derivative instruments

$
2.2

Fair value of derivative instruments

$


Fair value of derivative instruments

$
61.8

Fair value of derivative instruments

$
95.2Foreign exchange contracts

Fair value of derivative instruments

$
0.5

Fair value of derivative instruments

$
1.0

Fair value of derivative instruments

$


Fair value of derivative instruments

$
Total Derivatives



$
2.7



$
1.0



$
61.8



$
95.2


Derivatives Not Designated as Hedging Instruments  Effect of Derivative Instruments on Statement of Operations  $ in Millions

Amount of (Gain) / Loss Recognized in Income on DerivativesYears ended December 31,Location of (Gain) / Loss
Recognized in
Income on DerivativesDerivative
Instrument

2009

2008

2007Interest rate contracts

Unrealized (gain) loss on interest rate swaps

$
(35.2
)
$
76.0

$
27.9Foreign exchange contracts

Administrative Expense


0.5


(1.0
)

Total



$
(34.7
)
$
75.0

$
27.9


F-20

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Note 5  Net Investment in Finance Leases

The following table represents the components of the net investment in finance leases (in thousands):

December 31,
2009

December 31,
2008Gross finance lease receivables(1)

$
269,654

$
267,954Allowance on gross finance lease receivables(2)


(1,618
)

(1,420
)Gross finance lease receivables, net of allowance


268,036


266,534Unearned income(3)


(68,047
)

(70,044
)Net investment in finance leases

$
199,989

$
196,490


---

Contractual
maturities of the Company's gross finance lease receivables subsequent to December 31, 2009 are as follows (in thousands):

2010

$
51,3032011


48,1222012


44,6012013


39,4122014


30,2492015 and thereafter


55,967$
269,654


F-21

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Note 6  Earnings Per Share

The following table sets forth the calculation of basic and diluted earnings per share of the Company for the years ended
December 31, 2009, 2008 and 2007 (in thousands, except share data):

Year Ended
December 31,
2009

Year Ended
December 31,
2008

Year Ended
December 31,
2007Numerator:Net income applicable to common stockholders for basic and diluted earnings per share

$
71,586

$
35,796

$
38,791Denominator:Weighted average shares outstanding for basic earnings per share


31,021,339


32,572,901


33,183,252Dilutive stock options


50,926


120,419


186,706Weighted average shares for diluted earnings per share


31,072,265


32,693,320


33,369,958Earnings per share:  Basic

$
2.31

$
1.10

$
1.17Earnings per share  Diluted

$
2.30

$
1.09

$
1.16


For
the years ended December 31, 2009 and 2008, options to purchase shares of common stock of 597,191 and 18,000, respectively, were not included in the calculation of weighted
average shares for diluted earnings per share because their effects were antidilutive. For the years ended December 31, 2009 and 2007, restricted stock shares of 61,500 and 5,000, respectively,
were not included in the calculation of weighted average shares for diluted earnings per share because their effects were antidilutive.

Note 7  Capital Stock and Stock Options

Dividends

We paid the following quarterly dividends during the year ended December 31, 2009 and 2008 on our issued and outstanding common stock:

Record Date

Payment Date

Aggregate Payment

Per Share PaymentDecember 1, 2009


December 22, 2009

$
0.3 million

$
0.01September 3, 2009


September 24, 2009

$
0.3 million

$
0.01June 2, 2009


June 23, 2009

$
0.3 million

$
0.01March 12, 2009


March 26, 2009

$
0.3 million

$
0.01November 19, 2008


December 10, 2008

$
13.4 million

$
0.4125August 21, 2008


September 12, 2008

$
13.5 million

$
0.4125May 22, 2008


June 12, 2008

$
13.4 million

$
0.4125March 20, 2008


April 10, 2008

$
12.2 million

$
0.3750


Treasury Stock

On March 13, 2006, the Board of Directors authorized a stock buyback program for the repurchase of Company's common stock. The stock repurchase program, as
now amended, authorizes the Company to repurchase up to 4.0 million shares of its common stock.

F-22

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

The
Company repurchased the following amounts of Treasury shares:

Year

Shares Purchased

Amount Paid2009


1,953,692

$
17.4 million2008


643,200

$
10.9 million2007


276,029

$
6.3 million


A
total of 990,829 shares may yet be repurchased under the stock repurchase program.

Stock Options

2005 Management Omnibus Incentive Plan

In October 2005, the Company adopted the TAL International Group, Inc. 2005 Management Omnibus 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 2,500,000 shares of common stock were reserved for issuance under the 2005 Plan.

In
October 2005, the board of directors approved the grant of options under the 2005 Plan to purchase an aggregate of 612,195 shares of the Company's common stock upon consummation of
the IPO with an exercise price equal to the IPO price of the common stock, a vesting period of four years, and a contractual life of ten years. All 612,195 options granted on the IPO date became fully
vested as of December 30, 2005, the date their acceleration was approved by the Compensation Committee of the Company's board of directors. The purpose of the accelerated vesting was to avoid
future compensation expense associated with these options that the Company would otherwise recognize in its Consolidated
Statements of Operations upon the adoption of SFAS No. 123(R). The future compensation expense that was not incurred, based on the Company's implementation date for SFAS No. 123(R) of
January 1, 2006, was approximately $1.8 million per year in 2007 and 2008, and $1.5 million in 2009.

During
the year ended December 31, 2006, options to purchase 21,000 shares were granted at exercise prices equal to fair market values of the stock as of the grant date, with
exercise prices ranging from $21.99 to $24.69 per share. These options vest ratably over four years, and have a contractual life of ten years. Approximately $22,000, $22,000 and $18,000 of
compensation cost is reflected in administrative expense in the Company's statements of operations for the years ended December 31, 2009, 2008 and 2007, respectively, as a result of 21,000 new
options granted during 2006 (of which 3,000 options were cancelled in 2007). Total unrecognized compensation cost of approximately $12,000 as of December 31, 2009 related to options granted
during 2006 will be recognized over the remaining vesting period of approximately 0.5 years. The weighted-average fair value of options granted during 2006 was $4.88.

The
Company computed the estimated fair value of each option award on the date of grant using the Black-Scholes option-pricing model. Expected volatility was based on computed volatility
from trading activity of TAL stock since its IPO date and volatilities of other similar companies for prior periods. The expected term represents an estimate of the time the options are expected to
remain outstanding, which was calculated in 2006 as the average of the sum of the vesting period and the contractual life of the options. The risk-free rate for periods within the
contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant. For options granted during the year ended December 31, 2006, the following assumptions
were utilized in computing the fair value of

F-23

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

the
options: expected volatility of 28%, expected term of 6.5 years, expected annual dividends of $0.80, and risk-free rates of 4.73%  4.82%.

Cash
received from employee exercises of stock options during 2009, 2008 and 2007 was approximately $0, $45,000 and $233,000, respectively. TAL did not recognize any tax benefits
associated with these exercises, as the options represent "qualified" options for U.S. income tax purposes, which do not statutorily result in a tax deduction upon exercise.

In
addition, approximately $103,000 of compensation cost is reflected in administrative expense in 2009 related to a stock option modification related to a previously vested option
grant.

Stock
option activity under the Plans from January 1, 2009 to December 31, 2009 was as follows:

Options

Weighted
Average
Exercise Price

Weighted
Average
Remaining
Life (Yrs)

Aggregate
Intrinsic
Value $ in
000'sOutstanding January 1, 2009


612,692

$
18.16


6.8Granted


Exercised


Canceled


(15,501
)
$
18.00




$
Outstanding: December 31, 2009


597,191

$
18.17


5.8

$
Exercisable: December 31, 2009


592,691

$
18.13


5.8

$



Restricted Stock

Approximately $1.4 million, $1.2 million and $0.5 million of compensation cost is reflected in administrative expense in the Company's
statements of operations for the years ended December 31, 2009, 2008 and 2007, respectively, as a result of the restricted shares granted during 2009 and 2007. Total unrecognized compensation
cost of approximately $1.1 million as of December 31, 2009 related to restricted shares granted during 2009 and 2007 will be recognized over a weighted average vesting period of
approximately 1.2 years.

Restricted
stock activity January 1, 2009 to December 31, 2009 was as follows:

Number of shares outstanding

Weighted Average Grant
date fair valueNonvested at January 1, 2009


127,000

$
24.59Granted


108,000


9.57Vested


(21,000
)

16.81Forfeited


(1,750
)

18.16Nonvested at December 31, 2009


212,250


17.77


Note 8  Segment and Geographic Information

Industry Segment Information

The Company's operations include the acquisition, leasing, re-leasing and subsequent sale of multiple types of intermodal containers and chassis.
Intermodal containers are large, standardized steel boxes used to transport freight by ship, rail or truck. Chassis are used for the transportation of

F-24

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

containers
domestically. The Company primarily leases three principal types of equipment: (1) dry freight containers, which are used for general cargo such as manufactured component parts,
consumer staples, electronics and apparel, (2) refrigerated containers, which are used for perishable items such as fresh and frozen foods, and (3) special containers, which are used for
heavy and oversized cargo such as marble slabs, building products and machinery. The Company also has recently started leasing chassis, which are used for the transportation of containers domestically
via rail and roads, and tank containers which are used to transport bulk liquid products such as chemicals.

The
Company conducts its business activities in one industry, intermodal transportation equipment, and has two segments:



The
following tables show segment information for the years ended December 31, 2009, 2008 and 2007, and the consolidated totals reported (dollars in thousands):

2009

Equipment
Leasing

Equipment
Trading

TotalsTotal revenues

$
311,875

$
40,662

$
352,537Equipment trading expenses





37,538


37,538Depreciation and amortization


115,429


259


115,688Net (gain) on sale of equipment


(9,278
)




(9,278
)Interest and debt expense


68,004


803


68,807Income before income taxes(1)


60,691


881


61,572Goodwill at December 31


70,898


1,000


71,898Total assets at December 31


1,782,002


18,976


1,800,978Purchases of leasing equipment(2)


30,859





30,859Investments in finance leases(2)


27,098





27,098


---

F-25

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

2008

Equipment
Leasing

Equipment
Trading

TotalsTotal revenues

$
324,083

$
95,909

$
419,992Equipment trading expenses





84,216


84,216Depreciation and amortization


110,400


50


110,450Net (gain) on sale of equipment


(23,534
)




(23,534
)Interest and debt expense


63,797


1,186


64,983Income before income taxes(3)


98,724


8,414


107,138Goodwill at December 31


70,898


1,000


71,898Total assets at December 31


1,936,111


19,387


1,955,498Purchases of leasing equipment(4)


450,902





450,902Investments in finance leases(4)


41,733





41,733


---

2007

Equipment
Leasing

Equipment
Trading

TotalsTotal revenues

$
293,062

$
50,203

$
343,265Equipment trading expenses





43,920


43,920Depreciation and amortization


101,670





101,670Net (gain) on sale of equipment


(12,119
)




(12,119
)Interest and debt expense


51,656


473


52,129Income before income taxes(5)


83,753


4,521


88,274Goodwill at December 31


70,898


1,000


71,898Total assets at December 31


1,682,045


23,842


1,705,887Purchases of leasing equipment(6)


334,476





334,476Investments in finance leases(6)


58,407





58,407


---

Note:There are no intercompany revenues or expenses between segments. Additionally, certain administrative expenses have been allocated
between
segments based on an estimate of services provided to each segment.

Geographic Segment Information

The Company's customers use the containers for their global trade utilizing many worldwide trade routes. The Company earns its revenues from international
containers which are deployed by its customers around the world. Substantially all of the Company's leasing related revenues are

F-26

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

denominated
in U.S. dollars. The following table represents the allocation of domestic and international revenues for the periods indicated based the customers' primary domicile (in thousands):

Year Ended
December 31,
2009

Year Ended
December 31,
2008

Year Ended
December 31,
2007Total revenues:United States of America

$
32,781

$
45,917

$
33,830Asia


140,263


190,900


162,605Europe


154,906


148,828


120,804Other international


24,587


34,347


26,026Total

$
352,537

$
419,992

$
343,265


As
the Company's containers are used internationally, where no one container is domiciled in one particular place for a prolonged period of time, substantially all of the Company's
long-lived assets are considered to be international.

Note 9  Net (Gain) on Sale of Leasing Equipment

The net (gain) on sale of leasing equipment consists of the following (in thousands):

Year Ended
December 31,
2009

Year Ended
December 31,
2008

Year Ended
December 31,
2007Impairment loss on equipment held for sale

$
1,598

$
849

$
1,483(Gain) on sale of equipment  net of selling costs


(10,876
)

(24,383
)

(13,602
)Net (gain) on sale of leasing equipment

$
(9,278
)
$
(23,534
)
$
(12,119
)


Note 10  Income Taxes

The following table sets forth the income tax expense for the periods indicated (in thousands):

Year Ended
December 31,
2009

Year Ended
December 31,
2008

Year Ended
December 31,
2007Current taxes:Federal

$


$
223

$
State








Foreign





(18
)

78


205


78Deferred taxes:Federal


39,007


19,113


20,727State


355


(285
)

599Foreign


(94
)

34


19639,268


18,862


21,522Total

$
39,268

$
19,067

$
21,600


F-27

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

The following table reconciles federal income taxes computed at the statutory rate with income tax expense (benefit) (in thousands):

Year Ended
December 31,
2009

Year Ended
December 31,
2008

Year Ended
December 31,
2007Federal income taxes at statutory rate

$
38,799

$
19,203

$
21,137State income taxes (net of federal income tax benefit)


363


214


389Reversal of deferred state tax liabilities (net of federal income tax expense)


(133
)

(400
)

Other/effect of permanent differences


239


50


74$
39,268

$
19,067

$
21,600


Deferred
income tax assets and liabilities are comprised of the following (in thousands):

December 31,2009

2008Deferred income tax assets:Net operating loss carryforwards

$
65,877

$
33,593Allowance for losses


1,179


1,870Derivative instruments


21,522


33,692Deferred income


3,816


6,516Accrued liabilities & other


1,238


5,26793,632


80,938Deferred income tax liabilities:Accelerated depreciation


198,877


148,645Goodwill amortization


7,650


5,858206,527


154,503Net deferred income tax liability

$
112,895

$
73,565


The
Company has U.S. Federal net operating loss carryforwards of approximately $186 million at December 31, 2009. These losses will expire in 2025 through 2029. The Company
expects to fully apply these losses to the future taxable income that will be generated through the reversal of temporary differences, mainly accelerated depreciation, prior to their expiration. The
Company continues to monitor changes in its stock ownership which can potentially trigger annual limitations to the amount of net operating losses that may be utilized in future years under Internal
Revenue Code Section 382. The Company does not believe any of its net operating loss carry forwards are currently subject to Section 382 limitations.

It
is the Company's policy to permanently reinvest its foreign earnings. U.S. income taxes have not been provided on the undistributed earnings of the Company's foreign subsidiary. As of
December 31, 2009 the cumulative undistributed earnings were approximately $1.7 million.

In
accordance with the requirement to determine if the Company has any unrecognized tax benefits, which was implemented in 2007, the Company evaluated all tax positions and determined
that the cumulative effect of any uncertain tax positions and resulting unrecognized tax benefits did not have a material effect on the Company's consolidated results of operations and financial
position. At

F-28

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

January 1,
2009 and at December 31, 2009 the Company did not have any material unrecognized tax benefits. There were no increases or decreases in unrecognized tax benefits during the
year resulting from prior period tax positions, current period tax positions, settlements with tax authorities or the lapse of any statute of limitations, and no material changes in unrecognized tax
benefits are expected over the next twelve months. In addition, there is no impact to the effective tax rate. Estimated interest and penalties related to potential underpayment on any unrecognized tax
benefits are classified as a component of tax expense in the Consolidated Statements of Operations. The Company has not recorded any interest or penalties associated with unrecognized tax benefits.
The 2004 through 2009 tax years remain subject to examination by major tax jurisdictions.

Note 11  Savings Plan

The Company's employees participate in a defined contribution plan generally covering all of its U.S. salaried employees. Under the
provisions of the Plan, an employee is vested with respect to Company contributions after four years of service. The Company matches employee contributions up to 3% of qualified compensation and may,
at its discretion, make voluntary contributions. Contributions for each of the years ended December 31, 2009, 2008 and 2007 were approximately $0.3 million.

Note 12  Rental Income Under Operating Leases

The following are the minimum future rentals at December 31, 2009 due TAL under non-cancelable operating leases of
the Company's equipment (in thousands):

2010

$
164,0632011


129,3202012


105,5662013


86,0842014


64,8972015 and thereafter


107,898$
657,828


Minimum
lease revenues are recognized on a straight line basis over the lease term or, absent a specified lease term, estimated on hire period, inclusive of any free or reduced rent
periods.

Note 13  Commitments and Contingencies

Lease Commitments

The Company has cancelable and non-cancelable operating lease agreements principally for facilities and for equipment used in the Company's
operations. Total rent expense was approximately $2.3 million, $2.4 million, and $2.3 million, for the years ended December 31, 2009, 2008 and 2007, respectively.

F-29

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Future
minimum rental commitments under non-cancelable operating leases at December 31, 2009 were as follows (in thousands):

2010

$
2,6962011


2,0272012


8232013


352014


3$
5,584


At
December 31, 2009 the aggregate future minimum rentals to be received under non-cancelable subleases were as follows (in thousands):

2010

$
4302011


4302012


179$
1,039


Residual Value Guarantees

During 2008, the Company entered into commitments for equipment residual value guarantees in connection with certain finance leases that were sold or brokered to
financial institutions. The guarantees represent the Company's commitment that these assets will be worth a specified amount at the end of lease terms (if the lessee does not default on the lease)
which expires in 2016. At December 31, 2009, the maximum potential amount of the guarantees under which the Company could be required to perform was approximately $27.1 million. The
carrying values of the guarantees of $1.1 million have been deferred and are included in accounts payable and accrued expenses. The Company accounts for the residual value guarantees under
Accounting Standards Codification 450 (Contingencies) and expects the market value of the equipment covered by the guarantees will equal or exceed the value of the guarantees. Under the criteria
established by ASC 820, the Company performed fair value measurements of the guarantees at origination, using Level 2 inputs, which were based on significant other observable inputs other than
quoted prices, either on a direct or indirect basis.

Purchase Commitments

At December 31, 2009, the Company had commitments to purchase equipment in the amount of $88.1 million payable in 2010.

Contingencies

The Company is party to various pending or threatened legal or regulatory proceedings arising in the ordinary course of its business. Based upon information
presently available, management of the Company does not expect any liabilities arising from these matters to have a material effect on the consolidated financial position, results of operations or
cash flows of the Company.

F-30

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Indemnities

The Revolving Credit Facility, the Asset Backed Securitization Program and the Asset Backed Credit Facilities contain standard provisions present in loans of
these types which obligate the Company to reimburse the lenders thereunder for any increased costs associated with continuing to hold the loans thereunder on its books which arise as a result of
broadly defined regulatory changes, including changes in reserve requirements and bank capital requirements. These indemnities would have the practical effect of increasing the interest rate on the
Company's debt if they were to be triggered. In all cases, the Company has the right to repay the applicable loan and avoid the increased costs. The term of these indemnities matches the length of the
related term of the applicable loan.

Note 14  Selected Quarterly Financial Data (Unaudited)

The following table sets forth certain key interim financial information for the years ended December 31, 2009 and 2008:

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter(In thousands, except per share amounts)2009:Total revenues

$
100,155

$
90,059

$
82,916

$
79,407Net income(1)

$
16,616

$
35,777

$
3,176

$
16,017Net income per basic common share

$
0.52

$
1.15

$
0.10

$
0.53Net income per diluted common share

$
0.52

$
1.15

$
0.10

$
0.522008:Total revenues

$
101,098

$
103,158

$
107,687

$
108,049Net(loss) income(2)

$
(3,793
)
$
40,318

$
14,534

$
(15,263
)Net (loss) income per basic common share

$
(0.12
)
$
1.24

$
0.45

$
(0.47
)Net (loss) income per diluted common share

$
(0.12
)
$
1.23

$
0.44

$
(0.47
)


---

Note 15  Foreign Currency Activities

The Company recorded $0.2 million of unrealized foreign currency exchange losses in the year ended December 31, 2009 and
$1.1 million of unrealized foreign currency exchange losses in the year ended December 31, 2008, which resulted primarily from fluctuations in exchange rates related to its Euro and
Pound Sterling transactions and related assets.

F-31

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Table of Contents

TAL INTERNATIONAL GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)

Note 16  Subsequent Events

Amendment to 2009 Asset Backed Credit Facility

On February 16, 2010, TAL Advantage III, LLC, an indirect wholly owned subsidiary of TAL International
Group, Inc., increased the size of its 2009 Asset Backed Credit Facility from $100 million to $150 million.

Quarterly Dividend

On February 22, 2010, the Company's Board of Directors approved and declared a $0.25 per share quarterly cash dividend on its
issued and outstanding common stock, payable on March 11, 2010 to shareholders of record at the close of business on March 25, 2010.

F-32

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Table of Contents

SCHEDULE II

TAL International Group, Inc.

Valuation and Qualifying Accounts
Years ended December 31, 2009, 2008 and 2007
(In thousands)

Beginning
Balance

Additions/
(Reversals)

(Write-offs)
Reversals

Other(a)

Ending
BalanceFinance Lease  Allowance for doubtful accounts:For the year ended December 31, 2009

$
1,420

$
(1,517
)
$
1,713

$
2

$
1,618For the year ended December 31, 2008

$


$
4,117

$
(2,700
)
$
3

$
1,420For the year ended December 31, 2007

$


$


$


$


$
Accounts Receivable  Allowance for doubtful accounts:For the year ended December 31, 2009

$
807

$
398

$
(437
)
$
(11
)
$
757For the year ended December 31, 2008

$
961

$
329

$
(471
)
$
(12
)
$
807For the year ended December 31, 2007

$
266

$
700

$
(3
)
$
(2
)
$
961Allowance for equipment loss:For the year ended December 31, 2009

$
316

$
1,664

$
(929
)
$


$
1,051For the year ended December 31, 2008

$
92

$
432

$
(208
)
$


$
316For the year ended December 31, 2007

$
17

$
92

$
(17
)
$


$
92


(a)Primarily
relates to the effect of foreign currency translation.


S-1

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