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UNITEDSTATES SECURITIES AND EXCHANGECOMMISSION

WASHINGTON, D.C.20549

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FORM10-Q

|        |                                                                                        |
|--------|----------------------------------------------------------------------------------------|
|   | QUARTERLY REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |

For TheQuarterly Period Ended June  30,2006or

|        |                                                                                        |
|--------|----------------------------------------------------------------------------------------|
|   | TRANSITION REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934 |

For the Transition Period from                     to                     

Commission file number- 001-32638

TAL InternationalGroup, Inc.

(Exact name of registrant asspecified in thecharter)

|                                                             |  |  |                                       |
|-------------------------------------------------------------|--|--|---------------------------------------|
| Delaware                                                    |  |  | 20-1796526                            |
| (Stateor other jurisdiction ofincorporation ororganization) |  |  | (I.R.S. EmployerIdentificationNumber) |
| 100Manhattanville Road,Purchase, NewYork                    |  |  | 10577-2135                            |
| (Addressof principal executiveoffice)                       |  |  | (ZipCode)                             |
|                                                             |

(914)251-9000

(Registrant's telephonenumber including area code)

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

Indicate by check mark whether the registrant isa large accelerated filer, an accelerated filer, or a non-acceleratedfiler. See definition of ‘‘accelerated filer and largeaccelerated filer’’ in Rule 12b-2 of the Exchange Act(Check one):

Large accelerated filer                     Accelerated filer                     Non-accelerated filer

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

As of August  7,2006, there were 32,950,634 shares of the Registrant’s commonstock, $.001 par valueoutstanding.

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TAL INTERNATIONALGROUP,INC.INDEX

|                                    |  |  |                                                                                                       |  |  |        |
|------------------------------------|--|--|-------------------------------------------------------------------------------------------------------|--|--|--------|
| PartI — FinancialInformation |  |  | PageNo.                                                                                               |
| Item1.                             |  |  | FinancialStatements(unaudited)                                                                        |  |  |   |
|                               |  |  | ConsolidatedBalance Sheets at June 30, 2006 and December31, 2005                                      |  |  | 3      |
|                               |  |  | ConsolidatedStatements of Operations for the three and six months ended June30, 2006 and June 30,2005 |  |  | 4      |
|                               |  |  | Consolidated Statements of CashFlows for the six months ended June 30, 2006 andJune 30, 2005          |  |  | 5      |
|                               |  |  | Notes toConsolidated FinancialStatements                                                              |  |  | 6-13   |
| Item2.                             |  |  | Management's Discussion and Analysis of FinancialCondition and Results ofOperations                   |  |  | 14-26  |
| Item3.                             |  |  | Quantitative and Qualitative Disclosures AboutMarket Risk                                             |  |  | 26-28  |
| Item4.                             |  |  | Controls andProcedures                                                                                |  |  | 28     |
| Part II— OtherInformation    |  |  |                                                                                                  |
| Item1.                             |  |  | LegalProceedings                                                                                      |  |  | 29     |
| Item1A.                            |  |  | RiskFactors                                                                                           |  |  | 29     |
| Item4.                             |  |  | Submission of Matters to a Vote of SecurityHolders                                                    |  |  | 29     |
| Item6.                             |  |  | Exhibits                                                                                              |  |  | 30     |
| Signature                          |  |  | 31                                                                                                    |
|                                    |

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

This Quarterly Report onForm 10-Q contains certain forward-looking statements,including, without limitation, statements concerning the conditions inour industry, our operations, our economic performance and financialcondition, including, in particular, statements relating to ourbusiness and growth strategy and service development efforts. ThePrivate Securities Litigation Reform Act of 1995 provides a‘‘safe harbor’’ for certain forward-lookingstatements so long as such information is identified as forward-lookingand is accompanied by meaningful cautionary statements identifyingimportant factors that could cause actual results to differ materiallyfrom those projected in the information. When used in this QuarterlyReport on Form 10-Q, the words‘‘may’’,‘‘might’’,‘‘should’’,‘‘estimate’’,‘‘project’’,‘‘plan’’,‘‘anticipate’’,‘‘expect’’,‘‘intend’’,‘‘outlook’’,‘‘believe’’ and other similar expressionsare intended to identify forward-looking statements and information.You are cautioned not to place undue reliance on these forward-lookingstatements, which speak only as of their dates. These forward-lookingstatements are based on estimates and assumptions by our managementthat, although we believe to be reasonable, are inherently uncertainand subject to a number of risks and uncertainties. These risks anduncertainties include, without limitation, those identified under‘‘Risk Factors’’ in our Annual Report onForm 10-K filed with the Securities and Exchange Commission(‘‘SEC’’), on March  20,  2006,and all of our other filings filed with the SEC from October11,  2005 through the current date pursuant to the SecuritiesExchange Act of 1934.

We undertake no obligation topublicly update or revise any forward-looking statement as a result ofnew information, future events or otherwise, except as otherwiserequired by law. Reference is also made to such risks and uncertaintiesdetailed from time to time in our filings with the SEC.

PART I— FINANCIAL INFORMATION

|              |                      |
|--------------|----------------------|
| ITEM1.  | FINANCIAL STATEMENTS |

Theconsolidated financial statements of TAL International Group, Inc.(‘‘TAL’’ or the‘‘Company,’’) as of June  30,2006 (unaudited) and December  31,  2005 and for the threeand six months ended June  30,  2006 (unaudited) andJune  30,  2005 (unaudited) included herein have beenprepared by the Company, without audit, pursuant to U.S. generallyaccepted accounting principles and the rules and regulations of theSecurities and Exchange Commission (the‘‘SEC’’). However, certain information andnote disclosures normally included in financial statements prepared inaccordance with U.S. generally accepted accounting principles have beencondensed or omitted pursuant to such rules and regulations, althoughthe Company believes that the disclosures are adequate to make theinformation presented not misleading. These financial statementsreflect, in the opinion of management, all adjustments (consisting onlyof normal recurring adjustments) necessary to present fairly theresults for the interim periods. The results of operations for suchinterim periods are not necessarily indicative of the results for thefull year. These financial statements should be read in conjunctionwith the consolidated financial statements and the notes theretoincluded in the Company’s Annual Report on Form 10-K filed withthe Securities and Exchange Commission(‘‘SEC’’), on March  20,  2006,from which the accompanying December  31,  2005 BalanceSheet information was derived, and all of our other filings filed withthe SEC from October 11, 2005 through the current date pursuantto the Securities Exchange Act of 1934.

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TAL INTERNATIONAL GROUP,INC.

Consolidated Balance Sheets(Dollars inthousands, except sharedata)

|                                                                                                                                  |  |  |             |   |           |                 |  |  |  |   |           |   |
|----------------------------------------------------------------------------------------------------------------------------------|--|--|-------------|---|-----------|-----------------|--|--|--|---|-----------|---|
|                                                                                                                             |  |  | June30,2006 |   |           | December31,2005 |
|                                                                                                                             |  |  | (Unaudited) |   |           |            |
| Assets:                                                                                                                          |  |  |             |   |      |                 |  |  |  |   |      |   |
| Cashand cash equivalents (including restricted cash of $12,070 and $0)                                                           |  |  |             | $ | 45,374    |                 |  |  |  | $ | 27,259    |   |
| Accountsreceivable, net of allowances of $372 and$820                                                                            |  |  |             |   | 32,705    |                 |  |  |  |   | 31,738    |   |
| Net investment infinanceleases                                                                                                   |  |  |             |   | 117,777   |                 |  |  |  |   | 73,819    |   |
| Leasingequipment, net of accumulated depreciation and allowances of $166,439and$124,543                                          |  |  |             |   | 1,052,515 |                 |  |  |  |   | 1,036,363 |   |
| Leaseholdimprovements and other fixed assets, net of accumulated depreciationand amortization of $1,635 and$1,312                |  |  |             |   | 3,411     |                 |  |  |  |   | 3,771     |   |
| Equipment heldforsale                                                                                                            |  |  |             |   | 24,673    |                 |  |  |  |   | 24,844    |   |
| Goodwill                                                                                                                         |  |  |             |   | 71,898    |                 |  |  |  |   | 71,898    |   |
| Deferredfinancing costs                                                                                                          |  |  |             |   | 7,124     |                 |  |  |  |   | 3,540     |   |
| Otherassets (including fair value of derivativeinstruments)                                                                      |  |  |             |   | 31,149    |                 |  |  |  |   | 26,304    |   |
| Totalassets                                                                                                                      |  |  |             | $ | 1,386,626 |                 |  |  |  | $ | 1,299,536 |   |
| Liabilitiesand stockholders'equity:                                                                                              |  |  |             |   |      |                 |  |  |  |   |      |   |
| Accountspayable                                                                                                                  |  |  |             | $ | 34,283    |                 |  |  |  | $ | 7,524     |   |
| Accruedexpenses                                                                                                                  |  |  |             |   | 35,123    |                 |  |  |  |   | 30,063    |   |
| Income taxespayable                                                                                                              |  |  |             |   | 216       |                 |  |  |  |   | 116       |   |
| Deferred income taxliability                                                                                                     |  |  |             |   | 24,626    |                 |  |  |  |   | 9,239     |   |
| Debt:                                                                                                                            |  |  |             |   |      |                 |  |  |  |   |      |   |
| Assetsecuritizationfacility                                                                                                      |  |  |             |   | —   |                 |  |  |  |   | 710,000   |   |
| Assetbacked securities(ABS):                                                                                                     |  |  |             |   |      |                 |  |  |  |   |      |   |
| Term notes                                                                                                                       |  |  |             |   | 668,667   |                 |  |  |  |   | —   |   |
| Warehousefacility                                                                                                                |  |  |             |   | 35,000    |                 |  |  |  |   | —   |   |
| Revolvingcreditfacilities                                                                                                        |  |  |             |   | 160,000   |                 |  |  |  |   | 148,000   |   |
| Capitalleaseobligations                                                                                                          |  |  |             |   | 20,797    |                 |  |  |  |   | 14,627    |   |
| Totalliabilities                                                                                                                 |  |  |             |   | 978,712   |                 |  |  |  |   | 919,569   |   |
| Stockholders'equity:                                                                                                             |  |  |             |   |      |                 |  |  |  |   |      |   |
| Preferred stock, $.001par value, 500,000 shares authorized, noneissued                                                           |  |  |             |   | —   |                 |  |  |  |   | —   |   |
| Commonstock, $.001 par value, 100,000,000 shares authorized, 32,949,521 and32,882,208 shares issued and outstanding,respectively |  |  |             |   | 33        |                 |  |  |  |   | 33        |   |
| Additionalpaid-incapital                                                                                                         |  |  |             |   | 394,393   |                 |  |  |  |   | 394,389   |   |
| Accumulatedearnings(deficit)                                                                                                     |  |  |             |   | 9,088     |                 |  |  |  |   | (13,737   | ) |
| Accumulatedother comprehensive income (loss)                                                                                     |  |  |             |   | 4,400     |                 |  |  |  |   | (718      | ) |
| Totalstockholders' equity                                                                                                        |  |  |             |   | 407,914   |                 |  |  |  |   | 379,967   |   |
| Totalliabilities and stockholders' equity                                                                                        |  |  |             | $ | 1,386,626 |                 |  |  |  | $ | 1,299,536 |   |
|                                                                                                                                  |

Theaccompanying notes to the unaudited consolidated financial statementsare an integral part of these statements.

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TAL INTERNATIONAL GROUP,INC.

Consolidated Statements of Operations(Dollars and shares in thousands, except earnings pershare)

|                                                                                                                 |  |  |                            |   |         |                         |  |  |      |   |         |      |  |  |  |   |         |   |  |  |  |   |         |   |
|-----------------------------------------------------------------------------------------------------------------|--|--|----------------------------|---|---------|-------------------------|--|--|------|---|---------|------|--|--|--|---|---------|---|--|--|--|---|---------|---|
|                                                                                                            |  |  | ThreeMonths Ended June 30, |   |         | Six Months EndedJune30, |
|                                                                                                            |  |  | 2006                       |   |         | 2005                    |  |  | 2006 |   |         | 2005 |
|                                                                                                            |  |  | (Unaudited)                |   |         | (Unaudited)             |
| Revenues:                                                                                                       |  |  |                            |   |    |                         |  |  |      |   |    |      |  |  |  |   |    |   |  |  |  |   |    |   |
| Leasingrevenues, including income recognized on finance leases of $2,832,$1,138, $5,117, and $1,422respectively |  |  |                            | $ | 66,821  |                         |  |  |      | $ | 71,808  |      |  |  |  | $ | 133,696 |   |  |  |  | $ | 144,083 |   |
| Equipmenttradingrevenue                                                                                         |  |  |                            |   | 5,757   |                         |  |  |      |   | 6,891   |      |  |  |  |   | 10,776  |   |  |  |  |   | 9,399   |   |
| Managementfeeincome                                                                                             |  |  |                            |   | 1,573   |                         |  |  |      |   | 1,416   |      |  |  |  |   | 3,149   |   |  |  |  |   | 3,412   |   |
| Otherrevenues                                                                                                   |  |  |                            |   | 563     |                         |  |  |      |   | 418     |      |  |  |  |   | 1,040   |   |  |  |  |   | 1,171   |   |
| Totalrevenues                                                                                                   |  |  |                            |   | 74,714  |                         |  |  |      |   | 80,533  |      |  |  |  |   | 148,661 |   |  |  |  |   | 158,065 |   |
| Expenses:                                                                                                       |  |  |                            |   |    |                         |  |  |      |   |    |      |  |  |  |   |    |   |  |  |  |   |    |   |
| Equipmenttradingexpenses                                                                                        |  |  |                            |   | 4,714   |                         |  |  |      |   | 5,166   |      |  |  |  |   | 8,939   |   |  |  |  |   | 7,231   |   |
| Directoperatingexpenses                                                                                         |  |  |                            |   | 7,366   |                         |  |  |      |   | 7,180   |      |  |  |  |   | 13,423  |   |  |  |  |   | 14,297  |   |
| Administrativeexpenses                                                                                          |  |  |                            |   | 9,120   |                         |  |  |      |   | 9,242   |      |  |  |  |   | 18,659  |   |  |  |  |   | 18,951  |   |
| Depreciationandamortization                                                                                     |  |  |                            |   | 25,703  |                         |  |  |      |   | 29,373  |      |  |  |  |   | 51,192  |   |  |  |  |   | 58,658  |   |
| (Reversal)provision for doubtfulaccounts                                                                        |  |  |                            |   | (913    | )                       |  |  |      |   | 264     |      |  |  |  |   | (442    | ) |  |  |  |   | 39      |   |
| Net(gain) on sale of leasingequipment                                                                           |  |  |                            |   | (1,084  | )                       |  |  |      |   | (2,580  | )    |  |  |  |   | (976    | ) |  |  |  |   | (6,955  | ) |
| Write-offof deferred financing costs                                                                            |  |  |                            |   | 2,367   |                         |  |  |      |   | — |      |  |  |  |   | 2,367   |   |  |  |  |   | — |   |
| Interestand debtexpense                                                                                         |  |  |                            |   | 11,124  |                         |  |  |      |   | 21,496  |      |  |  |  |   | 23,580  |   |  |  |  |   | 42,610  |   |
| Unrealized(gain) loss on interest rateswaps                                                                     |  |  |                            |   | (4,444  | )                       |  |  |      |   | 8,674   |      |  |  |  |   | (3,590  | ) |  |  |  |   | (1,386  | ) |
| Managementfees                                                                                                  |  |  |                            |   | — |                         |  |  |      |   | 1,626   |      |  |  |  |   | — |   |  |  |  |   | 3,252   |   |
| Totalexpenses                                                                                                   |  |  |                            |   | 53,953  |                         |  |  |      |   | 80,441  |      |  |  |  |   | 113,152 |   |  |  |  |   | 136,697 |   |
| Incomebefore incometaxes                                                                                        |  |  |                            |   | 20,761  |                         |  |  |      |   | 92      |      |  |  |  |   | 35,509  |   |  |  |  |   | 21,368  |   |
| Incometax expense(benefit)                                                                                      |  |  |                            |   | 7,441   |                         |  |  |      |   | (224    | )    |  |  |  |   | 12,684  |   |  |  |  |   | 7,667   |   |
| Netincome                                                                                                       |  |  |                            |   | 13,320  |                         |  |  |      |   | 316     |      |  |  |  |   | 22,825  |   |  |  |  |   | 13,701  |   |
| Preferredstockdividends                                                                                         |  |  |                            |   | — |                         |  |  |      |   | (6,131  | )    |  |  |  |   | — |   |  |  |  |   | (12,159 | ) |
| Netincome (loss) applicable to commonstockholders                                                               |  |  |                            | $ | 13,320  |                         |  |  |      | $ | (5,815  | )    |  |  |  | $ | 22,825  |   |  |  |  | $ | 1,542   |   |
| Netincome (loss) per common share —Basic                                                                  |  |  |                            | $ | 0.40    |                         |  |  |      | $ | (0.57   | )    |  |  |  | $ | 0.69    |   |  |  |  | $ | 0.15    |   |
| Netincome (loss) per common share —Diluted                                                                |  |  |                            | $ | 0.40    |                         |  |  |      | $ | (0.57   | )    |  |  |  | $ | 0.68    |   |  |  |  | $ | 0.15    |   |
| Weightedaverage number of common shares outstanding — Basic                                               |  |  |                            |   | 32,895  |                         |  |  |      |   | 10,204  |      |  |  |  |   | 32,889  |   |  |  |  |   | 10,177  |   |
| Weightedaverage number of common shares outstanding— Diluted                                              |  |  |                            |   | 33,495  |                         |  |  |      |   | 10,204  |      |  |  |  |   | 33,469  |   |  |  |  |   | 10,605  |   |
|                                                                                                                 |

Theaccompanying notes to the unaudited consolidated financial statementsare an integral part of these statements.

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TAL INTERNATIONAL GROUP,INC.

Consolidated Statements of Cash Flows(Dollars inthousands)

|                                                                                 |  |  |                         |   |          |      |  |  |  |   |          |   |
|---------------------------------------------------------------------------------|--|--|-------------------------|---|----------|------|--|--|--|---|----------|---|
|                                                                            |  |  | Sixmonths ended June30, |
|                                                                            |  |  | 2006                    |   |          | 2005 |
|                                                                            |  |  | (Unaudited)             |
| Cashflows from operatingactivities:                                             |  |  |                         |   |     |      |  |  |  |   |     |   |
| Netincome                                                                       |  |  |                         | $ | 22,825   |      |  |  |  | $ | 13,701   |   |
| Adjustmentsto reconcile net income to net cash provided by operatingactivities: |  |  |                         |   |     |      |  |  |  |   |     |   |
| Depreciationandamortization                                                     |  |  |                         |   | 51,192   |      |  |  |  |   | 58,658   |   |
| Write-offof deferred financingcosts                                             |  |  |                         |   | 2,367    |      |  |  |  |   | —  |   |
| Amortizationof deferred financing costs                                         |  |  |                         |   | 323      |      |  |  |  |   | 2,987    |   |
| Net (gain) on saleof leasingequipment                                           |  |  |                         |   | (976     | )    |  |  |  |   | (6,955   | ) |
| Unrealized(gain) on interest rateswaps                                          |  |  |                         |   | (3,590   | )    |  |  |  |   | (1,386   | ) |
| Deferredincometaxes                                                             |  |  |                         |   | 15,387   |      |  |  |  |   | 7,525    |   |
| Stockcompensationcharge                                                         |  |  |                         |   | 4        |      |  |  |  |   | 245      |   |
| Changes inoperating assets andliabilities                                       |  |  |                         |   | 33,424   |      |  |  |  |   | 35,079   |   |
| Netcash provided by operatingactivities                                         |  |  |                         |   | 120,956  |      |  |  |  |   | 109,854  |   |
| Cashflows from investingactivities:                                             |  |  |                         |   |     |      |  |  |  |   |     |   |
| Purchases ofleasing equipment                                                   |  |  |                         |   | (106,353 | )    |  |  |  |   | (142,574 | ) |
| Investment infinanceleases                                                      |  |  |                         |   | (28,975  | )    |  |  |  |   | (14,963  | ) |
| Proceedsfrom sale ofequipment                                                   |  |  |                         |   | 26,315   |      |  |  |  |   | 60,477   |   |
| Cashcollections on financing leases, net of unearnedincome                      |  |  |                         |   | 6,312    |      |  |  |  |   | 3,083    |   |
| Other                                                                           |  |  |                         |   | 135      |      |  |  |  |   | —  |   |
| Netcash used in investingactivities                                             |  |  |                         |   | (102,566 | )    |  |  |  |   | (93,977  | ) |
| Cashflows from financingactivities:                                             |  |  |                         |   |     |      |  |  |  |   |     |   |
| Proceeds fromissuance of preferredstock                                         |  |  |                         |   | —  |      |  |  |  |   | 1,205    |   |
| Proceeds fromissuance of commonstock                                            |  |  |                         |   | —  |      |  |  |  |   | 1        |   |
| Initial borrowingsunder ABS term notes                                          |  |  |                         |   | 680,000  |      |  |  |  |   | —  |   |
| Payments under ABSterm notes                                                    |  |  |                         |   | (11,333  | )    |  |  |  |   | —  |   |
| Netborrowings under ABS warehousefacility                                       |  |  |                         |   | 35,000   |      |  |  |  |   | —  |   |
| Payments offinance fees related to new debtagreements                           |  |  |                         |   | (5,942   | )    |  |  |  |   | —  |   |
| Netpayments under asset securitizationfacility                                  |  |  |                         |   | (710,000 | )    |  |  |  |   | —  |   |
| Netborrowings (payments) under revolving creditfacilities                       |  |  |                         |   | 12,000   |      |  |  |  |   | (10,000  | ) |
| (Increase)in restricted cash                                                    |  |  |                         |   | (12,070  | )    |  |  |  |   | —  |   |
| Netcash used in financingactivities                                             |  |  |                         |   | (12,345  | )    |  |  |  |   | (8,794   | ) |
| Netincrease in cash and cashequivalents                                         |  |  |                         |   | 6,045    |      |  |  |  |   | 7,083    |   |
| Unrestrictedcash and cash equivalents, beginning ofperiod                       |  |  |                         |   | 27,259   |      |  |  |  |   | 16,424   |   |
| Unrestrictedcash and cash equivalents, end ofperiod                             |  |  |                         | $ | 33,304   |      |  |  |  | $ | 23,507   |   |
| Supplementalnon-cash financingactivities:                                       |  |  |                         |   |     |      |  |  |  |   |     |   |
| Purchases ofleasing equipment financed through capital leaseobligations         |  |  |                         | $ | 6,170    |      |  |  |  | $ | —  |   |
|                                                                                 |

Theaccompanying notes to the unaudited consolidated financial statementsare an integral part of thesestatements.

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TAL INTERNATIONALGROUP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIALSTATEMENTS

Note 1 — Description of the Business, Basisof Presentation, Recently Issued AccountingPronouncements

A.    Description of the Business

TAL International Group, Inc.(‘‘TAL,’’ or the‘‘Company’’) was formed on October26,  2004 and commenced operations on November  4,2004. TAL consists of the consolidated accounts of Trans Ocean Ltd.(‘‘TOL’’) and TAL International ContainerCorporation (‘‘TALI’’), formerly known asTransamerica Leasing Inc., and their subsidiaries. EffectiveOctober  31,  2004, TAL acquired all of the outstandingcapital stock of TOL and TALI for approximately $1.2  billion incash (‘‘theAcquisition’’).

The Company provideslong-term leases, service leases and finance leases of maritimecontainers and related equipment, along with maritime containermanagement services, through a worldwide network of offices, thirdparty depots and other facilities. The Company operates in bothinternational and domestic markets. The majority of the Company'sbusiness is derived from leasing its containers to shipping linecustomers through a variety of long-term and short-term contractuallease arrangements. The Company also provides container sales andpositioning services, enters into management agreements with thirdparty container owners under which the Company manages the leasing andselling of containers on behalf of the third party owners, and leaseschassis used for the transportation of containersdomestically.

B.    Basis of Presentation

Thepreparation of financial statements in conformity with U.S. generallyaccepted accounting principles requires management to make estimatesand assumptions that affect the reported amounts of assets andliabilities, the reported amounts of revenues and expenses during thereporting period and disclosure of contingent assets and liabilities atthe date of the financial statements. Actual results could differ fromthose estimates.

The consolidated financial statementsinclude the accounts of the Company and its subsidiaries. Allintercompany transactions and balances have been eliminated inconsolidation. Certain reclassifications have been made to theaccompanying prior period financial statements and notes to conformwith the current year’s presentation.

C.    RecentlyIssued Accounting Pronouncements

In June  2006,the Financial Accounting Standards Board(‘‘FASB’’) issued FASB Interpretation No.48, ‘‘Accounting for Uncertainty in Income Taxes —an interpretation of FASB Statement No. 109,’’(‘‘FIN 48’’). FIN 48 clarifies theaccounting for uncertainty in income taxes recognized in financialstatements in accordance with FASB Statement No. 109, Accounting forIncome Taxes. FIN 48 prescribes a recognition threshold andmeasurement attribute for the financial statement recognition andmeasurement of a tax position taken or expected to be taken in a taxreturn. FIN 48 also provides guidance on derecognition, classification,interest and penalties, accounting in interim periods, disclosure, andtransition. The Company is required to adopt the provisions of FIN 48during the first fiscal year beginning after December  15,2006. The Company is currently evaluating the impact of FIN 48 on itsconsolidated results of operations and financialposition.

In December  2004, the FinancialAccounting Standards Board (‘‘FASB’’)issued Statement of Financial Accounting Standards No.123RShare-Based Payment (‘‘SFAS No.123R’’). This statement is a revision of SFAS No. 123,Accounting for Stock-Based Compensation. SFAS No. 123Rsupercedes Accounting Principles Board Opinion No. 25, Accountingfor Stock Issued to Employees (‘‘APB No.25’’), and its related implementation guidance. SFAS No.123R requires companies to recognize in the statement of operations thefair value of all employee share-based payments, including grants of

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employee stock options, as well ascompensatory employee stock purchase plans. The Company adopted SFASNo. 123R on January  1,  2006. Given that the optionsoutstanding upon adoption of SFAS No. 123R were fully vested, theadoption of SFAS No.123R did not have an impact on the financialposition, results of operations or cash flows of the Company. However,grants made during the second quarter of 2006 and any future grants ofshare-based compensation did and will result in the recognition ofcompensation expense.

Note 2 — Initial PublicOffering

On October  17,  2005, the Companysold 11.5  million shares of common stock at a price of $18.00per share in an initial public offering(‘‘IPO’’) which generated net proceeds ofapproximately $189.2  million, after deducting underwriterdiscounts and other offering expenses. The Company used the netproceeds of this offering, together with additional borrowings undercertain of its debt facilities and available cash, to repay the entireoutstanding principal and accrued cash interest due on the seniorunsecured credit agreement which was approximately $288.0million on October  17,  2005. On October  21,2005, the underwriters of TAL’s IPO exercised theirover-allotment option in part and purchased 1.0  millionadditional shares of common stock from certain of TAL’sstockholders. TAL did not receive any proceeds from the sale of theshares pursuant to the over-allotment option.

Note 3 —Capital Stock and Stock-Based Compensation Plans

PreferredStock Exchange

All 201,205 outstanding shares of theCompany’s Series A 12.0% cumulative senior preferredstock were converted into 11,178,035 shares of common stock onOctober  17,  2005, based on the IPO price of $18.00 percommon share. The Company paid the aggregate outstanding accrueddividends on the Series A 12.0% cumulative senior preferredstock of $23.6  million in November  2005.

2004Management Stock Plan

During 2004, the Companyadopted the 2004 Management Stock Plan (the ‘‘2004Plan’’), which provides for the issuance of awards in theform of stock options, stock appreciation rights, restricted stock andcertain other instruments to employees, consultants and members of theCompany's board of directors. A total of 534,425 shares werereserved for issuance under the 2004 Plan.

During 2004,options to purchase a total of 400,945 shares were granted at anexercise price of $0.01 per share, which the board of directorsbelieved equaled the fair value per share of the Company's commonstock.

During 2005, options to purchase an additional53,667 shares were granted at an exercise price of $0.01 per share.

Upon completion of the IPO on October  17,  2005,all 454,612 options outstanding under the 2004 Plan became fullyvested. All options granted during 2004 and 2005 have a contractuallife of ten years.

2005 Management Omnibus IncentivePlan

In October  2005, the Company adopted theTAL International Group, Inc. 2005 Management Omnibus Incentive Plan(the ‘‘2005 Plan’’), which provided for theissuance of awards in the form of stock options, stock appreciationrights and restricted stock. A total of 2,500,000 shares of commonstock were reserved for issuance under the 2005 Plan.

InOctober  2005, the board of directors approved the grant ofoptions under the 2005 Plan to purchase an aggregate of 612,195 sharesof the Company’s common stock upon consummation of the IPO withan exercise price equal to the IPO price of the common stock, and avesting period of four years. All options granted in 2005 have acontractual life of ten years. All 612,195 options granted on the IPOdate became fully vested as of December  30,  2005, thedate their acceleration was approved by the Compensation Committee ofthe Company’s board of directors. The purpose of the acceleratedvesting was to avoid future compensation expense associated with theseoptions that the Company would otherwise recognize in its consolidatedstatements of operations upon the adoption of SFASNo.123(R).

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During the second quarter of 2006,options to purchase 9,500 shares were granted to several employees atfair market values as of the grant date with exercise prices rangingfrom $21.99 to $24.44 per share. These options vest ratably over fouryears, and have a contractual life of ten years.

Adoption ofNew Accounting Standard

Effective January1,  2006, the Company adopted the provisions of Statement ofFinancial Accounting Standards No. 123 (revised 2004), Share-BasedPayment (SFAS No.123R) requiring that compensation cost relating toshare-based payment transactions be recognized in the financialstatements. The cost is measured at the grant date, based on thecalculated fair value of the award, and is recognized as an expenseover the employee’s requisite service period (generally thevesting period of the equity award). Prior to January  1,2006, the Company accounted for share-based compensation to employeesin accordance with Accounting Principles Board Opinion No. 25,Accounting for Stock Issued to Employees (APB No. 25), andrelated interpretations. The Company also followed the disclosurerequirements of Statement of Financial Accounting Standards No. 123,Accounting for Stock-Based Compensation, as amended by Statementof Financial Accounting Standards No. 148, Accounting forStock-Based Compensation-Transition and Disclosure. The Companyadopted SFAS No.123R using the modified prospective method and,accordingly, financial statement amounts for prior periods presented inthis Form 10-Q have not been restated to reflect the fair value methodof recognizing compensation cost relating to stockoptions.

There was approximately four thousand dollars ofcompensation cost reflected in administrative expense in theCompany’s statement of operations related to theCompany’s stock-based compensation plans as a result of 9,500new options granted during the period. Total unrecognized compensationcost of approximately one hundred ten thousand dollars as ofJune  30,  2006 related to the new options granted duringthe quarter will be recognized over the remaining vesting period ofapproximately 3.75 years.

The Company computed theestimated fair value of each option award on the date of grant usingthe Black-Scholes option-pricing model. Expected volatility is based oncomputed volatility from trading activity of TAL stock since its IPOdate and volatilities of other similar companies. The Company derivesan expected term for its options using an estimated option exercisedate based on historical employee termination behavior. The expectedterm represents an estimate of the time options are expected to remainoutstanding. The risk-free rate for periods within the contractual lifeof the option is based on the U.S. treasury yield curve in effect atthe time of grant. For options granted during the three months endedJune  30,  2006, the following assumptions were utilized incomputing the fair value of the options: expected volatility of28%, expected term of 10 years, expected dividends of zero, andrisk-free rates of 4.97% – 5.14%.

Allpreviously granted options in 2005 and 2004 were fully vested as ofDecember  30,  2005.

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The following table illustrates theeffect on net income and earnings per share had the fair value methodof accounting been applied consistent with the requirements of SFAS No.123 to the Company's stock compensation plans for the three andsix months ended June  30,  2005 (in thousands, exceptearnings pershare):

|                                                                               |  |  |                                |   |        |                              |  |  |  |   |        |   |
|-------------------------------------------------------------------------------|--|--|--------------------------------|---|--------|------------------------------|--|--|--|---|--------|---|
|                                                                          |  |  | Threemonthsended June 30, 2005 |   |        | Six monthsendedJune 30, 2005 |
| Net (loss) incomeapplicable to commonstockholders:                            |  |  |                                |   |   |                              |  |  |  |   |   |   |
| Asreported                                                                    |  |  |                                | $ | (5,815 | )                            |  |  |  | $ | 1,542  |   |
| Add:Stock-based compensation expense included in reported netincome           |  |  |                                |   | 245    |                              |  |  |  |   | 245    |   |
| Deduct: Stock-basedcompensation expense determined under the fair valuemethod |  |  |                                |   | (241   | )                            |  |  |  |   | (244   | ) |
| Proforma net (loss) income applicable to commonstockholders                   |  |  |                                | $ | (5,811 | )                            |  |  |  | $ | 1,543  |   |
| (Loss)earnings per commonshare:                                               |  |  |                                |   |   |                              |  |  |  |   |   |   |
| As reported —Basic andDiluted                                           |  |  |                                | $ | (0.57  | )                            |  |  |  | $ | 0.15   |   |
| Proforma — Basic andDiluted                                             |  |  |                                | $ | (0.57  | )                            |  |  |  | $ | 0.15   |   |
| Weightedaverage number of common sharesoutstanding                            |  |  |                                |   |   |                              |  |  |  |   |   |   |
| —Basic                                                                  |  |  |                                |   | 10,204 |                              |  |  |  |   | 10,177 |   |
| —Diluted                                                                |  |  |                                |   | 10,204 |                              |  |  |  |   | 10,605 |   |
|                                                                               |

Stockoption activity under the Plans from January  1,  2006 toJune  30,  2006 was asfollows:

|                           |  |  |         |  |           |                              |  |  |                                   |   |        |                                        |  |  |  |  |        |  |  |  |  |   |        |  |
|---------------------------|--|--|---------|--|-----------|------------------------------|--|--|-----------------------------------|---|--------|----------------------------------------|--|--|--|--|--------|--|--|--|--|---|--------|--|
|                      |  |  | Options |  |           | WeightedAverageExercisePrice |  |  | WeightedAverageRemainingLife(Yrs) |   |        | AggregateIntrinsicValue $in000’s |
| Outstanding January1,2006 |  |  |         |  | 1,066,807 |                              |  |  |                                   | $ | 10.33  |                                        |  |  |  |  | 9.4    |  |  |  |  |   |   |  |
| Granted                   |  |  |         |  | 9,500     |                              |  |  |                                   | $ | 23.34  |                                        |  |  |  |  |   |  |  |  |  |   |   |  |
| Exercised                 |  |  |         |  | (67,313   | )                            |  |  |                                   | $ | 0.01   |                                        |  |  |  |  |   |  |  |  |  | $ | 1,498  |  |
| Canceled                  |  |  |         |  | —   |                              |  |  |                                   |   |   |                                        |  |  |  |  |   |  |  |  |  |   |   |  |
| OutstandingJune  30,2006  |  |  |         |  | 1,008,994 |                              |  |  |                                   | $ | 11.15  |                                        |  |  |  |  | 9.0    |  |  |  |  | $ | 13,066 |  |
| Exercisable:              |  |  |         |  |      |                              |  |  |                                   |   |   |                                        |  |  |  |  |   |  |  |  |  |   |   |  |
| June30,2006               |  |  |         |  | 999,494   |                              |  |  |                                   | $ | 11.03  |                                        |  |  |  |  | 8.9    |  |  |  |  | $ | 13,063 |  |
|                           |

Theweighted-average fair value of options granted during the quarter endedJune  30,  2006 was $11.94. Cash received from employeeexercises of stock options for the three months ended June30,  2006 was six hundred sixty-three dollars. TAL did notrecognize any tax benefits associated with these exercises.

Note4 — Debt

Asset Backed Securitization Program

Effective August  1,  2005, the Companyentered into an asset securitization facility (the‘‘Asset Securitization Facility’’) pursuantto which it had contributed certain eligible containers, together withthe related leases, to TAL Advantage I LLC, a special purpose entity(the ‘‘SPE’’) which is a wholly-ownedconsolidated subsidiary of the Company, whose primary business activityis to issue asset backed notes.

On April12,  2006, the SPE issued two series of floating rate securednotes under its Asset Backed Securitization(‘‘ABS’’) program designed to reduceborrowing costs and enhance financing resources for the Company'sequipment fleet. Included in the issuance was $680.0  million offloating rate secured term notes (the ‘‘Series 2006-1Notes’’ or ‘‘ABS TermNotes’’). The proceeds from this issuance, along

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with available cash, were used to repay theoutstanding borrowings under the Asset Securitization Facility. Awrite-off of $2.4  million was recorded for certain deferredfinancing fees in the second quarter of 2006 associated with thisre-financing. The Series 2006-1 Notes amortize in equal monthlyinstallments and have a legal final maturity of April  2021. AtJune  30,  2006, the outstanding balance under the ABS TermNotes was $668.7  million. At June  30,  2006, theapplicable interest rate, including the insurance premium, was LIBORplus 0.48%. The weighted average interest rate on the ABS TermNotes for the three months ended June  30,  2006 was5.6%.

On April  12,  2006, the SPEentered into a floating rate revolving facility (the‘‘Series 2005-1 Notes’’ or the‘‘ABS Warehouse Facility’’) under the ABSprogram. The ABS Warehouse Facility provides up to $300.0million of borrowing capacity to support future fleet expansion. TheSeries 2005-1 Notes have a two year revolving period that precedes aterm period in which the outstanding balance amortizes in equal monthlyinstallments. The ABS Warehouse Facility has a legal final maturity ofApril  2023. At June  30,  2006, the outstandingbalance under the ABS Warehouse Facility was $35.0  million. AtJune  30,  2006, the applicable commitment fee was0.30%, including the insurance premium, and the applicableinterest rate was LIBOR plus 0.74%, including the insurancepremium. The weighted average interest rate on the ABS WarehouseFacility for the three months ended June  30,  2006 was5.8%.

All debt issued under the ABS program iscollateralized by the assets of the SPE consisting of the revenueearning containers used in the Company’s leasing business,restricted cash and certain receivables related to revenue earningequipment. The SPE's borrowing capacity under the ABS program isdetermined by reference to an advance rate percentage of the net bookvalues, as calculated in the ABS program documents of the SPE'seligible containers, subject to certain adjustments and restrictedcash. Under the ABS program, the SPE is required to maintain restrictedcash balances on deposit in a designated bank account.

Based on the applicable advance rate of 82%, theSPE’s borrowing capacity was $706.8  million atJune  30,  2006. At June  30,  2006, theCompany was in compliance with all of the various ABS program covenantrequirements.

Revolving CreditFacilities

In connection with the Acquisition, theCompany entered into an $875.0  million Senior Secured CreditFacility (‘‘SSCF’’). Upon the closing ofthe asset securitization facility on August  1,  2005, theCompany amended and restated the SSCF to, among other things, reducethe maximum aggregate commitments thereunder to $175.0  million.Effective June  1,  2006, the Company further amended theSSCF to reduce the interest rate margin from LIBOR plus 2.125%to LIBOR plus 1.375% and to reduce the maximum aggregatecommitments thereunder to $165.0  million. The final maturitydate of this facility is August  1,  2008. The outstandingbalance under the facility was $160.0  million at June30,  2006 and $148.0  million at December  31,2005.

The Company’s borrowing capacity under thisfacility is based upon a variable advance rate percentage of the netbook values, as calculated in the credit agreement, of theCompany’s eligible containers and eligible chassis, subject tocertain adjustments. At June  30,  2006, the variableadvance rate percentage was 85%, but is subject to annualdecreases of 1% for each full calendar year following the IPOuntil a minimum advance rate of 82% is reached. At June30,  2006, the unused borrowing capacity was $5.0  millionbased on aggregate availability of $165.0  million. TheCompany’s eligible containers for the purposes of determiningborrowing capacity under this facility does not include any containerstransferred to the SPE. The SSCF is secured by a first priority lien onthe Company’s eligible containers, eligible chassis, relatedleases and lease rights and a pledge of the equity interests of theSPE.

At June  30,  2006, the SSCF applicablecommitment fee was 0.375%, and the applicable interest rate wasLIBOR plus 1.375%. Interest and fees and a portion of theoutstanding principal amount of the loans under this facility, togetherwith certain other amounts, are payable on a quarterly basis. Theportion of the outstanding principal amount of the loans, if any,payable on any such payment date will be equal to the amount by whichthe outstanding principal amount of the loans exceeds the 

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Company’s then effective borrowingcapacity. The weighted average interest rate under this facility forthe six months ended June  30,  2006 was 6.8%. AtJune  30,  2006, the Company was compliant with all of thevarious covenant requirements under thisfacility.

Effective June  7,  2006, theCompany entered into an additional revolving credit facility (the‘‘Swing Line Facility’’) to support generalworking capital requirements. The Company’s borrowing capacityunder this facility is based upon a 90% advance rate on the netbook values of the containers and chassis not included in the SPE. Thecommitment under the Swing Line Facility is $10.0  million andthere was no outstanding balance at June  30,  2006. AtJune  30,  2006, the applicable commitment fee was0.375%, and the applicable interest rate was LIBOR plus2.00%.

Capital Lease Obligations

The Company has entered into a series of capitalleases with various financial institutions totaling $20.8million to finance the purchase of chassis. The lease agreementsare structured as ten year Terminal Rental Adjustment Clause(‘‘TRAC’’) leases with purchase options atthe end of the lease terms equal to the TRAC amount as defined in eachlease. For income tax purposes, these leases are treated as operatingleases. The weighted average interest rate for these leases as ofJune  30,  2006 is 5.37%. The total lease obligationwas $20.8  million as of June  30,  2006, and was$14.6  million as of December  31,2005.

Interest Rate Swaps 

To hedge therisk associated with fluctuations in interest rates on long-termborrowings, the Company has entered into interest rate swap contractswith various financial institutions. The counterparties to theseagreements are highly rated financial institutions. In the unlikelyevent that the counterparties fail to meet the terms of the interestrate swap contracts, the Company’s exposure is limited to theinterest rate differential on the notional amount at each monthlysettlement period over the life of the agreements. The Company does notanticipate any non-performance by the counterparties.

Asof June  30,  2006, the Company had in place interest rateswap contracts to fix the floating interest rates on a portion of theborrowings under its debt facilities as summarizedbelow:

|                   |  |  |                 |  |  |                       |  |  |                               |
|-------------------|--|--|-----------------|--|--|-----------------------|--|--|-------------------------------|
| SwapDate          |  |  | Notional Amount |  |  | FixedLegInterest Rate |  |  | Term                          |
| December14,2004   |  |  | $200.0million   |  |  | 3.82%                 |  |  | 7years — amortizing     |
| December  14,2004 |  |  | $200.0  million |  |  | 3.82%                 |  |  | 7 years— amortizing     |
| December  14,2004 |  |  | $100.0  million |  |  | 3.82%                 |  |  | 7 years— amortizing     |
| October  28,2005  |  |  | $100.0  million |  |  | 4.82%                 |  |  | 6 years— non-amortizing |
| October  28,2005  |  |  | $25.0  million  |  |  | 4.71%                 |  |  | 2.75years-non-amortizing      |
|                   |

As of April12,  2006, in conjunction with the ABS program described above,the Company de-designated all of its existing interest rate swapcontracts. Previously, the Company had designated all interest rateswap contracts as cash flow hedges, in accordance with Statement ofFinancial Accounting Standards No.133, ‘‘Accounting forDerivative Instruments and Hedging Activities’’.Therefore, during the designation period beginning November1,  2005 through April  12,  2006, substantially allchanges in the fair value of the interest rate swap contracts werereflected in accumulated other comprehensive income (loss). Changes inthe fair value of these interest rate swap contracts in periods pre andpost designation have been recognized in the consolidated statements ofoperations as unrealized losses or gains on interest rate swaps.

At the time of de-designation, the change in fair valuereflected in accumulated other comprehensive income was $7.5million. This amount is being recognized in income as unrealized (gain)loss on interest rate swaps using the interest method over theremaining life of the contracts. Amounts recorded in accumulated othercomprehensive income (loss) would be reclassified into earnings upontermination of these interest rate swap contracts and related debtinstruments prior to their contractual maturity.

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The fair value of the interest rateswap contracts was $25.2  million at June  30,  2006,and $13.9  million at December  31,  2005, which isincluded in other assets in the consolidated balance sheets. In itsconsolidated statements of operations, the Company recognized a netunrealized gain of $4.4  million for the three months endedJune  30,  2006, a net unrealized loss of $8.7million for the three months ended June  30,  2005, a netunrealized gain of $3.6  million for the six months endedJune  30,  2006, and a net unrealized gain of $1.4million for the six months ended June  30,  2005, whichpredominantly represents the change in fair value of the interest rateswap contracts.

In July  2006, the Company enteredinto two additional interest rate swap contracts with financialinstitutions. The first interest rate swap contract has a notionalamount of $50.0  million, a non-amortizing term of five years anda fixed rate of 5.52%. The second interest rate swap contracthas a notional amount of $33.0  million, an amortizing term ofapproximately 11 years and a fixed rate of 5.56%. Changes in thefair value on these interest rate swap contracts will be recognized inthe consolidated statements of operations as unrealized gains or losseson interest rate swaps.

Note 5 — Earnings (Loss) PerShare

The following table sets forth the calculation ofbasic and diluted earnings (loss) per share for the three and sixmonths ended June  30,  2006 and 2005 (in thousands, exceptearnings pershare):

|                                                                                           |  |  |                           |   |        |                         |  |  |      |   |         |      |  |  |  |   |        |  |  |  |  |   |        |  |
|-------------------------------------------------------------------------------------------|--|--|---------------------------|---|--------|-------------------------|--|--|------|---|---------|------|--|--|--|---|--------|--|--|--|--|---|--------|--|
|                                                                                      |  |  | ThreeMonths EndedJune 30, |   |        | Six Months EndedJune30, |
|                                                                                      |  |  | 2006                      |   |        | 2005                    |  |  | 2006 |   |         | 2005 |
| Numerator:                                                                                |  |  |                           |   |   |                         |  |  |      |   |    |      |  |  |  |   |   |  |  |  |  |   |   |  |
| Netincome (loss) applicable to common stockholders for basic and dilutedearnings pershare |  |  |                           | $ | 13,320 |                         |  |  |      | $ | (5,815  | )    |  |  |  | $ | 22,825 |  |  |  |  | $ | 1,542  |  |
| Denominator:                                                                              |  |  |                           |   |   |                         |  |  |      |   |    |      |  |  |  |   |   |  |  |  |  |   |   |  |
| Weightedaverage shares outstanding for basic earnings (loss) pershare                     |  |  |                           |   | 32,895 |                         |  |  |      |   | 10,204  |      |  |  |  |   | 32,889 |  |  |  |  |   | 10,177 |  |
| Dilutivestockoptions                                                                      |  |  |                           |   | 600    |                         |  |  |      |   | — |      |  |  |  |   | 580    |  |  |  |  |   | 428    |  |
| Weightedaverage shares for diluted earnings (loss) pershare                               |  |  |                           |   | 33,495 |                         |  |  |      |   | 10,204  |      |  |  |  |   | 33,469 |  |  |  |  |   | 10,605 |  |
| Earnings(loss) pershare:                                                                  |  |  |                           |   |   |                         |  |  |      |   |    |      |  |  |  |   |   |  |  |  |  |   |   |  |
| Basic                                                                                     |  |  |                           | $ | 0.40   |                         |  |  |      | $ | (0.57   | )    |  |  |  | $ | 0.69   |  |  |  |  | $ | 0.15   |  |
| Diluted                                                                                   |  |  |                           | $ | 0.40   |                         |  |  |      | $ | (0.57   | )    |  |  |  | $ | 0.68   |  |  |  |  | $ | 0.15   |  |
|                                                                                           |

Note6 — Related Party Transactions

The Companyrecognized $1.6  million for the three months ended June30,  2005, and $3.3  million for the six months endedJune  30,  2005 of management fees and expenses relating tothe management consulting agreements with certain of theCompany’s stockholders. The management consulting agreementswere terminated as of the effective date of the IPO, October17,  2005.

Note 7 — Segment and GeographicInformation

Industry SegmentInformation

The Company operates in one industrysegment, intermodal equipment leasing.

Geographic SegmentInformation

The Company's customers use thecontainers for their global trade utilizing many worldwide traderoutes. The following table represents the allocation of domestic(U.S.) and international revenues for the periods indicated based onthe customers' primary domicile (in thousands):

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|                    |  |  |                            |   |        |                         |  |  |      |   |        |      |  |  |  |   |         |  |  |  |  |   |         |  |
|--------------------|--|--|----------------------------|---|--------|-------------------------|--|--|------|---|--------|------|--|--|--|---|---------|--|--|--|--|---|---------|--|
|               |  |  | ThreeMonths Ended June 30, |   |        | Six Months EndedJune30, |
|               |  |  | 2006                       |   |        | 2005                    |  |  | 2006 |   |        | 2005 |
| Totalrevenues:     |  |  |                            |   |   |                         |  |  |      |   |   |      |  |  |  |   |    |  |  |  |  |   |    |  |
| Domestic           |  |  |                            | $ | 7,474  |                         |  |  |      | $ | 8,189  |      |  |  |  | $ | 14,778  |  |  |  |  | $ | 15,663  |  |
| Asia               |  |  |                            |   | 35,120 |                         |  |  |      |   | 35,975 |      |  |  |  |   | 69,263  |  |  |  |  |   | 70,127  |  |
| Europe             |  |  |                            |   | 27,200 |                         |  |  |      |   | 31,823 |      |  |  |  |   | 54,996  |  |  |  |  |   | 63,607  |  |
| OtherInternational |  |  |                            |   | 4,920  |                         |  |  |      |   | 4,546  |      |  |  |  |   | 9,624   |  |  |  |  |   | 8,668   |  |
| Total              |  |  |                            | $ | 74,714 |                         |  |  |      | $ | 80,533 |      |  |  |  | $ | 148,661 |  |  |  |  | $ | 158,065 |  |
|                    |

Assubstantially all of the Company's containers are usedinternationally, where no one container is domiciled in one particularplace for a prolonged period of time, all of the Company'scontainers are considered to be international.

Note 8 —Commitments and Contingencies

At June  30,2006, commitments for capital expenditures totaled approximately$88.8  million, principally through the remainder of2006.

Note 9 — Income Taxes

Theconsolidated income tax expense for the six month periods endedJune  30,  2006 and 2005 was determined based uponestimates of the Company's consolidated effective income taxrates for the years ending December  31,  2006 and 2005,respectively. The difference between the consolidated effective incometax rate and the U.S. federal statutory rate is primarily attributableto state income taxes, foreign income taxes and the effect of certainpermanent differences.

Note 10 — Comprehensive Income

The following table provides a reconciliation of theCompany’s net income to comprehensive income (inthousands):

|                                                                                                                                        |  |  |                            |   |        |                         |  |  |      |   |         |      |  |  |  |   |        |  |  |  |  |   |         |   |
|----------------------------------------------------------------------------------------------------------------------------------------|--|--|----------------------------|---|--------|-------------------------|--|--|------|---|---------|------|--|--|--|---|--------|--|--|--|--|---|---------|---|
|                                                                                                                                   |  |  | ThreeMonths Ended June 30, |   |        | Six Months EndedJune30, |
|                                                                                                                                   |  |  | 2006                       |   |        | 2005                    |  |  | 2006 |   |         | 2005 |
| Netincome                                                                                                                              |  |  |                            | $ | 13,320 |                         |  |  |      | $ | 316     |      |  |  |  | $ | 22,825 |  |  |  |  | $ | 13,701  |   |
| Othercomprehensiveincome:                                                                                                              |  |  |                            |   |   |                         |  |  |      |   |    |      |  |  |  |   |   |  |  |  |  |   |    |   |
| Foreigncurrency translationadjustments                                                                                                 |  |  |                            |   | 129    |                         |  |  |      |   | (34     | )    |  |  |  |   | 135    |  |  |  |  |   | (43     | ) |
| Unrealized(loss) gain on derivative instruments designated as cash flow hedges(net of taxes of $(7), $0, $2,775 and $0, respectively ) |  |  |                            |   | (39    | )                       |  |  |      |   | — |      |  |  |  |   | 4,983  |  |  |  |  |   | — |   |
| Total                                                                                                                                  |  |  |                            | $ | 13,410 |                         |  |  |      | $ | 282     |      |  |  |  | $ | 27,943 |  |  |  |  | $ | 13,658  |   |
|                                                                                                                                        |

Note11 — Subsequent Events    

On July31,  2006, the Company entered into a credit facility to supportthe growth of its finance lease business (the ‘‘FinanceLease Facility’’). The Company’s borrowingcapacity under this facility is based upon a 90% advance rate onthe net present values of finance lease receivables on certaincontainers and chassis not included in the SPE. The Finance LeaseFacility has a two year revolving period that precedes a 10 year termin which the outstanding balance, as of the term conversion date,amortizes in monthly installments. The commitment under the FinanceLease Facility is $50.0  million. The applicable commitment feeand interest rate is 0.30% and LIBOR plus 1.00%,respectively.

On August  8,  2006,TAL’s board of directors approved and declared a $0.20 per sharequarterly cash dividend on its issued and outstanding common stock,payable on September  26,  2006 to shareholders of recordat the close of business on September  12,2006.

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|              |                                                                                      |
|--------------|--------------------------------------------------------------------------------------|
| ITEM2:  | MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS |

Thefollowing discussion and analysis of the consolidated financialcondition and results of operations of TAL International Group, Inc.and its subsidiaries should be read in conjunction with relatedconsolidated financial data and our annual audited consolidatedfinancial statements and related notes thereto included in our AnnualReport on Form 10-K filed with the Securities and Exchange Commissionon March  20,  2006. The statements in this discussionregarding industry outlook, our expectations regarding our futureperformance, liquidity and capital resources and other non-historicalstatements are subject to numerous risks and uncertainties, including,but not limited to, the risks and uncertainties described under‘‘Risk Factors’’ and‘‘Forward-Looking Statements’’ in our Form10-K. Our actual results may differ materially from those contained inor implied by any forward-looking statements.

OurCompany

We are one of the world's largest andoldest lessors of intermodal freight containers and chassis. Intermodalfreight containers are large, standardized steel boxes used totransport freight by ship, rail or truck. Chassis are used for thetransportation of containers domestically via rail and roads. Becauseof the handling efficiencies they provide, intermodal freightcontainers are the primary means by which many goods and materials areshipped internationally.

Our operations include theacquisition, leasing, re-leasing and subsequent sale of multiple typesof intermodal containers and chassis. As of June  30,2006, our fleet consisted of 633,930 containers and chassis, including73,993 containers under management for third parties, representing morethan one million twenty-foot equivalent units (TEU). We have anextensive global presence, offering leasing services through 20 officesin 12 countries and approximately 197 third party container depotfacilities in 42 countries as of June  30,  2006. Ourcustomers are among the world's largest shipping lines.

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

|  |              |                                                                                                                                                                                                                                                                                                                            |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Operating Flexibility — Thetiming, location and daily volume of cargo movements for a shippingline are often unpredictable. Leasing containers helps the shippinglines manage this uncertainty and minimize the requirement for largeinventory buffers by allowing them to pick-up leased containers onshort notice. |

|  |              |                                                                                                                                                                                                                |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Fleet SizeFlexibility — Container leases allow shipping lines toadjust the size and mix of their fleets as their trade volumes changedue to seasonality, market changes or changes in companystrategies. |

|  |              |                                                                                                                                                                                                                                                                         |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Alternative Source ofFinancing — Container leases provide an additional sourceof equipment financing to help shipping lines manage the high level ofinvestment required to maintain pace with the rapid growth of theasset-intensive container shipping industry. |

We leasethree principal types of containers: (1) dry freight containers, whichare 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 cargosuch as marble slabs, building products and machinery. We also manageour own container disposals, act as the disposal agent for a number ofour shipping line customers, and buy and sell used containers throughour Trader group. As of June  30,  2006, dry, refrigerated,special containers and Trader represented approximately 86%,5%, 7% and 1 % of our fleet on a unit basis,respectively. Our chassis leasing business, which commenced in thefourth quarter of 2005, represented approximately 1% of ourfleet on a unit basis as of June  30,2006.

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

|              |  |  |                        |  |         |                   |  |  |              |  |         |       |  |  |         |  |         |       |  |  |       |  |         |         |  |  |       |  |         |  |  |  |  |  |         |  |  |  |  |  |         |  |  |  |  |  |         |  |  |  |  |  |         |  |
|--------------|--|--|------------------------|--|---------|-------------------|--|--|--------------|--|---------|-------|--|--|---------|--|---------|-------|--|--|-------|--|---------|---------|--|--|-------|--|---------|--|--|--|--|--|---------|--|--|--|--|--|---------|--|--|--|--|--|---------|--|--|--|--|--|---------|--|
|         |  |  | EquipmentFleet inUnits |
|         |  |  | June 30,2006           |  |         | December 31, 2005 |  |  | June 30,2005 |
|         |  |  | Owned                  |  |         | Managed           |  |  | Total        |  |         | Owned |  |  | Managed |  |         | Total |  |  | Owned |  |         | Managed |  |  | Total |
| Dry          |  |  |                        |  | 487,116 |                   |  |  |              |  | 57,128  |       |  |  |         |  | 544,244 |       |  |  |       |  | 464,353 |         |  |  |       |  | 59,180  |  |  |  |  |  | 523,533 |  |  |  |  |  | 477,677 |  |  |  |  |  | 61,217  |  |  |  |  |  | 538,894 |  |
| Refrigerated |  |  |                        |  | 33,222  |                   |  |  |              |  | 1,508   |       |  |  |         |  | 34,730  |       |  |  |       |  | 34,006  |         |  |  |       |  | 1,625   |  |  |  |  |  | 35,631  |  |  |  |  |  | 35,041  |  |  |  |  |  | 1,658   |  |  |  |  |  | 36,699  |  |
| Special      |  |  |                        |  | 27,045  |                   |  |  |              |  | 15,357  |       |  |  |         |  | 42,402  |       |  |  |       |  | 27,389  |         |  |  |       |  | 16,025  |  |  |  |  |  | 43,414  |  |  |  |  |  | 28,165  |  |  |  |  |  | 16,775  |  |  |  |  |  | 44,940  |  |
| Chassis      |  |  |                        |  | 4,268   |                   |  |  |              |  | — |       |  |  |         |  | 4,268   |       |  |  |       |  | 1,210   |         |  |  |       |  | — |  |  |  |  |  | 1,210   |  |  |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | — |  |
| Subtotal     |  |  |                        |  | 551,651 |                   |  |  |              |  | 73,993  |       |  |  |         |  | 625,644 |       |  |  |       |  | 526,958 |         |  |  |       |  | 76,830  |  |  |  |  |  | 603,788 |  |  |  |  |  | 540,883 |  |  |  |  |  | 79,650  |  |  |  |  |  | 620,533 |  |
| Trader       |  |  |                        |  | 8,286   |                   |  |  |              |  | — |       |  |  |         |  | 8,286   |       |  |  |       |  | 10,123  |         |  |  |       |  | — |  |  |  |  |  | 10,123  |  |  |  |  |  | 19,517  |  |  |  |  |  | — |  |  |  |  |  | 19,517  |  |
| Total        |  |  |                        |  | 559,937 |                   |  |  |              |  | 73,993  |       |  |  |         |  | 633,930 |       |  |  |       |  | 537,081 |         |  |  |       |  | 76,830  |  |  |  |  |  | 613,911 |  |  |  |  |  | 560,400 |  |  |  |  |  | 79,650  |  |  |  |  |  | 640,050 |  |
|              |

|              |  |  |                              |  |         |                   |  |  |              |  |         |       |  |  |         |  |           |       |  |  |       |  |         |         |  |  |       |  |         |  |  |  |  |  |         |  |  |  |  |  |         |  |  |  |  |  |         |  |  |  |  |  |           |  |
|--------------|--|--|------------------------------|--|---------|-------------------|--|--|--------------|--|---------|-------|--|--|---------|--|-----------|-------|--|--|-------|--|---------|---------|--|--|-------|--|---------|--|--|--|--|--|---------|--|--|--|--|--|---------|--|--|--|--|--|---------|--|--|--|--|--|-----------|--|
|         |  |  | EquipmentFleet inTEU’s |
|         |  |  | June30, 2006                 |  |         | December 31, 2005 |  |  | June 30,2005 |
|         |  |  | Owned                        |  |         | Managed           |  |  | Total        |  |         | Owned |  |  | Managed |  |           | Total |  |  | Owned |  |         | Managed |  |  | Total |
| Dry          |  |  |                              |  | 776,631 |                   |  |  |              |  | 97,546  |       |  |  |         |  | 874,177   |       |  |  |       |  | 737,802 |         |  |  |       |  | 100,759 |  |  |  |  |  | 838,561 |  |  |  |  |  | 756,583 |  |  |  |  |  | 104,066 |  |  |  |  |  | 860,649   |  |
| Refrigerated |  |  |                              |  | 59,548  |                   |  |  |              |  | 2,167   |       |  |  |         |  | 61,715    |       |  |  |       |  | 60,674  |         |  |  |       |  | 2,394   |  |  |  |  |  | 63,068  |  |  |  |  |  | 62,132  |  |  |  |  |  | 2,450   |  |  |  |  |  | 64,582    |  |
| Special      |  |  |                              |  | 42,228  |                   |  |  |              |  | 25,283  |       |  |  |         |  | 67,511    |       |  |  |       |  | 42,249  |         |  |  |       |  | 26,179  |  |  |  |  |  | 68,428  |  |  |  |  |  | 43,282  |  |  |  |  |  | 27,227  |  |  |  |  |  | 70,509    |  |
| Chassis      |  |  |                              |  | 7,738   |                   |  |  |              |  | — |       |  |  |         |  | 7,738     |       |  |  |       |  | 2,270   |         |  |  |       |  | — |  |  |  |  |  | 2,270   |  |  |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | —   |  |
| Subtotal     |  |  |                              |  | 886,145 |                   |  |  |              |  | 124,996 |       |  |  |         |  | 1,011,141 |       |  |  |       |  | 842,995 |         |  |  |       |  | 129,332 |  |  |  |  |  | 972,327 |  |  |  |  |  | 861,997 |  |  |  |  |  | 133,743 |  |  |  |  |  | 995,740   |  |
| Trader       |  |  |                              |  | 11,581  |                   |  |  |              |  | — |       |  |  |         |  | 11,581    |       |  |  |       |  | 15,968  |         |  |  |       |  | — |  |  |  |  |  | 15,968  |  |  |  |  |  | 31,330  |  |  |  |  |  | — |  |  |  |  |  | 31,330    |  |
| Total        |  |  |                              |  | 897,726 |                   |  |  |              |  | 124,996 |       |  |  |         |  | 1,022,722 |       |  |  |       |  | 858,963 |         |  |  |       |  | 129,332 |  |  |  |  |  | 988,295 |  |  |  |  |  | 893,327 |  |  |  |  |  | 133,743 |  |  |  |  |  | 1,027,070 |  |
|              |

Welease our equipment on a per diem basis to our customers under threetypes of leases: long-term leases, service leases and finance leases.Long-term leases, typically with terms of three to eight years, provideus with stable cash flow and low transaction costs by requiringcustomers to maintain specific containers on-hire for the duration ofthe lease. Service leases command a premium per diem rate in exchangefor providing customers with a greater level of operational flexibilityby allowing the pick-up and drop-off of containers during the leaseterm. Finance leases, which are typically structured as full payoutleases, provide for a predictable recurring revenue stream with thelowest daily cost to the customer because customers are generallyrequired to retain the container for the duration of its useful life.As of June  30,  2006, approximately 91% of ourcontainers were on-hire to customers, with approximately 58% ofour containers on long-term leases, approximately 26% on serviceleases or long-term leases whose fixed terms have expired but for whichthe related units remain on-hire and for which we continue to receiverental payments, and approximately 7% on finance leases. Inaddition, approximately 6% of our containers were available forlease and approximately 3% were available forsale.

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

|                                  |  |  |              |  |       |                   |  |  |              |  |       |   |  |  |  |  |       |   |
|----------------------------------|--|--|--------------|--|-------|-------------------|--|--|--------------|--|-------|---|--|--|--|--|-------|---|
| LeasePortfolio                   |  |  | June 30,2006 |  |       | December 31, 2005 |  |  | June 30,2005 |
| Long-termlease                   |  |  |              |  | 58.2  | %                 |  |  |              |  | 59.0  | % |  |  |  |  | 58.2  | % |
| Servicelease                     |  |  |              |  | 25.6  |                   |  |  |              |  | 25.6  |   |  |  |  |  | 27.6  |   |
| Financelease                     |  |  |              |  | 7.1   |                   |  |  |              |  | 4.6   |   |  |  |  |  | 3.8   |   |
| Totalleased                      |  |  |              |  | 90.9  |                   |  |  |              |  | 89.2  |   |  |  |  |  | 89.6  |   |
| Existingunits available forlease |  |  |              |  | 4.1   |                   |  |  |              |  | 5.1   |   |  |  |  |  | 4.1   |   |
| New unitsavailable forlease      |  |  |              |  | 1.7   |                   |  |  |              |  | 2.6   |   |  |  |  |  | 4.0   |   |
| Availableforsale                 |  |  |              |  | 3.3   |                   |  |  |              |  | 3.1   |   |  |  |  |  | 2.3   |   |
| Totalportfolio                   |  |  |              |  | 100.0 | %                 |  |  |              |  | 100.0 | % |  |  |  |  | 100.0 | % |
|                                  |

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Operating Performance

Ourprofitability is primarily determined by the extent to which ourleasing and other revenues exceed our ownership, operating andadministrative expenses. Our profitability is also impacted by the gainor loss that we realize on the sale of our used containers. During thefirst quarter of 2006, seasonal factors and market conditions placedpressure on our profitability. Our profitability improved in the secondquarter as we were able to benefit from an increase in container pricesand an improvement in market conditions.

Our leasingrevenue is primarily driven by our owned fleet size, utilization andaverage rental rates. As of June  30,  2006, our ownedfleet included 897,726 TEU, an increase of 4.5% fromDecember  31,  2005. The increase in fleet size relative tothe fourth quarter of 2005 was mainly due to the delivery of a largenumber of containers purchased in the first quarter of 2006. Thesecontainer deliveries proved to be timely since they allowed us tocapitalize on the strong increase in leasing demand we experiencedearly in the second quarter. We expect sizable container deliveries inthe third quarter of 2006 as well.

Our June30,  2006 fleet size was relatively unchanged from June30,  2005 despite the 4.5% increase achieved in the firsthalf of this year mainly due to the reduction in our trading equipmentresale inventories. In addition, in the latter half of 2005, we limitedour investment in new containers due to a temporary surplus of newcontainers in China.

Our average utilization was89.8% in the second quarter of 2006, an increase of 1.1%from the first quarter of 2006, though a decrease of 0.6% fromthe second quarter of 2005. Ending utilization increased 2.2%from 88.7% as of March  31,  2006 to 90.9% asof June  30,  2006. We experienced exceptionally strongdemand for dry and special containers during the early part of the 2006second quarter, and we managed to increase our average utilizationwhile also absorbing a net increase of over 35,000 TEU of containers inour fleet. Demand for refrigerated containers remained somewhat weak inthe 2006 second quarter and the average utilization of our refrigeratedcontainers fell slightly. The strong demand for dry and specialcontainers resulted from stronger than expected cargo volumes prior tothe traditional peak season combined with a reduction in the productionof new containers. Due to this favorable combination and our largeearly purchase of containers in 2006, we achieved one of our bestmonths ever for net container pick-ups in April. However, leasingdemand moderated and our utilization stabilized toward the end of thesecond quarter as production space for new containers became availableand cargo volumes came more into line with our customers’expectations.

Our average utilization in the secondquarter of 2006 was 0.6% lower than it was in the second quarterof 2005 mainly due to the high starting point for utilization in 2005.Utilization at the end of 2004 was exceptionally high, so that while weexperienced a downward trend during the first half of 2005, the highstarting point ensured that the average utilization for the first andsecond quarters of 2005 was strong.

The following tablesets forth our average fleet utilization for the periods indicatedbelow:

|                    |  |  |              |  |      |               |  |  |              |  |      |              |  |  |  |  |      |   |  |  |  |  |      |   |
|--------------------|--|--|--------------|--|------|---------------|--|--|--------------|--|------|--------------|--|--|--|--|------|---|--|--|--|--|------|---|
|               |  |  | June30, 2006 |  |      | June 30, 2005 |  |  | June 30,2006 |  |      | June 30,2005 |
|               |  |  | 3months      |  |      | 3 months      |  |  | 6 months     |  |      | 6months      |
| AverageUtilization |  |  |              |  | 89.8 | %             |  |  |              |  | 90.4 | %            |  |  |  |  | 88.9 | % |  |  |  |  | 91.5 | % |
|                    |

Averagelease rates for our dry container product line decreased by almost2% during the second quarter of 2006 despite a large increase inthe price of new dry containers. New container prices fell steeply inthe fourth quarter of 2005 and the first part of 2006, then climbednearly 50% in the late first quarter and early second quarter,due to an increase in the price of steel in China, wood floor shortagesand a reduction in production by the large container manufacturers. Newrefrigerated container prices did not change substantially during thequarter since steel represents a relatively small portion of the totalunit cost of a refrigerated container. In addition, there was noshortage of production capacity for refrigeratedcontainers.

The decrease in our average dry containerlease rates was mainly caused by the completion of several large leaseextension transactions. The profitability of our shipping linecustomers has come under 

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pressure this year due to a large increase invessel capacity and declining freight rates, and our customers areactively seeking ways to reduce operating expenses. In several cases,we have responded to our customers’ requests for lease ratereductions by renewing or extending lease agreements in return forlease rate savings, and in 2006 we have completed lease extensiontransactions that cover more than 10% of the dry containers inour fleet. While these lease extension transactions have reduced ourcurrent revenue, we expect they will have a positive impact on the netpresent value of our lease portfolio, particularly for our oldercontainers, since they extend the revenue-earning life of thecontainers. The higher price of new containers has also not beenheavily reflected in our average lease rates since most of thecontainers we supplied to our customers in the second quarter wereplaced on leases negotiated during the first quarter when containerprices and market leasing rates were lower. If container prices remainat their current level for a sustained period, we expect to seepositive momentum in our average dry container leasingrates.

Average lease rates for refrigerated containersdecreased by approximately 1% during the second quarter of 2006as compared to the first quarter of 2006, mainly due to lease extensiontransactions. Average lease rates for special containers were flatduring the second quarter. Our average leasing rates for refrigeratedcontainers will likely decrease further due to the completion of alease extension transaction in the third quarter with one of ourlargest customers for refrigerated containers.

During thesecond quarter of 2006, we recognized a $1.1  million gain on thesale of our used containers compared to a $0.1  million loss inthe first quarter of 2006 and a $2.6  million gain in the secondquarter of 2005. The improvement compared to the first quarter of 2006mainly resulted from higher sales volumes which reduced the number ofcontainers in the assets held for sale category and allowed us torealize unrecognized gains on the units previously held for sale. Theportion of our container fleet identified as for sale decreased from3.8% as of March  31,  2006 to 3.3% as ofJune  30,  2006. The decrease in gain relative to thesecond quarter of 2005 mainly resulted from a decrease in averageselling prices. Selling prices were exceptionally high in the firsthalf of 2005 due to high new container prices and very low inventoriesof available containers.

Our direct operating expensesincreased by $1.3  million in the second quarter of 2006 from thefirst quarter of 2006 mainly due to an increase in repair andpositioning expense associated with the large increase in the number ofcontainers picked-up by our customers in the second quarter. Theincrease in direct operating expenses was offset by a reversal in ourprovision for doubtful accounts due to the successful resolution of arepair charge dispute.

Our ownership expenses,principally depreciation and interest expense, were much lower in thesecond quarter of 2006 than they were for the second quarter of 2005.The decrease in depreciation expense in 2006 resulted from thetermination of depreciation charges for containers that reached the endof their accounting useful life at the end of 2005 but remain in ourfleet. The significant reduction in interest expense in the secondquarter of 2006 compared to the level we experienced in 2005 was due tothe benefits of our securitization as well as the large reduction inthe amount of outstanding debt and interest rates that we achieved as aresult of our initial public offering in the fourth quarter of lastyear.

On April  12,  2006, we successfullycompleted the placement of our $680.0  million Series 2006-1Floating Rate Secured Notes (the ‘‘ABS TermNotes’’). The net proceeds from this offering, togetherwith cash on hand, were used to repay all principal and interest thatwas owed under the Asset Securitization Facility. Simultaneously withthe closing of the ABS Term Note offering, we also completed theplacement of our $300.0  million Series 2005-1 Floating RateSecured Notes (the ‘‘ABS WarehouseFacility’’). The ABS Warehouse Facility has a two yearrevolving period in which we can meet our new equipment procurementfunding requirements. These two transactions have positively impactedour future operating performance by reducing the borrowing spread on$680.0  million of our previously outstanding indebtedness whilealso allowing us to finance future growth at significantly reducedrates. We also successfully renegotiated our Senior Secured CreditFacility to reduce the borrowing spread by 0.75% and reduce ourcommitment from $175.0  million to $165.0  million.

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On August  8,  2006,TAL’s board of directors approved and declared a $0.20 per sharequarterly cash dividend on its issued and outstanding common stock,payable on September  26,  2006 to shareholders of recordat the close of business on September  12,2006.

Results of Operations

The following tablesummarizes our results of operations for the three months and sixmonths ended June  30,  2006 and 2005 in dollars and as apercentage of totalrevenues:

|                                             |  |  |                            |   |         |                          |  |  |         |  |         |         |  |  |         |   |         |         |  |  |         |  |         |         |  |  |  |   |         |   |  |  |  |  |         |   |  |  |  |   |         |   |  |  |  |  |         |   |
|---------------------------------------------|--|--|----------------------------|---|---------|--------------------------|--|--|---------|--|---------|---------|--|--|---------|---|---------|---------|--|--|---------|--|---------|---------|--|--|--|---|---------|---|--|--|--|--|---------|---|--|--|--|---|---------|---|--|--|--|--|---------|---|
|                                        |  |  | ThreeMonths Ended June 30, |   |         | Six Months Ended June30, |
|                                        |  |  | 2006                       |   |         | 2005                     |  |  | 2006    |  |         | 2005    |
|                                        |  |  | Dollars                    |   |         | Percent                  |  |  | Dollars |  |         | Percent |  |  | Dollars |   |         | Percent |  |  | Dollars |  |         | Percent |
| Leasingrevenues                             |  |  |                            | $ | 66,821  |                          |  |  |         |  | 89.4    | %       |  |  |         | $ | 71,808  |         |  |  |         |  | 89.2    | %       |  |  |  | $ | 133,696 |   |  |  |  |  | 89.9    | % |  |  |  | $ | 144,083 |   |  |  |  |  | 91.1    | % |
| Equipmenttradingrevenue                     |  |  |                            |   | 5,757   |                          |  |  |         |  | 7.7     |         |  |  |         |   | 6,891   |         |  |  |         |  | 8.5     |         |  |  |  |   | 10,776  |   |  |  |  |  | 7.3     |   |  |  |  |   | 9,399   |   |  |  |  |  | 6.0     |   |
| Managementfeeincome                         |  |  |                            |   | 1,573   |                          |  |  |         |  | 2.1     |         |  |  |         |   | 1,416   |         |  |  |         |  | 1.8     |         |  |  |  |   | 3,149   |   |  |  |  |  | 2.1     |   |  |  |  |   | 3,412   |   |  |  |  |  | 2.2     |   |
| Otherrevenues                               |  |  |                            |   | 563     |                          |  |  |         |  | 0.8     |         |  |  |         |   | 418     |         |  |  |         |  | 0.5     |         |  |  |  |   | 1,040   |   |  |  |  |  | 0.7     |   |  |  |  |   | 1,171   |   |  |  |  |  | 0.7     |   |
| Totalrevenues                               |  |  |                            |   | 74,714  |                          |  |  |         |  | 100.0   |         |  |  |         |   | 80,533  |         |  |  |         |  | 100.0   |         |  |  |  |   | 148,661 |   |  |  |  |  | 100.0   |   |  |  |  |   | 158,065 |   |  |  |  |  | 100.0   |   |
| Equipmenttradingexpenses                    |  |  |                            |   | 4,714   |                          |  |  |         |  | 6.3     |         |  |  |         |   | 5,166   |         |  |  |         |  | 6.4     |         |  |  |  |   | 8,939   |   |  |  |  |  | 6.0     |   |  |  |  |   | 7,231   |   |  |  |  |  | 4.6     |   |
| Directoperatingexpenses                     |  |  |                            |   | 7,366   |                          |  |  |         |  | 9.9     |         |  |  |         |   | 7,180   |         |  |  |         |  | 8.9     |         |  |  |  |   | 13,423  |   |  |  |  |  | 9.0     |   |  |  |  |   | 14,297  |   |  |  |  |  | 9.0     |   |
| Administrativeexpenses                      |  |  |                            |   | 9,120   |                          |  |  |         |  | 12.2    |         |  |  |         |   | 9,242   |         |  |  |         |  | 11.5    |         |  |  |  |   | 18,659  |   |  |  |  |  | 12.6    |   |  |  |  |   | 18,951  |   |  |  |  |  | 12.0    |   |
| Depreciationandamortization                 |  |  |                            |   | 25,703  |                          |  |  |         |  | 34.4    |         |  |  |         |   | 29,373  |         |  |  |         |  | 36.5    |         |  |  |  |   | 51,192  |   |  |  |  |  | 34.4    |   |  |  |  |   | 58,658  |   |  |  |  |  | 37.1    |   |
| (Reversal)provision for doubtful accounts.. |  |  |                            |   | (913    | )                        |  |  |         |  | (1.2    | )       |  |  |         |   | 264     |         |  |  |         |  | 0.3     |         |  |  |  |   | (442    | ) |  |  |  |  | (0.3    | ) |  |  |  |   | 39      |   |  |  |  |  | 0.0     |   |
| Net(gain) on sale of leasingequipment       |  |  |                            |   | (1,084  | )                        |  |  |         |  | (1.4    | )       |  |  |         |   | (2,580  | )       |  |  |         |  | (3.2    | )       |  |  |  |   | (976    | ) |  |  |  |  | (0.7    | ) |  |  |  |   | (6,955  | ) |  |  |  |  | (4.4    | ) |
| Write-offof deferred financingcosts         |  |  |                            |   | 2,367   |                          |  |  |         |  | 3.2     |         |  |  |         |   | — |         |  |  |         |  | — |         |  |  |  |   | 2,367   |   |  |  |  |  | 1.6     |   |  |  |  |   | — |   |  |  |  |  | — |   |
| Interestand debtexpense                     |  |  |                            |   | 11,124  |                          |  |  |         |  | 14.9    |         |  |  |         |   | 21,496  |         |  |  |         |  | 26.7    |         |  |  |  |   | 23,580  |   |  |  |  |  | 15.9    |   |  |  |  |   | 42,610  |   |  |  |  |  | 27.0    |   |
| Unrealized(gain) loss on interest rateswaps |  |  |                            |   | (4,444  | )                        |  |  |         |  | (5.9    | )       |  |  |         |   | 8,674   |         |  |  |         |  | 10.8    |         |  |  |  |   | (3,590  | ) |  |  |  |  | (2.4    | ) |  |  |  |   | (1,386  | ) |  |  |  |  | (0.9    | ) |
| Managementfees                              |  |  |                            |   | — |                          |  |  |         |  | — |         |  |  |         |   | 1,626   |         |  |  |         |  | 2.0     |         |  |  |  |   | — |   |  |  |  |  | — |   |  |  |  |   | 3,252   |   |  |  |  |  | 2.1     |   |
| Totalexpenses                               |  |  |                            |   | 53,953  |                          |  |  |         |  | 72.2    |         |  |  |         |   | 80,441  |         |  |  |         |  | 99.9    |         |  |  |  |   | 113,152 |   |  |  |  |  | 76.1    |   |  |  |  |   | 136,697 |   |  |  |  |  | 86.5    |   |
| Incomebefore incometaxes                    |  |  |                            |   | 20,761  |                          |  |  |         |  | 27.8    |         |  |  |         |   | 92      |         |  |  |         |  | 0.1     |         |  |  |  |   | 35,509  |   |  |  |  |  | 23.9    |   |  |  |  |   | 21,368  |   |  |  |  |  | 13.5    |   |
| Incometax expense(benefit)                  |  |  |                            |   | 7,441   |                          |  |  |         |  | 10.0    |         |  |  |         |   | (224    | )       |  |  |         |  | (0.3    | )       |  |  |  |   | 12,684  |   |  |  |  |  | 8.5     |   |  |  |  |   | 7,667   |   |  |  |  |  | 4.8     |   |
| Netincome                                   |  |  |                            |   | 13,320  |                          |  |  |         |  | 17.8    | %       |  |  |         | $ | 316     |         |  |  |         |  | 0.4     | %       |  |  |  |   | 22,825  |   |  |  |  |  | 15.4    | % |  |  |  |   | 13,701  |   |  |  |  |  | 8.7     | % |
|                                             |

Comparisonof Three Months Ended June  30,  2006 to Three Months EndedJune  30,  2005. 

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

|                               |  |  |                           |   |        |      |  |  |  |   |        |  |
|-------------------------------|--|--|---------------------------|---|--------|------|--|--|--|---|--------|--|
|                          |  |  | ThreeMonths Ended June30, |
|                          |  |  | 2006                      |   |        | 2005 |
| Leasingrevenues:              |  |  |                           |   |   |      |  |  |  |   |   |  |
| Per diemrevenue               |  |  |                           | $ | 56,732 |      |  |  |  | $ | 62,988 |  |
| Financelease revenue          |  |  |                           |   | 2,832  |      |  |  |  |   | 1,138  |  |
| Feeand ancillary leaserevenue |  |  |                           |   | 7,257  |      |  |  |  |   | 7,682  |  |
| Totalleasingrevenues          |  |  |                           | $ | 66,821 |      |  |  |  | $ | 71,808 |  |
|                               |

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Total leasing revenues were$66.8  million for the three months ended June  30,2006, compared to $71.8  million for the three months endedJune  30,  2005, a decrease of $5.0  million, or7.0%. The decrease primarily resulted from a decrease inutilization and per diem rates, partially offset by an increase infinance lease revenue.

Equipment TradingActivities.    Equipment trading revenue represents theproceeds on the sale of equipment purchased for resale. Equipmenttrading expenses represents the cost of equipment sold as well asrelated sellingcosts.

|                            |  |  |                           |   |        |      |  |  |  |   |        |   |
|----------------------------|--|--|---------------------------|---|--------|------|--|--|--|---|--------|---|
|                       |  |  | ThreeMonths Ended June30, |
|                       |  |  | 2006                      |   |        | 2005 |
| Equipmenttradingrevenues   |  |  |                           | $ | 5,757  |      |  |  |  | $ | 6,891  |   |
| Equipmenttradingexpenses   |  |  |                           |   | (4,714 | )    |  |  |  |   | (5,166 | ) |
| Netequipment tradingmargin |  |  |                           | $ | 1,043  |      |  |  |  | $ | 1,725  |   |
|                            |

Thenet equipment trading margin decreased $0.7  million for thethree months ended June  30,  2006 compared to the threemonths ended June  30,  2005. In 2005, third-party sellingmargins were supported by increasing used container sale prices formost of the year which generally increased the value of our tradinginventory during the period the containers wereheld.

Direct operating expenses.    Directoperating expenses primarily consist of our costs to repair containersand chassis returned off lease, to store the equipment when it is noton lease, and to reposition equipment that has been returned tolocations with weak leasing demand.

During the threemonths ended June  30,  2006, direct operating costsincreased by $0.2  million compared to the same period of 2005,mainly due to an increase in storage costs of $0.6  millionresulting from a decrease in average utilization. This increase waspartially offset by lower repair costs.

Depreciationand amortization.    Depreciation and amortization was$25.7  million for the three months ended June  30,2006, compared to $29.4  million for the three months endedJune  30,  2005, a decrease of $3.7  million or12.6%. The decrease was primarily due to certain equipmentbecoming fully depreciated in the fourth quarter of 2005, as well as asmaller depreciable fleet in 2006.

(Reversal)provision for doubtful accounts.    There was a reversal fordoubtful accounts for $(0.9) million for the three months endedJune  30,  2006, compared to a provision of $0.3million for the three months ended June  30,  2005. In thesecond quarter of 2006, we recorded a benefit for the reversal of anallowance upon collecting a past due repair receivable from one of ourlarge customers.

Net (gain) on sale of leasingequipment.    Gain on sale of equipment was $1.1million for the three months ended June  30,  2006,compared to a gain of $2.6  million for the three months endedJune  30,  2005, a decrease of $1.5  million. Resultsin 2006 were impacted by a decrease in selling prices for usedcontainers.

Write-off of deferred financingcosts.    Write-off of deferred financing costs was$2.4  million for the three months ended June  30,2006, compared to zero for the three months ended June30,  2005. The current year write-off is the result of therefinancing of the Company’s asset securitization facility inApril  2006.

Interest and debtexpense.    Interest and debt expense was $11.1  millionfor the three months ended June  30,  2006, compared to$21.5  million for the three months ended June  30,2005, a decrease of $10.4  million. The decrease was primarilydue to changes in our capital structure resulting from the IPO, whichdecreased our debt level and effective interestrate.

Unrealized (gain) loss on interest rateswaps.    Unrealized (gain) on interest rate swaps was $(4.4)million for the three months ended June  30,  2006,compared to an unrealized loss of $8.7  million for the threemonths ended June  30,  2005. The fair market value of theswap contracts increased to approximately $25.2 million in the secondquarter of 2006 due to an increase in interest rates. The $8.7million unrealized loss incurred in the three months ended June30,  2005 represented a decrease in the fair value of theinterest rate swap contracts due to a decrease in interest rates fromthe first quarter of 2005.

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Managementfees.    Management fees were zero for the three months endedJune  30,  2006, compared to $1.6  million for thethree months ended June  30,  2005. Management fees of$1.6  million for the period ended June  30,  2005were payable pursuant to certain management agreements which terminatedupon the completion of the IPO in October2005.

Income tax expense (benefit).    Incometax expense was $ 7.4 million for the three months endedJune  30,  2006, compared to an income tax benefit of ($0.2) million for the three months ended June  30,  2005,and the effective tax rates were 35.8 % for the threemonths ended June  30,  2006 and a negative rate forthe three months ended June  30,  2005. Our tax rate wasnegative for the three months ended June 30, 2005 due to a reduction inour state tax liability as a result of the cumulative impact of achange in our New York State tax rate from 3% to 1%.

We do not expect to pay any significant U.S. federal or stateor local income taxes for a number of years due to the availability ofaccelerated U.S. tax depreciation for our existing container fleet andour planned future equipment purchases. Any material changes in marketconditions or company strategy could either accelerate or further deferthe timing of our tax payments.

Comparison of SixMonths Ended June  30,  2006 to Six Months EndedJune  30,  2005.

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

|                               |  |  |                         |   |         |      |  |  |  |   |         |  |
|-------------------------------|--|--|-------------------------|---|---------|------|--|--|--|---|---------|--|
|                          |  |  | SixMonths Ended June30, |
|                          |  |  | 2006                    |   |         | 2005 |
| Leasingrevenues:              |  |  |                         |   |    |      |  |  |  |   |    |  |
| Per diemrevenue               |  |  |                         | $ | 113,095 |      |  |  |  | $ | 127,228 |  |
| Financelease revenue          |  |  |                         |   | 5,117   |      |  |  |  |   | 1,422   |  |
| Feeand ancillary leaserevenue |  |  |                         |   | 15,484  |      |  |  |  |   | 15,433  |  |
| Totalleasingrevenues          |  |  |                         | $ | 133,696 |      |  |  |  | $ | 144,083 |  |
|                               |

Totalleasing revenues were $133.7  million for the six months endedJune  30,  2006, compared to $144.1  million for thesix months ended June  30,  2005, a decrease of$10.4  million, or 7.2%. The decrease primarily resultedfrom a decrease in utilization and per diem rates, partially offset byan increase in finance lease revenue due to an increase in the financelease portfolio.

Equipment TradingActivities.    Equipment trading revenue represents theproceeds on the sale of equipment purchased for resale. Equipmenttrading expenses represents the cost of equipment sold as well asrelated sellingcosts.

|                            |  |  |                         |   |        |      |  |  |  |   |        |   |
|----------------------------|--|--|-------------------------|---|--------|------|--|--|--|---|--------|---|
|                       |  |  | SixMonths Ended June30, |
|                       |  |  | 2006                    |   |        | 2005 |
| Equipmenttradingrevenues   |  |  |                         | $ | 10,776 |      |  |  |  | $ | 9,399  |   |
| Equipmenttradingexpenses   |  |  |                         |   | (8,939 | )    |  |  |  |   | (7,231 | ) |
| Netequipment tradingmargin |  |  |                         | $ | 1,837  |      |  |  |  | $ | 2,168  |   |
|                            |

Thenet equipment trading margin decreased $0.3  million for the sixmonths ended June  30, 2006 compared to the six months endedJune  30,  2005, due to lower selling prices relative tothe cost of equipment sold.

Direct operatingexpenses.    Direct operating expenses primarily consist ofour costs to repair containers and chassis returned off lease, to storethe equipment when it is not on lease, and to reposition equipment thathas been returned to locations with weak leasingdemand.

During the six months ended June  30,2006, direct operating expenses were $13.4  million, compared to$14.3  million for the six months ended June  30,2005, a decrease of 6.3%. Positioning costs decreased

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by $0.4  million and repair costsdecreased by $2.2  million in the six months ended June30,  2006 compared to the same period of 2005. These decreaseswere partially offset by an increase in handling and storage costs of$2.0  million due to a decrease inutilization.

Depreciation andamortization.    Depreciation and amortization was$51.2  million for the six months ended June  30,2006, compared to $58.7  million for the six months endedJune  30,  2005, a decrease of $7.5  million or12.8%. The decrease was primarily due to certain equipmentbecoming fully depreciated in the fourth quarter of 2005, as well as asmaller depreciable fleet in 2006.

(Reversal)provision for doubtful accounts.    There was a reversal fordoubtful accounts for $(0.4) million for the six months endedJune  30,  2006, compared to a provision of $39 thousandfor the six months ended June  30,  2005. In the six monthsended June  30,  2006, we recorded a benefit for thereversal of an allowance upon collecting a past due repair receivablefrom one of our large customers.

Net (gain) on sale ofleasing equipment.    Gain on sale of equipment was$1.0  million for the six months ended June  30,2006, compared to a gain of $7.0  million for the six monthsended June  30,  2005, a decrease of $6.0  million.The gain recorded in 2005 included a $2.9  million benefit fromthe sale of on-hire containers to one of our customers and a sale ofequipment to an investor as part of our managed equipment program. Inaddition, results in 2006 were impacted by a decrease in selling pricesfor used containers.

Write-off of deferred financingcosts.    Write-off of deferred financing costs was$2.4  million for the six months ended June  30,2006, compared to zero for the six months ended June  30,2005. The current year write-off is the result of the refinancing ofthe Company’s asset securitization facility in April2006.

Interest and debt expense.    Interestand debt expense was $23.6  million for the six months endedJune  30,  2006, compared to $42.6  million for thesix months ended June  30,  2005, a decrease of$19.0  million. The decrease was primarily due to changes in ourcapital structure resulting from the IPO, which decreased our debtlevel and effective interest rate.

Unrealized (gain)loss on interest rate swaps.    Unrealized gain on interestrate swaps was $3.6 million for the six months ended June30,  2006, compared to an unrealized gain of $1.4  millionfor the six months ended June  30,  2005. The fair marketvalue of the swap contracts increased to approximately $25.2million as of June  30,  2006 due to an increase ininterest rates. The $1.4  million unrealized gain incurred in thesix months ended June  30,  2005 represented an increase inthe fair value of the interest rate swap contracts due to an increasein expected interest rates from the beginning of2005.

Management fees.    Management feeswere zero for the six months ended June  30,  2006,compared to $3.3  million for the six months ended June30,  2005. Management fees of $3.3  million for the periodended June  30,  2005 were payable pursuant to certainmanagement agreements which terminated upon the completion of the IPOin October  2005.

Income taxexpense.    Income tax expense was $12.7  million forthe six months ended June  30,  2006, compared to incometax expense of $7.7  million for the six months ended June30,  2005, and the effective tax rates were 35.7 %for the six months ended June  30,  2006 and 35.9% for the six months ended June  30,  2005. Thestate tax rate was reduced from 3% to 1% in the quarterended June  30,  2005 as a result of a favorable change inNew York State tax law.

We do not expect to pay anysignificant U.S. federal or state or local income taxes for a number ofyears due to the availability of accelerated U.S. tax depreciation forour existing container fleet and our planned future equipmentpurchases. Any material changes in market conditions or companystrategy could either accelerate or further defer the timing of our taxpayments.

Liquidity and CapitalResources    

Our principalsources of liquidity are cash flows generated from operations,borrowings under our Asset Backed Securitization(‘‘ABS’’) program and our revolving creditfacilities. Our cash flows will be used to finance capitalexpenditures, provide working capital, meet debt service requirements,and pay dividends. We believe that cash from operations and existingcash, together with available 

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borrowings under our ABS program and ourrevolving credit facilities will be sufficient to meet our liquidityrequirements for at least the next twelve months. However, our futureoperating performance and ability to extend or refinance ourindebtedness will be dependent on future economic conditions andfinancial, business and other factors that are beyond ourcontrol.

On April  12,  2006, we issued our$680.0  million ABS Term Notes. The proceeds from the issuancewere used to repay outstanding borrowings under our assetsecuritization facility. The ABS Term Notes amortize in equal monthlyinstallments and have a legal final maturity of April2021.

On April  12,  2006, we entered into afloating rate revolving facility (the ‘‘ABS WarehouseFacility’’). The ABS Warehouse Facility has a two yearrevolving period that precedes a term period in which the outstandingbalance amortizes in equal monthly installments. The ABS WarehouseFacility has a legal final maturity of April  2023. The ABSWarehouse Facility will provide us with up to $300  million offunding needed to support our fleet growth.

All debt to beissued under the ABS program is collateralized by the assets of TALAdvantage I LLC, a special purpose entity (the‘‘SPE’’) consisting of revenue earningcontainers that we use in our leasing business, restricted cash andcertain receivables related to revenue earning equipment. The Series2005-1 Notes and the Series 2006-1 Notes were both issued by theSPE.

As of June  30,  2006, our outstandingindebtedness was comprised of the following: $668.7  millionunder the ABS Term Notes, $35.0  million under the ABS WarehouseFacility (total commitment of $300.0  million) and $160.0million under the senior secured credit facility (total commitment of$165.0  million). In support of our short-term working capitalneeds, we also have a $10.0  million revolving credit facility(the ‘‘Swing Line Facility’’), which wasunfunded at June  30,  2006. In addition, we have$20.8  million of capital lease obligations outstanding as ofJune  30, 2006.

The Company is subject to variouscovenant requirements under its various debt facilities. At June30,  2006, the Company was in compliance with allcovenants.

On July  31,  2006, the Companyentered into a credit facility to support the growth of our financelease business (the ‘‘Finance LeaseFacility’’). The Company’s borrowing capacityunder this facility is based upon a 90% advance rate on the netpresent values of finance lease receivables on certain containers andchassis not included in the SPE. The Finance Lease Facility has a twoyear revolving period that precedes a 10 year term in which theoutstanding balance, as of the term conversion date, amortizes inmonthly installments. The commitment under the Finance Lease Facilityis $50.0  million. The applicable commitment fee and interestrate is 0.30% and LIBOR plus 1.00%,respectively.

On August  8,  2006,TAL’s board of directors approved and declared a $0.20 per sharequarterly cash dividend on its issued and outstanding common stock,payable on September  26,  2006 to shareholders of recordat the close of business on September  12,  2006.

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Cash Flow

The followingtable sets forth certain cash flow information for the six months endedJune  30,  2006 and 2005 (inthousands):

|                                                            |  |  |                          |   |          |      |  |  |  |   |          |   |
|------------------------------------------------------------|--|--|--------------------------|---|----------|------|--|--|--|---|----------|---|
|                                                       |  |  | SixMonths Ended June 30, |
|                                                       |  |  | 2006                     |   |          | 2005 |
| Net cash provided by operatingactivities                   |  |  |                          | $ | 120,956  |      |  |  |  | $ | 109,854  |   |
| Netcash used in investingactivities:                       |  |  |                          |   |     |      |  |  |  |   |     |   |
| Purchases ofleasingequipment                               |  |  |                          | $ | (106,353 | )    |  |  |  | $ | (142,574 | ) |
| Investmentin financeleases                                 |  |  |                          |   | (28,975  | )    |  |  |  |   | (14,963  | ) |
| Proceedsfrom sale ofequipment                              |  |  |                          |   | 26,315   |      |  |  |  |   | 60,477   |   |
| Cashcollections on financing leases, net of unearnedincome |  |  |                          |   | 6,312    |      |  |  |  |   | 3,083    |   |
| Other                                                      |  |  |                          |   | 135      |      |  |  |  |   | —  |   |
| Netcash used in investingactivities                        |  |  |                          | $ | (102,566 | )    |  |  |  | $ | (93,977  | ) |
| Netcash used in financingactivities                        |  |  |                          | $ | (12,345  | )    |  |  |  | $ | (8,794   | ) |
|                                                            |

OperatingActivities 

Net cash provided by operatingactivities increased by $11.1  million to $121.0  millionin the six months ended June  30,  2006, compared to$109.9  million in the six months ended June  30,2005 primarily due to an increase in net income.

InvestingActivities 

Net cash used in investing activitieswas $102.6  million in the six months ended June30,  2006, as compared to $94.0  million in the six monthsended June  30,  2005. Capital expenditures were$135.3  million, including investments in finance leases of$29.0  million, in the six months ended June  30,2006, compared to $157.5 million, including investments in financeleases of $15.0  million, in the six months ended June30,  2005. During the first half of 2005, we elected to exercisepurchase options of approximately $17.5  million for containerswe formerly leased-in on operating leases. Excluding these purchases,capital expenditures decreased by $4.8  million primarily due toa decline in new equipment prices compared to the first six months of2005. Sales proceeds from the disposal of equipment decreased$34.2  million to $26.3  million in the six months endedJune  30,  2006, compared to $60.5  million in thesix months ended June  30,  2005. Included in salesproceeds in the first half of 2005 were $26.4  million of saleproceeds related to the sale of on-hire containers to one of ourcustomers and the sale of containers to an investor as part of ourmanaged equipment program. The remaining decrease in sales proceeds isprimarily due to a decrease in equipment selling prices. Cashcollections on financing leases, net of unearned income increased by$3.2  million to $6.3  million for the six months endedJune  30,  2006, compared to $3.1  million for thesix months ended June  30,  2005 as a result of an increasein our finance lease portfolio.

Financing Activities

Net cash used in financing activities was$12.3  million for the six months ended June  30,2006, compared to net cash used in financing activities of $8.8million for the six months ended June  30,  2005. In thesix months ended June  30,  2006, net cash used infinancing activities was primarily used to pay down borrowings on oursecuritized debt, payoff the outstanding balance on our assetsecuritization facility, and fund a restricted cash account under ourABS program. This was offset by increased borrowings under our seniorsecured credit facility and our warehouse facility, the proceeds ofwhich were primarily used to finance the purchase of new equipment. Inthe six months ended June  30,  2005, net cash used infinancing activities was primarily used to pay down borrowings underour senior secured credit facility.

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Contractual Obligations

Weare parties to various operating and capital leases and are obligatedto make payments related to our long term borrowings. We are alsoobligated under various commercial commitments, including obligationsto our equipment manufacturers. Our equipment manufacturer obligationsare in the form of conventional accounts payable, and are satisfiedfrom cash flows from operating and long term financingactivities.

The following table summarizes our contractualobligations and commercial commitments as of June  30,2006:

|                                    |  |  |                                                                |   |         |      |  |  |      |   |        |      |  |  |      |   |         |                   |  |  |  |   |         |  |  |  |  |   |         |  |  |  |  |   |         |  |
|------------------------------------|--|--|----------------------------------------------------------------|---|---------|------|--|--|------|---|--------|------|--|--|------|---|---------|-------------------|--|--|--|---|---------|--|--|--|--|---|---------|--|--|--|--|---|---------|--|
|                               |  |  | ContractualObligations by Twelve Month Period Ending June  30, |
|                               |  |  | (dollars in millions)                                          |
| ContractualObligations:            |  |  | Total                                                          |   |         | 2007 |  |  | 2008 |   |        | 2009 |  |  | 2010 |   |         | 2011andthereafter |
| Total debtobligations(1):          |  |  |                                                                |   |    |      |  |  |      |   |   |      |  |  |      |   |    |                   |  |  |  |   |    |  |  |  |  |   |    |  |  |  |  |   |    |  |
| ABStermnotes                       |  |  |                                                                | $ | 839.1   |      |  |  |      | $ | 97.6   |      |  |  |      | $ | 95.1    |                   |  |  |  | $ | 92.7    |  |  |  |  | $ | 90.2    |  |  |  |  | $ | 463.5   |  |
| ABSwarehousefacility               |  |  |                                                                |   | 51.2    |      |  |  |      |   | 3.0    |      |  |  |      |   | 3.4     |                   |  |  |  |   | 5.5     |  |  |  |  |   | 5.3     |  |  |  |  |   | 34.0    |  |
| Revolvingcreditfacilities(2)       |  |  |                                                                |   | 182.4   |      |  |  |      |   | 10.7   |      |  |  |      |   | 10.8    |                   |  |  |  |   | 160.9   |  |  |  |  |   | — |  |  |  |  |   | — |  |
| Capitalleaseobligations            |  |  |                                                                |   | 28.4    |      |  |  |      |   | 2.6    |      |  |  |      |   | 3.7     |                   |  |  |  |   | 1.9     |  |  |  |  |   | 2.1     |  |  |  |  |   | 18.1    |  |
| Operatingleases (mainlyfacilities) |  |  |                                                                |   | 5.7     |      |  |  |      |   | 1.6    |      |  |  |      |   | 1.2     |                   |  |  |  |   | 1.3     |  |  |  |  |   | 1.6     |  |  |  |  |   | — |  |
| Equipmentpurchaseobligations       |  |  |                                                                |   | 88.8    |      |  |  |      |   | 88.8   |      |  |  |      |   | — |                   |  |  |  |   | — |  |  |  |  |   | — |  |  |  |  |   | — |  |
| Totalcontractualobligations        |  |  |                                                                | $ | 1,195.6 |      |  |  |      | $ | 204.3  |      |  |  |      | $ | 114.2   |                   |  |  |  | $ | 262.3   |  |  |  |  | $ | 99.2    |  |  |  |  | $ | 515.6   |  |
|                                    |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                 |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Amountsinclude actual and estimated interest for floating-rate debt based onJune  30,  2006 rates and the net effect of the interestrate swaps. |

|     |                                                                                                            |
|-----|------------------------------------------------------------------------------------------------------------|
| (2) | Amounts include theobligations under the senior secured credit facility along with theSwing Line Facility. |

Off-Balance Sheet Arrangements

At June  30,  2006, we did not have anyrelationships with unconsolidated entities or financial partnerships,such entities which are often referred to as structured finance orspecial purpose entities, which would have been established for thepurpose of facilitating off-balance sheet arrangements. We are,therefore, not exposed to any financing, liquidity, market or creditrisk that could arise if we had engaged in suchrelationships.

Critical Accounting Policies

Ourconsolidated financial statements have been prepared in conformity withaccounting principles generally accepted in the United States, whichrequire us to make estimates and assumptions that affect the amountsand disclosures reported in the consolidated financial statements andaccompanying notes. Our estimates are based on historical experienceand currently available information. Actual results could differ fromsuch estimates. The following paragraphs summarize our criticalaccounting policies. Additional accounting policies are discussed inthe notes to our 2005 Form 10-K and elsewhere in this Form10-Q.

Revenue Recognition

OperatingLeases with Customers

We enter into long-term leases andservice leases with ocean carriers and other parties, principally aslessor in operating leases, for marine cargo containers. Long-termleases provide the ocean carriers with specified container equipmentfor a specified term. Our leasing revenues are based upon the number ofcontainers leased, the applicable per diem rate and the length of thelease. Long-term 

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leases typically range for a period of threeto eight years. Revenues are recognized on a straight-line basis overthe life of the respective lease. Advanced billings are deferred andrecognized in the period earned. Service leases do not specify theexact number of containers to be leased or the term that each containerwill remain on-hire but allow the lessee to pick up and drop offcontainers at various locations specified in the lease agreement. Undera service lease, rental revenue is based on the number of containersutilized at contracted per diem rates. Revenue for customers wherecollection is not assured is deferred and recognized when the amountsare received. Also, in accordance with FASB EITF No. 99-19,Reporting Revenue Gross as a Principal versus Net as an Agent,we recognize billings to customers for damages incurred and certainother pass through costs as leasing revenue based on the terms of thecontractual agreements with the customer.

Finance Leaseswith Customers

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

LeasingEquipment

Leasing equipment is recorded at cost anddepreciated to an estimated residual value on a straight-line basisover the estimated useful life. We will continue to review ourdepreciation policies on a regular basis to determine whether changeshave taken place that would suggest that a change in our depreciationpolicies, useful lives of our equipment or the assigned residual valuesis warranted. In addition, periodically a determination is made, ifindicators of impairment are present, as to whether the carrying valueof our fleet exceeds its estimated future undiscounted cash flows. Theestimated useful lives for our leasing equipment ranges from 10 to 20years from the date of manufacture. Estimated useful lives have beenbased on independent appraisals and will be adjusted if necessary basedon actual experience. Costs incurred to place new equipment intoservice, including costs to transport the equipment to its initialon-hire location, are capitalized. We charge repair and maintenancecosts as incurred and include these costs in direct operatingexpenses.

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

Equipment Held for Sale

Inaccordance with the Financial Accounting Standards Board(‘‘FASB’’) Statement No. 144, Accountingfor the Impairment or Disposal of Long-Lived Assets(‘‘SFAS No. 144’’), container equipmentheld for sale is carried at the lower of its fair value, less costs tosell, based on current transactions, or carrying value; depreciation onsuch assets is halted and disposals generally occur within ninety days.Subsequent changes to the asset's fair value, either increases ordecreases, are recorded as adjustments to the carrying value of theequipment held for sale; however, any such adjustments would not exceedthe equipment's carrying value at the time it was initiallyclassified as held for sale. Initial write-downs of assets held forsale are recorded as an impairment charge and are included in net(gain) loss on sale of leasing equipment. Realized gains and lossesresulting from the sale of equipment held for sale are recorded as anet (gain) loss on sale of leasing equipment.

Allowance forDoubtful Accounts

Our allowance for doubtfulaccounts is updated on a regular basis and is based upon a review ofthe collectibility of our receivables. This review considers the riskprofile of the customer, credit quality indicators such as the level ofpast-due amounts and economic conditions. An account is considered pastdue when a payment has not been received in accordance with thecontractual terms. Accounts 

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are generally charged off after an analysisis completed which indicates that collection of the full principalbalance is deemed uncollectible. Changes in economic conditions orother events may necessitate additions or deductions to the allowancefor doubtful accounts. The allowance for doubtful accounts is intendedto provide for losses inherent in the accounts receivable, and requiresthe application of estimates and judgments as to the outcome ofcollection efforts and the realization of collateral, among otherthings. We believe our allowance for doubtful accounts is adequate toprovide for credit losses inherent in our accounts receivable. However,actual losses could exceed the amounts provided for in certainperiods.

Recently Issued Accounting Pronouncements

In June  2006, the Financial Accounting Standards Board(‘‘FASB’’) issued FASB Interpretation No.48, ‘‘Accounting for Uncertainty in Income Taxes —an interpretation of FASB Statement No. 109,’’(‘‘FIN 48’’). FIN 48 clarifies theaccounting for uncertainty in income taxes recognized in financialstatements in accordance with FASB Statement No. 109, Accounting forIncome Taxes. FIN 48 prescribes a recognition threshold andmeasurement attribute for the financial statement recognition andmeasurement of a tax position taken or expected to be taken in a taxreturn. FIN 48 also provides guidance on derecognition, classification,interest and penalties, accounting in interim periods, disclosure, andtransition. The Company is required to adopt the provisions of FIN 48during the first fiscal year beginning after December  15,2006. The Company is currently evaluating the impact of FIN 48 on itsconsolidated results of operations and financialposition.

In December  2004, the FinancialAccounting Standards Board (‘‘FASB’’)issued Statement of Financial Accounting Standards No.123RShare-Based Payment (‘‘SFAS No.123R’’). This statement is a revision of SFAS No. 123,Accounting for Stock-Based Compensation. SFAS No. 123Rsupercedes Accounting Principles Board Opinion No. 25, Accountingfor Stock Issued to Employees (‘‘APB No.25’’), and its related implementation guidance. SFAS No.123R requires companies to recognize in the statement of operations thefair value of all employee share-based payments, including grants ofemployee stock options, as well as compensatory employee stock purchaseplans. The Company adopted SFAS No. 123R on January  1,2006. Given that the options outstanding upon adoption of SFAS No. 123Rwere fully vested, the adoption of SFAS No.123R did not have an impacton the financial position, results of operations or cash flows of theCompany. However, grants made during the second quarter of 2006 and anyfuture grants of share-based compensation did and will result in therecognition of compensation expense.

|              |                                                           |
|--------------|-----------------------------------------------------------|
| ITEM3:  | Quantitative and Qualitative Disclosures AboutMarket Risk |

Market risk represents the risk of changes invalue of a financial instrument, derivative or non-derivative, causedby fluctuations in interest rates, foreign exchange rates and equityprices. Changes in these factors could cause fluctuations in results ofour operations and cash flows. In the ordinary course of business, weare exposed to foreign currency, interest rate, and creditrisks.

Foreign Currency Exchange Rate Risk

Although we have significant foreign-basedoperations, the U.S. dollar is the operating currency for the largemajority of our leases (both customers obligations and companyobligations), and most of our revenues and expenses in 2006 and 2005were denominated in U.S. dollars. As a result, foreign currencyfluctuations did not materially impact our financial results in thoseperiods.

Interest Rate Risk 

We enterinto interest rate swap contracts to fix the interest rates on aportion of our debt. We assess and manage the external and internalrisk associated with these derivative instruments in accordance withthe overall operating goals. External risk is defined as those risksoutside of our direct control, including counterparty credit risk,liquidity risk, systemic risk and legal risk. Internal risk relates tothose operational risks within the management oversight structure andincludes actions taken in contravention of our policy.

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The primary external risk of ourinterest rate swap contracts is counterparty credit exposure, which isdefined as the ability of a counterparty to perform its financialobligations under a derivative contract. All derivative agreements arewith major money center financial institutions rated investment gradeby nationally recognized rating agencies, with our counterparties rated‘‘AA’’ or better. Credit exposures aremeasured based on the market value of outstanding derivativeinstruments. Both current exposures and potential exposures arecalculated for each derivative contract to monitor counterparty creditexposure.

As of June 30, 2006, the Company had in placeinterest rate swap contracts to fix the floating interest rates on aportion of the borrowings under its debt facilities as summarizedbelow:

|                   |  |  |                 |  |  |                       |  |  |                               |
|-------------------|--|--|-----------------|--|--|-----------------------|--|--|-------------------------------|
| SwapDate          |  |  | Notional Amount |  |  | Fixed LegInterestRate |  |  | Term                          |
| December 14,2004  |  |  | $200.0million   |  |  | 3.82%                 |  |  | 7years — amortizing     |
| December 14,2004  |  |  | $200.0 million  |  |  | 3.82%                 |  |  | 7 years— amortizing     |
| December 14, 2004 |  |  | $100.0million   |  |  | 3.82%                 |  |  | 7 years —amortizing     |
| October 28, 2005  |  |  | $100.0million   |  |  | 4.82%                 |  |  | 6 years —non-amortizing |
| October 28, 2005  |  |  | $25.0million    |  |  | 4.71%                 |  |  | 2.75years-non-amortizing      |
|                   |

In July 2006, theCompany entered into two additional interest rate swap contracts withfinancial institutions. The first interest rate swap contract has anotional amount of $50.0 million, a non-amortizing term of five yearsand a fixed rate of 5.52%. The second interest rate swapcontract has a notional amount of $33.0 million, an amortizing term ofapproximately 11 years and a fixed rate of 5.56%. Changes in thefair value on these interest rate swap contracts will be recognized inthe consolidated statements of operations as unrealized gains or losseson interest rate swaps.

While we utilize interest rateswap contracts to manage the market risk associated with fluctuationsin interest rates on a large portion of our variable rate indebtedness,our earnings are affected by changes in interest rates. If marketinterest rates for our variable rate indebtedness averaged 50 basispoints more than the weighted average interest rate actually paidduring the three months ended June  30,  2006, our interestexpense, after considering the effects of our interest rate swapagreements, would have increased, and income before incomes taxes wouldhave decreased, by $0.3  million for the three months endedJune  30,  2006. These amounts are determined byconsidering the impact of the hypothetical interest rates on ourborrowings and interest rate swap agreements. This analysis does notconsider the effects of the reduced level of overall economic activitythat could exist in such an environment.

Credit Risk

We maintain detailed credit records regarding ourcustomers and set maximum exposure limits for our significant customersbased on our review of these records. Credit criteria include, but arenot limited to, customer payment history, customer financial positionand performance (e.g., net worth leverage, profitability, trade routes,country of domicile, social and political climate, and the type of, andlocation of, containers that are to be supplied.) We diligently monitorour customers' performance and our lease exposures on an ongoingbasis, and our credit management processes are aided by the longpayment experience we have with most of our customers and our broadnetwork of long-standing relationships in the shipping industry thatprovide current information about our customers.

Industryfactors that provide incremental credit protection include the stronggrowth in the container industry, effective collection tools, our highrecovery rate for containers in default situations and there-marketability of our container fleet. The strong growth in thecontainer industry helps minimize the risk of customer defaults sincethe core assets of a poorly performing shipping line, its ships andcontainers, are generally needed to meet world containerized tradedemand. As a result, poorly performing shipping lines are oftenacquired by others. In addition, the law in certain major portlocations is highly favorable to creditors and many of our largecustomers call on ports that will allow us to arrest, or seize, thecustomer’s ships or bunkers, or repossess our containers if thecustomer is in default under our container leases. We have historicallyrecovered approximately 90% of our 

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containers that were the subject ofdefaulted contracts and we are able to successfully re-market theserepossessed containers through our worldwide sales infrastructure.However, we typically incur operating expenses such as repairs andpositioning when containers are recovered after a customerdefault.

For the six months ended June  30,2006, our five largest customers accounted for approximately 46%of our leasing revenues, with our largest customer accounting forapproximately 18% of our leasing revenues. As of June30,  2006, approximately 76% of our containers wereon-hire to our 20 largest customers.

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

|              |                          |
|--------------|--------------------------|
| ITEM4.  | CONTROLS AND PROCEDURES. |

Basedupon the required evaluation of our disclosure controls and procedures(as defined in Rules 13a-15(e) and 15d-15(e) under theSecurities and Exchange Act of 1934, as amended (the‘‘Exchange Act’’)), our President and ChiefExecutive Officer and our Vice President and Chief Financial Officerconcluded that as of June 30, 2006 our disclosure controls andprocedures were adequate and effective to ensure that information wasgathered, analyzed and disclosed on a timely basis.

Therehas been no change in our internal control over financial reporting (asdefined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)that occurred during our fiscal quarter ended June 30, 2006,that has materially affected, or is reasonably likely to materiallyaffect, our internal control over financialreporting.

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PART II —OTHER INFORMATION

|               |                   |
|---------------|-------------------|
| ITEM 1.  | LEGALPROCEEDINGS. |

From time to time, we are a party tolitigation matters arising in connection with the normal course of ourbusiness. While we cannot predict the outcome of these matters, in theopinion of our management, based on information presently available tous, we believe that we have adequate legal defenses, reserves orinsurance coverage and any liability arising from these matters willnot have a material adverse effect on our business. Nevertheless,unexpected adverse future events, such as an unforeseen development inour existing proceedings, a significant increase in the number of newcases or changes in our current insurance arrangements could result inliabilities that have a material adverse impact on ourbusiness.

|                |               |
|----------------|---------------|
| ITEM 1A.  | RISK FACTORS. |

For a complete listing of our risk factors, refer to our 2005Form 10-K filed with the Securities and Exchange Commission onMarch  20,  2006.

|               |                                                     |
|---------------|-----------------------------------------------------|
| ITEM 4.  | SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS. |

On May  23,  2006, the Company heldits Annual Meeting of Stockholders. At the Annual Meeting, thestockholders of the Company voted on (i) the election of eightdirectors to serve until the 2007 Annual Meeting of Stockholders oruntil their respective successors are elected and qualified, and(ii) to ratify the appointment of Ernst & Young LLP asthe Company’s independent registered public accounting firm forthe fiscal year ending December  31,2006.

The number of votes cast for the election of theeight directors were asfollows:

|                      |  |  |                |  |            |                   |  |  |                                        |
|----------------------|--|--|----------------|--|------------|-------------------|--|--|----------------------------------------|
|                 |  |  | NumberofShares |
| Nominee              |  |  | For            |  |            | WithholdAuthority |
| Brian M.Sondey       |  |  |                |  | 25,577,879 |                   |  |  | 4,801,589                              |
| BruceR. Berkowitz    |  |  |                |  | 29,357,263 |                   |  |  | 1,022,205                              |
| A.Richard CaputoJr.  |  |  |                |  | 25,282,803 |                   |  |  | 5,096,665                              |
| Brian J.Higgins      |  |  |                |  | 25,572,845 |                   |  |  | 4,806,623                              |
| John W.JordanII      |  |  |                |  | 25,441,609 |                   |  |  | 4,937,859                              |
| Frederic H.Lindeberg |  |  |                |  | 30,281,741 |                   |  |  |      97,727 |
| DavidW.Zalaznick     |  |  |                |  | 25,429,254 |                   |  |  | 4,950,214                              |
| DouglasJ.Zych        |  |  |                |  | 25,944,145 |                   |  |  | 4,435,323                              |
|                      |

Thenumber of votes cast to ratify the appointment of Ernst & Young LLPas the Company’s independent registered public accounting firmwere asfollows:

|                |  |  |         |  |  |         |
|----------------|--|--|---------|--|--|---------|
| NumberofShares |
| For            |  |  | Against |  |  | Abstain |
| 30,379,028     |  |  | 410     |  |  | 30      |
|                |

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|              |           |
|--------------|-----------|
| ITEM6.  | EXHIBITS. |

|               |  |  |                                                                                                                                        |
|---------------|--|--|----------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  |  | ExhibitDescription                                                                                                                     |
| 31.1*         |  |  | Certificationof the Chief Executive Officer pursuant to Rules 13a-14(a) and15d-14(a) of the Securities Exchange Act of 1934, asamended |
| 31.2*         |  |  | Certification of the ChiefFinancial Officer pursuant to Rules 13a-14(a) and 15d-14(a) of theSecurities Exchange Act of 1934, asamended |
| 32.1*         |  |  | Certification by ChiefExecutive Officer pursuant to 18 U.S.C. Section1350                                                              |
| 32.2*         |  |  | Certification by Chief FinancialOfficer pursuant to 18 U.S.C. Section1350                                                              |
|               |

|  |
|--|
|  |  |
|  |

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

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SIGNATURE

Pursuantto the requirements of the Securities Exchange Act of 1934, theRegistrant has duly caused this report to be signed on its behalf bythe undersigned thereunto duly authorized.

|               |  |  |                                                                                 |
|---------------|--|--|---------------------------------------------------------------------------------|
|          |  |  | TALInternational Group,Inc.                                                     |
| August10,2006 |  |  |                                                                            |
|          |  |  | /s/Chand Khan                                                                   |
|          |  |  | Chand KhanVice PresidentandChief Financial Officer(Principal AccountingOfficer) |
|               |

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