COMMENTARY

CHAIRMAN'S STATEMENT

Trencor performed very well in the past year, largely due to Textainer's excellent results. Trading profit, after net interest, increased by 31% to US$75 million from US$57 million in 2004. In rand terms, it grew by the same percentage to R480 million. Adjusted undiluted headline earnings per share were 36,1 US cents (2004: 23,8 US cents) or 281,3 SA cents (2004: 90,2 SA cents). The board declared a final dividend of 30 SA cents per share making a total of 40 SA cents per share for the year (2004: 12 SA cents).

This year, for the first time, we are required to report under International Financial Reporting Standards and, where applicable, comparative figures have been restated to accord with the new requirements. These restatements are detailed elsewhere in the annual financial statements.

We have again published a summary of our results as well as unaudited income statements and balance sheets in US dollars. The purpose is to facilitate interpretation of the results and more easily assess the impact of changes in the R/US$ exchange rate. We are pleased to learn that this has proved useful to readers of our financial statements.

In 2005 we celebrated 75 years since the business started and 50 years since listing on the JSE. We are proud to note that Trencor was a leader in a recent authoritative survey of 30 year growth. A shareholder who invested in Trencor on 1 January 1975 and reinvested dividends would to 30 September 2005 have enjoyed a total return in excess of 30% per annum over the period. Put another way, R1 000 invested then would now be worth about R4 million.

It is just over a year ago that we settled a long-standing query from the South African Revenue Service. The removal of that uncertainty in the minds of third parties has significantly benefited our business and the many relationships that are part of it.

At the last annual general meeting, the possibility of reviewing the shareholding structure of the Trencor and Mobile group was discussed. Various possibilities that may affect the group structure are being investigated.

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TRADING

TEXTAINER

The container leasing industry enjoyed an exceptional year and in this context our business achieved outstanding results. All of Textainer's divisions performed well and we believe the company has raised the platform of its business. As forecast a year ago, the favourable trading conditions continued for most of the year. Its excellent management team was able to take advantage of these conditions and profits in 2005 grew by 18,0% to US$61,6 million. This included US$4,9 million and US$5,8 million in unrealised gains on derivative instruments in 2005 and 2004 respectively. The resale division had an outstanding year. It sold 50 000 containers and, in the strong market of 2005, the good margins achieved were a significant contributor to the year's results.

The shipping lines had ordered new containers heavily in the good conditions of 2004 and 2005 – leading to oversupply in the second half of 2005. As a consequence the market turned down significantly towards the end of the third quarter of 2005 and in early March 2006 Textainer's fleet utilisation reached a low point of 88,6%. Although we have planned on the basis that this reduced level will continue for most of 2006, there has been a slight up-tick since this low point.

Accordingly, we only purchased 78 454 TEU (twenty-foot equivalent unit) of new containers compared to our expectation early in the year of 150 000 TEU. The year ended with fleet utilisation at 90,3% compared to the average for the year of 91,9% and a high of 96,7% in October 2004. The price of new containers reflected these conditions – peaking at about US$2 300 in June/July 2005 and declining to about US$1 400 by February 2006.

We have further reduced the volatility of earnings by raising the portion of our owned fleet on long-term lease to 75% (2004: 70%).

Despite a reduction in the company's gearing, Textainer's return of earnings to equity has improved. With continuing strong cash flow and an able management team, we have been actively seeking acquisitions in, or closely related to, its main business. The company is continuing this initiative and hopes weaker trading conditions may result in success.

The good trading conditions in the container industry have also improved collections from our long-term receivables and led to improved cash flow and a reduction in the attributable valuation adjustment.

TRENSTAR

TrenStar Inc again fell short of our expectations. This was mainly due to reduced demand in the UK for beer in kegs and continued delays in concluding large contracts for new business. The lack of a stronger balance sheet hampers the business in certain aspects, and we have engaged an international merchant bank to review the business and advise on alternatives for its future which could include raising capital or merging the business with that of a competitor.

TrenStar SA on the other hand improved its performance and made a positive contribution to earnings. It also made good progress in growing its supply chain services business, particularly in the automotive industry.

LEVERAGE AND FUNDING

The group's borrowings are mainly asset based: US$541 million (R3,4 billion) in Textainer and US$275 million (R1,7 billion) in TrenStar Inc. Against this, 97% of the group's assets are based in foreign currencies, mainly US dollars and UK pounds. At year-end there was only US$3 million in debt at the centre and this has since been reduced to zero.

PROSPECTS

In view of the more difficult trading conditions in the container leasing business, we expect lower earnings from Textainer. Corrective action we are taking at TrenStar may not have a significant effect this year. Accordingly, we are anticipating a small reduction in Trencor's US dollar-based earnings in 2006.

It is a pleasure to acknowledge the outstanding contribution made during the year by our dedicated personnel. I am also grateful to my co-directors for the guidance, wisdom and judgement they apply to the business of Trencor.

N I JOWELL 29 MARCH 2006