Trencor endorses the Code of Corporate Practices and Conduct in the King II Report on Corporate Governance. Ongoing enhancement of corporate governance principles is a global movement, fully supported by the board which, together with senior management, will continue to adopt, as appropriate, existing and new principles which advance good practical corporate governance and add value to the group's business activities.

The board is of the opinion that the group has, in all material respects and where relevant, complied with the Code during the year under review.

The salient features of the group's corporate governance are set out below.

BOARD OF DIRECTORS

COMPOSITION

The names and brief résumés of the directors appear here.

The board currently comprises eight directors, three of whom are executive and five non-executive of which four qualify as independent non-executive directors in terms of the King II Report. The directors have considerable experience and an excellent understanding of the group's business.

Board effectiveness reviews were conducted in 2002 and 2005 and further reviews will be conducted at appropriate intervals.

There is a procedure for appointments to the board. Nominations for appointment to the board are formal and transparent and submitted by the nomination committee to the full board for consideration.

CHAIRMAN/CEO

The roles of chairman and chief executive officer are separate. The CEOs of operating subsidiaries report to the chairmen of their respective boards, who in turn report to the Trencor board.

The board is satisfied that no one individual director or block of directors has undue power on decision-making.

PROFESSIONAL ADVICE

All directors have access to the company secretary and management and are entitled to obtain independent professional advice at the company's expense if required.

MEETINGS

The board meets regularly on a scheduled quarterly basis and at such other times as circumstances may require. During the year ended 31 December 2005, five meetings were held and these were attended by all members in person or by video link.

Board papers are timeously issued to all directors prior to each meeting and contain relevant detail to inform members of the financial and trading position of the company and each of its operating subsidiaries.

The chairman also meets with non-executive directors, either individually or collectively, on an ad-hoc basis to apprise them of any significant matters that may require their input and guidance. In addition, the independent non-executive directors hold separate meetings as and when they deem it appropriate.

DIRECTORS' SERVICE CONTRACTS

None of the directors are bound by any service contracts. All executive directors have an engagement letter which provides for a notice period of between one and three months to be given by either party.

In terms of the articles of association, not less than one-third of the directors are required to retire by rotation at each annual general meeting of the company and may offer themselves for re-election. The appointment of new directors during the year is required to be confirmed at the next annual general meeting and such new directors are required to retire at such annual general meeting, but may offer themselves for re-election.

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SHARE OPTIONS

The following share options in terms of The Trencor Share Option Plan have been granted to and accepted by executive directors and/or their family trusts:

		NUMBER OF
	DATE	OPTIONS AT	OFFER PRICE	EXERCISABLE AS FOLLOWS
	GRANTED	31/12/2005	PER SHARE (R)	BETWEEN	AND
J E McQUEEN	30/06/01	1 000 000	5,25	11/07/02	30/06/09
	11/06/04	50 000	12,10	11/06/07	11/06/12
	11/06/04	50 000	12,10	11/06/08	11/06/12
	11/06/04	50 000	12,10	11/06/09	11/06/12
	11/06/04	50 000	12,10	11/06/10	11/06/12
		1 200 000
H R VAN DER MERWE	30/06/01	1 600 000	5,25	11/07/02	30/06/09
	11/06/04	50 000	12,10	11/06/07	11/06/12
	11/06/04	50 000	12,10	11/06/08	11/06/12
	11/06/04	50 000	12,10	11/06/09	11/06/12
	11/06/04	50 000	12,10	11/06/10	11/06/12
		1 800 000

The right to exercise the options granted on 11 June 2004 is subject to certain performance criteria being met.

During the year, options granted on 30 June 2001 at the option price of R5,25 per share, were exercised and the shares sold as follows:

DIRECTORS' INTERESTS

The number of shares held by the directors in the issued share capital of the company, other than indirect interests through Mobile Industries Ltd, at 31 December 2005 and 2004 were as follows:

	BENEFICIAL		NON-BENEFICIAL		TOTAL
	DIRECT	INDIRECT	DIRECT	INDIRECT	2005	2004
H A GORVY	–	–	–	–	–	–
J E HOELTER	–	–	–	–	–	–
C JOWELL	41 210	20 904	–	–	62 114	62 114
N I JOWELL	41 808	20 904	–	–	62 712	62 712
J E McQUEEN	49 649	102 133	–	–	151 782	151 782
D M NUREK	–	–	–	–	–	–
E OBLOWITZ	10 000	–	–	–	10 000	–
H R VAN DER MERWE	–	–	–	–	–	–
	142 667	143 941	–	–	286 608	276 608

None of the directors held any interest in the 6% convertible debentures in issue in the company (2004: nil).

Mr J E Hoelter has an indirect beneficial interest in 1 038 873 shares (2004: 1 038 873 shares) representing 5,5% (2004: 5,5%) in the issued common stock of Textainer Group Holdings Ltd, Trencor's 73% (2004: 73%) subsidiary.

There have been no changes in these interests between the financial year-end and the date of this report.

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SUB-COMMITTEES OF THE BOARD

Several sub-committees exist, each with specific terms of reference, to assist the board in discharging its responsibilities. The composition of these committees is reviewed on an ongoing basis. The names of the members of the sub-committees appear under Directors/Committees.

NOMINATION COMMITTEE

During 2002 the board appointed a nomination committee to identify and recommend to the board, suitable competent candidates for appointment as independent non-executive directors. The committee comprises three non-executive directors, two of whom are independent.

The committee meets on an ad-hoc basis. During the year, the committee held one meeting which was attended by all members.

EXECUTIVE COMMITTEE

The executive committee, comprising the three executive directors and one non-executive director, meets formally on a regular basis throughout the year and informally on a weekly basis. During the year, 10 formal monthly meetings were held which were attended by all members, save that Mr C Jowell attended 9 meetings.

This committee has the authority of the board, which is subject to annual review, to take decisions on matters involving financial risk management and matters requiring immediate action (subject to the approval of the committee chairman or his nominee) and passing of enabling resolutions, which:

• do not have major policy implications for the group, or
• have been discussed with and the support obtained from a majority of board members, save that any dissenting director has the right to call a board meeting, or
• if requiring significant capital expenditure, are in the normal course of business of the existing divisions and operations of the group.

AUDIT COMMITTEE

An audit committee, formally established by the board in the early 1990s, presently consists of four independent non-executive directors and normally meets at least twice a year, prior to the finalisation of the group's interim results and reviewed annual results, and at such other times as may be required. The committee is primarily responsible for assisting the board in carrying out its duties in regard to accounting policies, internal controls and audit, financial reporting, identification and monitoring of risk, and the relationship with the external auditors.

In addition to the committee members, the chairman of the board, the financial director and certain other group executives are normally invited to attend meetings of the committee as observers. The external auditors attend all meetings and have direct and unrestricted access to the audit committee at all times.

During the year, the committee met on two occasions. The meetings were attended by all members.

In addition, the committee chairman meets separately with the external auditors on an ad-hoc basis.

The audit committee is satisfied that the external auditors are independent in the discharge of their duties. The use of the services of the external auditors for significant non-audit services is considered by the committee on an ad-hoc basis.

The main group operating entities, Textainer Group Holdings Ltd and TrenStar Inc, each have their own audit committees comprising persons who are not executives within those entities. These committees submit minutes and reports to the Trencor audit committee after each meeting. The external auditors of these group entities have direct and unrestricted access to the respective audit committees.

Where appropriate, the internal audit functions are primarily outsourced to suitably qualified independent external parties which are contracted on an ad-hoc basis to perform certain internal audit functions in terms of specified terms of reference and to report thereon to the executive committee and, if required, the main audit committee. The internal auditors have direct and unrestricted access to the respective audit committees.

REMUNERATION COMMITTEE

The remuneration committee of the board has been in existence since the early 1990s and was formalised in 1996. It reports directly to the board and comprises one independent non-executive director as committee chairman and the chairman of the board. The committee's task is to review the compensation of executive and non-executive directors and senior management and to grant options in terms of The Trencor Share Option Plan. Members of the remuneration committee are not eligible for participation under The Trencor Share Option Plan.

During the year, two committee meetings were held, which were attended by both members.

The committee may, if required, seek the advice of external independent consultants.

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SUCCESSION PLANNING

The board is satisfied that suitable succession plans are in place other than at TrenStar Inc where the matter is receiving attention.

BOARD AND BOARD COMMITTEE TERMS OF REFERENCE

The board is ultimately accountable and responsible for the performance and affairs of the group. In essence, it provides strategic direction to the group, monitors and evaluates operational performance and executive management of the company and its subsidiary and associate companies, determines policies and processes to ensure effective risk management and internal controls, determines policies regarding communication and is responsible for ensuring an effective composition of the board.

Formal detailed terms of reference for the nomination, executive, audit and remuneration sub-committees have been approved and formally implemented and are reviewed by the board on a regular basis.

RISK MANAGEMENT

Responsibility for managing the group's risk lies ultimately with the board of directors. However, the executive committee and management at operating levels assist the board in discharging its responsibilities in this regard by identifying, monitoring and managing risk on an ongoing basis and within the authority conferred upon them by the board. The identification and mitigation of risk is a key responsibility of management throughout the group and of the executive committee.

The following significant risk exposures within our businesses and the possible impacts and the measures taken to mitigate such risks have been identified:

EXCHANGE RATE FLUCTUATIONS

Most of our businesses are dollar-based and, accordingly, changes in the R/US$ exchange rate can and do significantly affect the translation of assets, liabilities, profits and losses into South African currency. The long-term export receivables are all denominated in US dollars. The board has decided that these receivables should remain in dollars and should not be hedged into any other currency, save that the executive committee is authorised to sell limited amounts due to be collected forward, into rand, if it believes that it would enhance the rand receipts to do so. Unrealised gains and losses arising on the translation at reporting dates of the unhedged portion of the long-term receivables and related impairments are included in profit and loss and changes in the R/US$ exchange rate may result in volatility in earnings when expressed in rand.

INTEREST RATES

Virtually all of the group's borrowings are denominated in foreign currency, principally US dollars and British pounds. Textainer has a firm policy that long-term lease business should be financed with fixed rate debt and master lease (short-term) business should be financed with floating rate debt. Interest on loans raised to purchase containers leased out under long-term leases (usually of five years' duration at fixed rates) is swapped into fixed interest rate contracts of a similar term, while loans raised to purchase containers for master lease (leases of shorter term) are at variable rates. Furthermore, the company enters into interest-rate cap contracts to guard against unexpected increases in interest rates on such variable interest-rate loans. In the event that Textainer is not able to apply hedge accounting principles to the interest rate swaps, notwithstanding that such swaps may be economically effective, it will be required to account on the basis that the net result of the marked-to-market valuation of these instruments is flowed through the income statement. This may result in volatility of earnings.

CREDIT RISK CONCENTRATION

Textainer's customers are mainly international shipping lines which transport goods on international trade routes. Once the containers are on-hire with a lessee, Textainer does not track their location. The domicile of the lessee is not indicative of where the lessee is transporting containers. The business risk for Textainer in its international operations lies with the creditworthiness of the lessees rather than the geographic location of the containers or the domicile of the lessees. Revenue from one lessee amounted to US$20,0 million and US$16,8 million or 11% of Textainer's lease rental income, for the years ended 31 December 2005 and 2004 respectively. Trade receivables from one lessee amounted to US$4,4 million or 10% of trade receivables as at 31 December 2004.

DECREASE IN CONTAINER FLEET UTILISATION

A decline in utilisation, for example due to a reduction in world trade or in container traffic on particular routes or an oversupply of competitors' containers, could result in reduced revenue, increased storage expenses and thus lower profit. In order to reduce volatility in revenue and earnings, Textainer has increased the proportion of its overall fleet on long-term lease to 68,4% of the total. Almost 75,0% of Textainer's owned containers are on long-term lease. Textainer has also developed a very active used-container trading operation and thus has an effective infrastructure to dispose of containers that have reached the end of their economic lives on the best available terms. Textainer monitors containers due to come off lease and manages their disposal or release.

CONTAINER OFF-HIRES IN LOW DEMAND LOCATIONS

A build up of off-hire containers in low demand locations where they cannot easily be on-hired again, could lead to decreased utilisation, reduced revenue, higher storage costs and the possibility of having to ship the equipment, at considerable cost, to positions where it can be leased out. To reduce this exposure, Textainer is increasingly placing containers into long-term leases and also negotiating more favourable lease terms that limit the number of containers that lessees may off-hire in low demand areas. It also regularly repositions containers from low to high demand locations.

NEW CONTAINER PRICES

Changes in the prices of new container equipment have an impact on lease rates. In general, declining new container prices lead to a softening in rates, while increasing prices may result in upward pressure on lease rates.

DECLINING RESIDUAL VALUES OF CONTAINERS

The ultimate return from the ownership of a container will depend, in part, upon the residual value at the end of its economic life. The market value of a used container depends upon, among other things, its physical condition, supply and demand for containers of its type and remaining useful life in relation to the cost of a new container at the time of disposal and the location where it will be sold. A decline in residual values of containers can adversely affect returns from container ownership and cash flows.

DECREASE IN ACTIVITY – EFFECT ON LONG-TERM RECEIVABLE COLLECTIONS

Declines in lease rates, utilisation and residual values of equipment in the container industry can adversely affect the cash flows of container owners and could impair the ability of these companies to meet their obligations to the group and its export partners under the long-term export contracts. Conversely, improved market conditions may enhance their ability to meet these obligations. Trencor's in-depth understanding of the industry and many of the main participants enable the company to closely monitor the activities of these entities and, where necessary, take whatever action may be required to protect the group's and its export partners' interests. Changes in market conditions in the industry require the company to make appropriate valuation adjustments from time to time to recognise the changes in the timing and possible non-receipt of instalments due under these long-term export contracts.

RISK AREAS IN TRENSTAR'S ACTIVITIES

TrenStar relies on information systems that support the core functions of managing asset movements. Accurate tracking of returnable packaging units between depots and various manufacturers and suppliers within the supply chain is necessary to (a) provide customers with added value in the form of visibility of returnable packaging units and other mobile assets, (b) ensure that transaction costs are correctly apportioned between the various users of the service and (c) to bill clients accurately and efficiently. The TrenStar mobile asset management system is a web-enabled tool that translates physical movements into billing and location data that is then passed through to the ERP system for further financial processing. Typical risk areas associated with enterprise systems and business activities such as TrenStar are within the domains of application and database design, technical architecture, software development methodology, configuration management, information security, IT continuity/disaster management, asset losses and declines in customers' business affecting TrenStar's billable revenue.

Growth in the asset-owning part of TrenStar's business is capital intensive and requires ongoing funding. At year-end this requirement tied up US$20 million of funds in security accounts.

Market and customer acceptance of TrenStar's unique business model can be a slow process, sometimes resulting in longer than expected lead times for successful closing of contracts.

The TrenStar business was launched in the beer keg industry in the UK. As a result there is currently a concentration of the company's business in this industry, and a decline in the business of these customers will represent an exposure for the company.

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INFORMATION RESOURCES MANAGEMENT

Trencor, like other organisations, is reliant on information technology ('IT') to effectively and efficiently conduct its business. The group's IT systems, policies and procedures are reviewed on an ongoing basis to ensure that effective internal controls are in place to manage risk and promote efficiencies, and as far as possible to comply with universally accepted standards and methods, such as (amongst others) CobiT (Control Objectives for Information Technology Resources), as endorsed by the IT Governance Institute. Attention is continuously focused on maximising the benefits whilst minimising the risks associated with all aspects of the IT portfolio inasmuch as they apply to business operations.

INFORMATION SECURITY

Compliance with legislative requirements contributes towards the protection of corporate information, but in itself only addresses a small part of the total number of threats posed to the business arising from its dependencies on information technology and the internet. Security policies and procedures for employees and the use of technologies such as enterprise and personal firewalls, antivirus systems, intrusion monitoring and detection are applied, as well as frequent application of software security 'patches' issued by vendors as and when vulnerabilities are discovered.

BUSINESS CONTINUITY

Trencor head office has established procedures that when invoked enable a complete recovery of the IT network and business systems within specified time limits. Textainer and TrenStar have established their own business continuity plans.

GROUP STRATEGY

Early in 2005 the board confirmed the strategy statement of the group as follows:

1. Trencor's strategy is to invest in operations that have as their business:
   To enable the controlled movement of goods by providing, managing and integrating the use of equipment, services, knowledge and information.
2. We aim to do this by:
   • providing a global and integrated set of offerings through owning, managing and/or leasing of assets used by customers in the controlled movement of goods;
   • the increasing use of, and investment in, information and communication technologies and appropriate forms of information management and electronic trading;
3. This strategy is intended to contribute to the growth and improvement of those existing businesses already involved in the movement of goods, and to include in our activities similar businesses that have the potential to render acceptable returns.

CODE OF ETHICS

The board, management and staff agreed a formal code of ethical conduct in 1998 which seeks to ensure high ethical standards. All directors, managers and employees are expected to strive at all times to adhere to this code, and to enhance the reputation of the group. The code is signed by all directors, managers and senior employees at least every three years.

Any transgression of the code is required to be brought to the attention of the audit committee.

RESTRICTION ON TRADING IN SECURITIES

A formal policy, implemented some years ago, prohibits directors, officers and employees from dealing in the company's securities and those of Mobile, from the date of the end of an interim reporting period until after the interim results have been published and similarly from the end of the financial year until after the reviewed annual results have been published. Directors and employees are reminded of this policy prior to the commencement of any restricted period.

In addition, no dealing in the company's securities is permitted by any director, officer or employee whilst in possession of information which could affect the price of the company's securities and which is not in the public domain.

Directors of the company and of its major subsidiaries are required to obtain clearance from Trencor's chairman (and in the case of the chairman, or in the absence of the chairman, from the chairman of the audit or remuneration committee) prior to dealing in the company's securities, and to timeously disclose to the company full details of any transaction for notification to and publication by the JSE.

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STAKEHOLDER COMMUNICATION

Members of the executive committee of the board meet on an ad-hoc basis with institutional investors, investor analysts, individuals and members of the financial media. Discussions at such meetings are restricted to matters that are in the public domain.

Shareholders are informed, by means of press announcements and releases in South Africa and/or printed matter sent to such shareholders, of all relevant corporate matters and financial reporting as required in terms of prevailing legislation. In addition, such announcements are communicated via a broad range of channels in both the elec-tronic and print media. The company maintains a corporate website (http://www.trencor.net) containing financial and other information, including interactive interim, reviewed and annual results. The site has links to the websites of each major operating subsidiary company.

EMPLOYMENT EQUITY

In compliance with the Employment Equity Act, the group's South African operating entities have each developed their own employment equity policies and plans in consultation with their employees. The elected employment equity committees at the respective operations are responsible for ensuring and monitoring the achievement of the employment equity goals within their business units.

TRAINING

Skills development committees at South African operations are charged with the responsibility to comply with the requirements of the Skills Development Act, so as to develop and improve the knowledge, skills and capabilities of employees as far as is reasonably possible.

SAFETY, HEALTH AND ENVIRONMENT

The group is committed to providing and maintaining a safe and healthy risk-free working environment and continually strives to prevent workplace accidents, fatalities and occupational health and safety related incidents.

At 31 December 2005 the group had 528 employees (2004: 408) of which 285 (2004: 118) were based in South Africa and 243 (2004: 290) outside South Africa.

Based on the existing demographics of the group's staff complement and the various geographical locations throughout the world, the board is of the opinion that the impact on the group as a result of the HIV and AIDS epidemic within South Africa and elsewhere, although unquantifiable at this time, will not be significant.

There are no significant environmental impact issues caused by the group's operations and all group entities are, where relevant, at the very least fully compliant with the environmental legislation in their particular jurisdictions.

ACCESS TO INFORMATION

The company and all of its South African subsidiaries are compliant with the provisions of the Promotion of Access to Information Act. The manual in terms of this legislation is available from the registered office of the company and on the company's website.

FINANCIAL INTELLIGENCE CENTRE ACT

Group companies within South Africa have all administrative measures in place in respect of the regulations of the Financial Intelligence Centre Act.

COMMUNITY INVESTMENTS

Financial support is primarily allocated to selected educational institutions and assistance in the form of bursaries is granted to students without employment obligations. The group also assists various community and welfare organisations.

Textainer and its employees provided monetary assistance to the Red Cross for relief efforts following the tsunami and hurricane Katrina disasters in an aggregate amount of US$112 809.

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