TEXTAINER

www.textainer.com

Textainer Group Holdings Ltd, our 72,3% offshore subsidiary, is primarily engaged in owning and leasing standard and special dry freight marine cargo containers to global transportation companies. 2006 produced the second best performance in Textainer’s 27 year history, with profit after tax of US$54,2 million (2005: US$59,3 million).

Average fleet utilisation for the year was 91,1% (2005: 91,9%) with actual utilisation on 23 March 2007 at 90,9%.

Textainer’s customers include virtually all of the leading international shipping lines. They are served by Textainer’s own offices, agents and depots strategically located in markets throughout the world. Textainer’s carefully designed specifications, in-house production quality control, depot selection and audit programme are all part of a system built to control customers’ costs and provide a high-quality container service.

In addition to its own fleet, Textainer manages containers for a number of other owners, including TAC, a container owning company in which Trencor has a 44% shareholding. Management fees and sales commissions arising from these arrangements continue to make significant contributions to the company’s operating results and also promote financial stability, even in cyclical downturns. Including finance leases, the total fleet under Textainer’s management at 31 December 2006 numbered 1 528 000 TEU (twenty-foot equivalent unit) of which some 63,6% (2005: 69,1%) were finance leases or on long-term lease. Textainer itself owned 528 000 TEU of which 67,3% (2005: 70,1%) were finance leases or on long-term lease. The average age of Textainer’s owned fleet and of the whole fleet is 6,7 years.

Effective 1 July 2006, Textainer and Gateway Management Services Ltd entered into an agreement whereby Textainer purchased certain container management rights for a total consideration of US$19 million, thereby increasing the total fleet under management by 317 000 TEU. The purchase price will be amortised over the term of the container management agreements.

New equipment purchases during the year amounted to 94 900 TEU with virtually all of them going into long-term leases and finance lease contracts. At the end of 2006, the company had unutilised borrowing facilities of approximately US$288 million at its disposal. The ratio of interest-bearing debt to total equity was 181% (2005: 203%) which is conservative by industry standards.

The equipment resale division enhances the returns to container owners by maximising the value received at the end of the economic life of the equipment. It also purchases used containers around the world, sometimes repositions them and sells them in major demand markets. During the year the strong leasing market made the sourcing of used containers for resale very difficult. The division nevertheless made an excellent contribution to net profit as a result of higher sale prices for used containers. The logistics division ensures that the repositioning of empty containers from surplus to demand locations is completed in the most cost-efficient manner possible.

A summarised balance sheet and income statement for Textainer appears on these aforementioned links.

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TRENSTAR SA

www.trenstar.co.za

The business model of TrenStar SA (Pty) Ltd, owned 100% by Trencor, is to provide customers in South Africa with returnable packaging units, and, where appropriate, to manage these for the customer to improve control and visibility of these assets and their contents. In certain instances the customer owns the units, with TrenStar SA providing the track and trace equipment, software and related management services, creating greater efficiencies as these units move through the supply chain. In South Africa mobile assets include a range of cargo and intermediate bulk containers, metal cages, plastic bins, pallets and Alpal units. We also offer barcode and radio frequency identification (RFID) tracking technology, business analysis and information management, and advise larger customers on the design and sourcing of mobile assets. Recently the business model has expanded to provide packaging management services inside the customer’s own plant.

During the year under review, TrenStar SA made good progress in further establishing its business as a reliable supplier, mainly in the automotive and retail industries. As understanding of the benefits to the customer of this business model increases, we expect this growth trend to continue.

Revenue grew to R72 million (2005: R57 million), with profit before interest and tax improving to R9,8 million (2005: R3,5 million). The company has no outside borrowings.

TRENSTAR INC

www.trenstar.com

TrenStar Inc, our 58% held subsidiary headquartered in Denver, Colorado, and its operating companies (collectively ‘TrenStar’) has a business model similar to that of TrenStar SA described above. Its major operations are in the USA and the UK and it has a 33% holding in Jettainer, a joint venture company with Lufthansa Air Cargo based in Frankfurt, Germany, which provides and manages air cargo containers.

Revenue for the year grew to US$65,6 million (2005: US$56,0 million), with the net loss, including some US$4,0 million in restructuring costs and losses sustained in an operation since discontinued and impairment of kegs of US$8,8 million, at US$20,0 million (2005: loss US$9,9 million).

In the US good progress was made in TrenStar’s beer keg and synthetic rubber contracts, which performed better than budget. Jettainer also performed well. TrenStar management improved cost control and management disciplines in general.

However, developments over the last year in the UK beer keg business were disappointing. Higher beer keg losses due to increased theft in an environment of high prices for scrap metal, coupled with declining draught beer sales (on which TrenStar’s revenue is based) on the part of two of TrenStar’s larger UK brewer customers made the contracts between these two customers and the TrenStar subsidiaries concerned uneconomic. Contractual disputes with these customers regarding responsibility for keg replacements have exacerbated the situation. At the year-end, TrenStar was hopeful that these disputes could be resolved on a basis that would enable the continuation of the contracts, but subsequent to the year-end, this turned out not to be viable. In February 2007 the TrenStar subsidiary that contracted with one of these customers was placed into administration to ensure an orderly dissolution of the relationship with this customer and, during March 2007, the contract with the customer was terminated. It is likely that the contract with the other customer will similarly end. With the cessation of these contracts,TrenStar’s goal of pooling and managing kegs for multiple brewers in the UK is no longer viable and, as a result, it may exit the beer keg business in the UK and Europe. TrenStar believes that it should be able to do so on the basis that the brewers involved will repurchase the keg fleets at values that will cover the related outstanding debt, although part of existing security deposits may have to be forfeited and it is possible that some termination fees and closure costs will have to be incurred.

The above developments hampered TrenStar’s efforts to raise significant new equity to de-gear its balance sheet and improve profitability. Once the basis for exiting the beer keg business in the UK is firm, the strategic alternatives for the future of the rest of TrenStar will be explored further.

At 31 December 2006 TrenStar’s total interest-bearing debt amounted to US$391,4 million, of which US$263,6 million or 67% was ring-fenced in special purpose subsidiary companies. TrenStar’s debt is in turn ring-fenced with no recourse to Trencor.

LONG-TERM RECEIVABLES

The aggregate of outstanding long-term receivables at 31 December 2006 amounted to US$332 million (2005: US$380 million). The discount rate applied in the valuation of the US$-denominated long-term receivables is unchanged from 2005 at 8,5% per annum and the net present value of these receivables, before any fair value adjustments, totalled R2,1 billion (2005: R2,1 billion). An exchange rate of US$1 = R6,98 was used to translate dollar amounts into rand at 31 December 2006 (2005: US$1 = R6,31). In compliance with the requirements of International Financial Reporting Standards, the resulting translation gain, amounting to R205 million at net present value (2005: gain of R272 million) has been included in profit before tax.

The decrease in the value of the rand resulted in a loss of R69 million (2005: loss of R85 million) on translation of the dollar-denominated fair value adjustment against the receivables. Furthermore, given the trading conditions currently being experienced in the container leasing industry and the current outlook for the collectibility of, and timing of receipts from, the long-term receivables, management considered a further reduction in the dollar amount of the net fair value adjustment to be appropriate. This reduction, translated into rand, had a positive effect on pre-tax profit amounting to R60 million (2005: R67 million) in the year under review. At 31 December 2006, the net present value of long-term receivables after fair value adjustments amounted to R1,4 billion (2005: R1,5 billion).

The discount rate applied to reduce the rand amounts attributable to third parties to their net present values is unchanged from 2005 at 10% per annum.

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TAC

The TAC group, in which Trencor has a 44% shareholding, owned 224 000 TEU of dry freight containers of various types and 2 450 stainless steel tank containers at 31 December 2006, which are managed by a number of equipment managers. Textainer continues to manage the largest portion of the dry freight container fleet and Exsif Worldwide Inc manages most of the stainless steel tank containers. Market conditions, which we noted in last year’s annual report had softened in the fourth quarter of 2005, improved from March 2006 and average utilisation across the whole fleet remained at 91% for the year. New container prices were fairly volatile during the year while the resale prices for used containers have continued to hold up well. During the year, TAC purchased 13 630 TEU of new equipment at a cost of US$22 million from manufacturers in China; these purchases were financed out of the company’s existing facilities. All of the new equipment purchased is intended to be placed into long-term leases.

PROPERTY INTERESTS

The sale of the group’s 31% interest in a property development in Midrand known as Midrand Town Centre, was finalised during the year. The sale realised cash of R19,7 million for Trencor and a profit of R2,7 million.

Trencor has a 15% interest in the company that owns and operates Grand Central Airport in Midrand, Gauteng, which continues to provide satisfactory returns. Our exposure to this investment is R3 million. This investment is regarded as non-core and will be disposed of when a suitable opportunity arises.

FINANCE

The principal financial ratios at 31 December 2006 and the comparative figures for 2005 are reflected in the table below. In order to demonstrate the impact of the consolidation of Textainer and BLI, the wholly-owned subsidiary of TrenStar Inc which owns the beer keg fleets used by three major UK brewers, the ratios are also stated on the basis of notionally accounting for Trencor’s interests in these companies using the equity accounting method.

There is no interest-bearing debt at the centre. The ratio of interest-bearing debt to total shareholders’ equity in Textainer declined from 203% at 31 December 2005 to 181% at the end of 2006.

Total capital expenditure during the year amounted to R1 698 million of which R938 million was incurred by Textainer in replacing and expanding its container fleet. TrenStar expended R720 million in replacing and expanding its equipment fleets. These amounts were all funded out of existing funding facilities and, in the case of TrenStar, also from a combination of the proceeds of fresh funds raised from shareholders and facilities established.

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