##### Table of Contents
















10-K





|                                                 |  |                                                                                                              
|------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------
|(Mark One)                                       |  |                                                                                                              
|x                                                |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE             
    SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended: December 31, 2005    
|OR                                              
|o                                                |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE             
    SECURITIES EXCHANGE ACT OF 1934
|For the transition period
    from:           to



THE CRONOS GROUP


(Exact name of Registrant as specified in its charter)


|                                                                   |  |                                     
|------------------------------------------------------------------ |  | ------------------------------------
|LUXEMBOURG                                                         |  | NOT APPLICABLE                      
|(State or other Jurisdiction of incorporation or
    organization) |  | (I.R.S. Employer Identification No.)

5, RUE GUILLAUME KROLL,
L-1882 LUXEMBOURG


(Address of principal executive offices)(zip code)


Registrants telephone number, including area codes:


(352) 26 48 36 88





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


|                             |  |                                                             
|---------------------------- |  | ------------------------------------------------------------
|Title of each class
    None |  | Name of each exchange on which registered
    Not applicable

Securities registered pursuant to Section 12(g) of the
Act.


Common Shares, $2 par value per share




o x


o x


x o


S-K 10-K 10-K. x


12b-2


|                          |  |                     |  |                        
|------------------------- |  | ------------------- |  | -----------------------
|Large accelerated filer o |  | Accelerated filer o |  | Non-accelerated filer x

12b-2) o x






|       |  |                             
|------ |  | ----------------------------
|Class  |  | Number of Shares Outstanding
|       |  |                             
|Common |  | 7,599,347                   



|                                                      |  |                           
|----------------------------------------------------- |  | --------------------------
|Document                                              |  | Form 10-K Parts           
|                                                      |  |                           
|Proxy Statement for Annual Meeting to be held in 2006 |  | Part II  Item 5, Part III









---



##### 










TABLE OF CONTENTS


The Cronos Group


|                  |                                                                                                                                |      |    |    | 
|----------------- | ------------------------------------------------------------------------------------------------------------------------------ | ---- | -- | -- | 
|                  |                                                                                                                                | Page |   
|                  |                                                                                                                                |      |   
|Introductory Note |                                                                                                                                |      | ii |   
|PART I            |                                                                                                                                |      | 1  |   
|                  | Item 1  Business                                                                                                              |      |    | 1  | 
|                  | Item 1A  Risk Factors                                                                                                         |      |    | 10 | 
|                  | Item 1B  Unresolved Staff
    Comments                                                                                        |      |    | 11 | 
|                  | Item 2  Properties                                                                                                            |      |    | 12 | 
|                  | Item 3  Legal
    Proceedings                                                                                                 |      |    | 13 | 
|                  | Item 4  Submission of
    Matters to a Vote of Security Holders                                                               |      |    | 15 | 
|PART II           |                                                                                                                                |      | 16 |   
|                  | Item 5  Market for the
    Companys Common Equity, Related Stockholder Matters and
    Issuer Purchases of Equity Securities |      |    | 16 | 
|                  | Item 6  Selected Financial
    Data                                                                                           |      |    | 17 | 
|                  | Item 7  Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations                         |      |    | 20 | 
|                  | Item 7A  Quantitative and
    Qualitative Disclosures about Market Risk                                                       |      |    | 46 | 
|                  | Item 8  Financial
    Statements and Supplementary Data                                                                       |      |    | 48 | 
|                  | Item 9  Changes In and
    Disagreements with Accountants on Accounting and Financial
    Disclosure                          |      |    | 48 | 
|                  | Item 9A  Controls and
    Procedures                                                                                          |      |    | 48 | 
|                  | Item 9B  Other
    Information                                                                                                |      |    | 48 | 
|PART III          |                                                                                                                                |      | 49 |   
|                  | Item 10  Directors and
    Executive Officers of the Group                                                                    |      |    | 49 | 
|PART IV           |                                                                                                                                |      | 50 |   
|                  | Item 15  Exhibits and
    Financial Statement Schedules                                                                       |      |    | 50 | 
|EXHIBIT 10.13    
|EXHIBIT 10.14    
|EXHIBIT 10.15    
|EXHIBIT 21.1     
|EXHIBIT 23.1     
|EXHIBIT 31.1     
|EXHIBIT 31.2     
|EXHIBIT 32.1     



i



---



##### Table of Contents






INTRODUCTORY NOTE






10-K


ii



---



##### Table of Contents






PART I







|         |         
|-------- | --------
|Item 1  | Business

Introduction


(société
anonyme holding) L-1882






Industry
Background










Operations






1



---



##### Table of Contents







24-hour


Benefits
of Leasing for Shipping Lines






| |   |                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Leasing provides shipping lines with the flexibility to respond
    to rapidly changing market opportunities;                                                           
|
| |  | Leasing allows shipping lines to respond to changing seasonal
    and trade route demands, thereby optimizing their capital
    investment and minimizing storage costs;
|
| |  | Leasing enables shipping lines to expand their trade routes
    without making a permanent commitment to support their new
    structure;                               
|
| |  | Leasing gives shipping lines access to the equipment they need
    without having to make large capital expenditures;                                                   
|
| |  | Leasing offers a shipping line an alternative source of
    financing in a traditionally capital-intensive industry; and,                                               
|
| |  | Leasing permits shipping lines to benefit from the relationship
    between container manufacturers and leasing companies.                                              

Fleet
Profile




2



---



##### Table of Contents





|                        |                         |      |         |        |      |   |         |        |  |   |         |        |  |      |         |        |  |   |         |        | 
|----------------------- | ----------------------- | ---- | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ |  | ---- | ------- | ------ |  | - | ------- | ------ | 
|(in thousands)          |                         | 2005 |         |        | 2004 |   |         | 2003   |  |   | 2002    |        |  | 2001 |        
|                        |                         |      |         |        |      |   |         |        |  |   |         |        |  |      |        
|Dry cargo containers    |                         | $    | 94,638  |        |      | $ | 91,511  |        |  | $ | 80,773  |        |  | $    | 78,760  |        |  | $ | 84,921  |       
|Specialized containers: |                         |      |         |        |      |   |         |        |  |   |         |        |  |      |         |        |  |   |         |       
|                        | Refrigerated containers |      |         | 19,890 |      |   |         | 20,613 |  |   |         | 20,829 |  |      |         | 21,293 |  |   |         | 22,422 | 
|                        | Tank containers         |      |         | 10,188 |      |   |         | 8,295  |  |   |         | 6,713  |  |      |         | 6,123  |  |   |         | 5,908  | 
|                        | Dry freight specials    |      |         | 14,308 |      |   |         | 11,677 |  |   |         | 9,186  |  |      |         | 7,467  |  |   |         | 7,094  | 
|                        |                         |      |         |        |      |   |         |        |  |   |         |        |  |      |        
|Total                   |                         | $    | 139,024 |        |      | $ | 132,096 |        |  | $ | 117,501 |        |  | $    | 113,643 |        |  | $ | 120,345 |       
|                        |                         |      |         |        |      |   |         |        |  |   |         |        |  |      |        



| |                     
| | --------------------
| | Dry Cargo Containers

® i.e., ®




| |                       
| | ----------------------
| | Specialized Containers









| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Cronos owns the patents for the CPC, a specialized container of
    extra interior width designed specifically for the carriage of
    cargo on metric pallets. The patents expire at various dates
    between 2006 and 2013. CPCs allow for the side-by-side stowage
    of metric pallets, which is not possible in a standard ISO
    container, thereby increasing the pallet load capacity per
    container. In addition to its leasing activity, Cronos earns CPC
    licence fee income on the sale of CPCs to third parties.
|
| |  | A rolltrailer is a heavy-duty chassis used for moving heavy
    cargo or containers onto and off of Roll On  Roll Off
    ships. Cronos entered the rolltrailer market in 1996 when it
    acquired a Swedish company with an existing fleet of
    rolltrailers.                                                                                                                                                                                                                                                                    
|
| |  | Open tops are primarily used to enable loading of heavy
    machinery from above the container and for the carriage of
    certain over-height cargoes that would be unsuitable for a
    standard ISO container.                                                                                                                                                                                                                                                                                                                     
|
| |  | Flat racks similarly are typically used for the transportation
    of heavy machinery and can be folded flat for inexpensive and
    efficient repositioning.                                                                                                                                                                                                                                                                                                                                                                         

3



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Bulkers are containers designed for the carriage of granular
    cargoes, including plastics, certain chemicals and agricultural
    products. The cargo carried by bulkers can be loaded and shipped
    in a loose state without the need for any other packaging.

|                        |                         |                                 |       |      |      |  |       |      |  |  |       |      |  |      |       |      |  |  |       |      | 
|----------------------- | ----------------------- | ------------------------------- | ----- | ---- | ---- |  | ----- | ---- |  |  | ----- | ---- |  | ---- | ----- | ---- |  |  | ----- | ---- | 
|                        |                         | Cronos Fleet (in TEU thousands) |      
|                        |                         | at December 31,                 |      
|                        |                         |                                 |      
|                        |                         | 2005                            |       |      | 2004 |  |       | 2003 |  |  | 2002  |      |  | 2001 |      
|                        |                         |                                 |       |      |      |  |       |      |  |  |       |      |  |      |      
|Dry cargo containers    |                         |                                 | 393.9 |      |      |  | 399.1 |      |  |  | 370.5 |      |  |      | 364.5 |      |  |  | 368.4 |     
|Specialized containers: |                         |                                 |       |      |      |  |       |      |  |  |       |      |  |      |       |      |  |  |       |     
|                        | Refrigerated containers |                                 |       | 14.9 |      |  |       | 11.5 |  |  |       | 12.3 |  |      |       | 13.3 |  |  |       | 13.9 | 
|                        | Tank containers         |                                 |       | 4.9  |      |  |       | 3.5  |  |  |       | 2.7  |  |      |       | 2.4  |  |  |       | 2.3  | 
|                        | Dry freight specials    |                                 |       | 32.1 |      |  |       | 25.2 |  |  |       | 20.3 |  |      |       | 14.8 |  |  |       | 21.6 | 
|                        |                         |                                 |       |      |      |  |       |      |  |  |       |      |  |      |      
|Total fleet             |                         |                                 | 445.8 |      |      |  | 439.3 |      |  |  | 405.8 |      |  |      | 395.0 |      |  |  | 395.9 |     
|                        |                         |                                 |       |      |      |  |       |      |  |  |       |      |  |      |      

Company
Strategy




Types
of Leases Available to Shipping Lines


Master leases


Term leases


Direct financing leases






4



---



##### Table of Contents



Lease
Profile


|                 |                 |                                                           |    |             |              |   |       |      |     |   |          |    |     |       |    |    |     |   |    |    |     |  
|---------------- | --------------- | --------------------------------------------------------- | -- | ----------- | ------------ | - | ----- | ---- | --- | - | -------- | -- | --- | ----- | -- | -- | --- | - | -- | -- | --- | -
|                 |                 | Percentage of Fleet by Lease Type as of December 31, 2005 |   
|                 |                 |                                                           |   
|                 |                 | Product Type                                              |   
|                 |                 |                                                           |   
|                 |                 |                                                           |    | Dry Freight |              |   | Total |     
|Type of Lease    |                 | Dry Cargo                                                 |    |             | Refrigerated |   |       | Tank |     |   | Specials |    |     | Fleet |   
|                 |                 |                                                           |    |             |              |   |       |      |     |   |          |    |     |       |   
|Master           |                 |                                                           | 47 | %           |              |   | 26    | %    |     |   | 42       | %  |     |       | 46 | %  |     |   | 46 | % 
|Term             |                 |                                                           |    |             |              |   |       |      |     |   |          |    |     |       |    |    |     |   |    |   
|                 | - short-term(1) |                                                           |    | 12          | %            |   |       | 25   | %   |   |          | 14 | %   |       |    | 18 | %   |   |    | 13 | %  
|                 | - long-term(2)  |                                                           |    | 35          | %            |   |       | 45   | %   |   |          | 33 | %   |       |    | 20 | %   |   |    | 34 | %  
|Direct Financing |                 |                                                           | 6  | %           |              |   | 4     | %    |     |   | 11       | %  |     |       | 16 | %  |     |   | 7  | % 
|                 |                 |                                                           |    |             |              |   |       |      |     |   |          |    |     |       |   
|                 |                 | Total                                                     |    |             | 100          | % |       |      | 100 | % |          |    | 100 | %     |    |    | 100 | % |    |    | 100 | %
|                 |                 |                                                           |    |             |              |   |       |      |     |   |          |    |     |       |   




|    |                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------
|(1) | Short-term leases represent term leases that are either
    scheduled for renegotiation or that may expire in 2006.        
|   
|(2) | Long-term leases represent term leases that expire after 2006,
    the majority of which will expire between 2007 and 2012.



Customers






Acquisition
Policy






5



---



##### Table of Contents



Repair
and Maintenance






Disposition
of Used Containers






Competition








pick-up




Insurance




6



---



##### Table of Contents







Employees






Operating
Segments














Lease agreements with US Limited Partnership Programs,
the Joint Venture Program and Private Container Programs




7



---



##### Table of Contents





|                                |       |      |     |      |      |  |     |      |  |  |      |      |  |      |     |      |  |  |     |      | 
|------------------------------- | ----- | ---- | --- | ---- | ---- |  | --- | ---- |  |  | ---- | ---- |  | ---- | --- | ---- |  |  | --- | ---- | 
|                                |       | 2005 |     |      | 2004 |  |     | 2003 |  |  | 2002 |      |  | 2001 |    
|                                |       |      |     |      |      |  |     |      |  |  |      |      |  |      |    
|US Limited Partnership Programs |       |      | 18% |      |      |  | 22% |      |  |  | 25%  |      |  |      | 27% |      |  |  | 29% |     
|Joint Venture Program           |       |      | 31% |      |      |  | 14% |      |  |  | 8%   |      |  |      | 4%  |      |  |  |    |     
|Private Container Programs      |       |      | 29% |      |      |  | 32% |      |  |  | 36%  |      |  |      | 39% |      |  |  | 40% |     
|Owned Containers                |       |      | 22% |      |      |  | 32% |      |  |  | 31%  |      |  |      | 30% |      |  |  | 31% |     
|                                |       |      |     |      |      |  |     |      |  |  |      |      |  |      |    
|                                | Total |      |     | 100% |      |  |     | 100% |  |  |      | 100% |  |      |     | 100% |  |  |     | 100% | 
|                                |       |      |     |      |      |  |     |      |  |  |      |      |  |      |    





US
Limited Partnership Programs








| |   |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Acquisition feesequal to between 1.5% and 5% (depending
    on the program) of the original cost of equipment acquired by
    the partnerships. Such fees are paid on or about the date of the
    equipment purchase and are recognized as income for accounting
    purposes by Cronos, in its statement of operations, on a
    straight-line basis over the period of the agreement to which
    they relate;
|
| |  | Management feesequal to 7% of gross lease revenue;                                                                                                                                                                                                                                                                                                                                                               
|
| |  | Reimbursed administrative expensesfor certain overhead
    and operating expenses;                                                                                                                                                                                                                                                                                                                               
|
| |  | Incentive feesequal to 15% of distributable cash after
    the limited partners have received an amount equal to their
    capital contributions plus an 8%  10% cumulative
    compounded annual return on their adjusted capital contributions
    (depending on the program);                                                                                                                                
|
| |  | General partners shareequal to 5% of distributable
    cash generated by the partnerships operating activities
    and 1% of distributions from sales proceeds.                                                                                                                                                                                                                                                



Joint
Venture Program




8



---



##### Table of Contents







| |   |                                                                                                                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Acquisition feesequal to 1.25% of the original cost of
    equipment acquired by the Joint Venture Program. Such fees are
    paid on or about the date of the equipment purchase and are
    recognized as income for accounting purposes by Cronos, in its
    statement of operations, on a straight-line basis over the
    period of the agreement to which they relate;
|
| |  | Management feesequal to 8% of net lease revenue (gross
    lease revenue less direct operating expenses);                                                                                                                                                                                                                                                                    
|
| |  | Disposition feesequal to 5% of disposal proceeds
    providing that at the time of disposition the disposal proceeds
    exceed the net book value of the container.                                                                                                                                                                                                         

Private
Container Programs








Owned
Containers






Financial
Information about Geographic Areas


non-US




9



---



##### Table of Contents








|          |             
|--------- | ------------
|Item 1A  | Risk Factors



Market for Common Shares.


Political, Economic & Business Risks.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Political instability;                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Fluctuations in world trade: Demand for leased containers is
    dependent upon levels of world trade and the supply of
    containers relative to demand. Future fluctuations in world
    trade could negatively affect the Groups container leasing
    operations;                                                                                                                                 
|
| |  | Fluctuations in inflation, interest rates and foreign exchange
    rates;                                                                                                                                                                                                                                                                                                                               
|
| |  | Import and export tariffs and restrictions;                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Restrictions on the movement of capital;                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Terrorist attacks and the risk of terrorist attack;                                                                                                                                                                                                                                                                                                                                                     
|
| |  | Economic conditions in the shipping and other industries;                                                                                                                                                                                                                                                                                                                                               
|
| |  | The supply and cost of new containers: For example, lease rates
    can be impacted by the over-supply of new containers into the
    market;                                                                                                                                                                                                                                                           
|
| |  | Fluctuations in supply and demand for containers resulting from,
    among other things, obsolescence, changes in the methods or
    economics of a particular mode of transportation or changes in
    governmental regulations or safety standards;                                                                                                                                                   
|
| |  | Fluctuations in shipping lines fleet mix: Demand for
    leased containers is largely dependent on the decision of
    shipping lines to lease, rather than purchase, containers to
    supplement their own operating fleets. Any significant changes
    in the composition of the shipping lines leased and owned
    container fleets could adversely affect the demand for leased
    containers;
|
| |  | Increases in maintenance expenses, taxes, insurance costs, third
    party fees and other expenses attributable to the operation and
    the maintenance of the containers that cannot be offset by
    increased lease revenues from the containers;                                                                                                                                                   
|
| |  | The risk of uninsured losses with respect to the containers or
    insured losses for which insurance proceeds are inadequate; and,                                                                                                                                                                                                                                                                     
|
| |  | The effects of strikes, labor disputes and foreign political
    unrest.                                                                                                                                                                                                                                                                                                                                

Competition.


Requirement for Third Party Capital.


Defaults by Lessees.


10



---



##### Table of Contents



re-lease


Residual Value of Containers.


Specialized Containers.


Environmental. non-CFC non-CFC


Key Personnel.











|          |                          
|--------- | -------------------------
|Item 1B  | Unresolved Staff Comments



11



---



##### Table of Contents








|         |           
|-------- | ----------
|Item 2  | Properties





|                        |                         |            |        |         |           |  |         |        |  |  |         |        | 
|----------------------- | ----------------------- | ---------- | ------ | ------- | --------- |  | ------- | ------ |  |  | ------- | ------ | 
|                        |                         |            |        | Managed |           |  |        
|                        |                         | Owned      |        |         | Container |  |         | Total  | 
|                        |                         | Containers |        |         | Programs  |  |         | Fleet  | 
|                        |                         |            |        |         |           |  |         |        | 
|Dry cargo containers    |                         |            | 63,214 |         |           |  | 330,666 |        |  |  | 393,880 |       
|Specialized containers: |                         |            |        |         |           |  |         |        |  |  |         |       
|                        | Refrigerated containers |            |        | 5,654   |           |  |         | 9,246  |  |  |         | 14,900 | 
|                        | Tank containers         |            |        | 1,615   |           |  |         | 3,255  |  |  |         | 4,870  | 
|                        | Dry freight specials    |            |        | 15,681  |           |  |         | 16,437 |  |  |         | 32,118 | 
|                        |                         |            |        |         |           |  |         |        | 
|Total                   |                         |            | 86,164 |         |           |  | 359,604 |        |  |  | 445,768 |       
|                        |                         |            |        |         |           |  |         |        | 





|                        |                         |                            |     |     |     | 
|----------------------- | ----------------------- | -------------------------- | --- | --- | --- | 
|Dry cargo containers    |                         |                            | 91% |    
|Specialized containers: |                         |                            |     |    
|                        | Refrigerated containers |                            |     | 87% |    
|                        | Tank containers         |                            |     | 84% |    
|                        | Dry freight specials:   |                            |     |     |    
|                        |                         | CPCs                       |     |     | 92% | 
|                        |                         | Rolltrailers               |     |     | 93% | 
|                        |                         | Other dry freight specials |     |     | 82% | 

12



---



##### Table of Contents








|         |                  
|-------- | -----------------
|Item 3  | Legal Proceedings

TOEMT
Litigation


8-K








| |    |                                                                                                                                                                                                                                                                                                                                                                                                                      
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | The transfer on or about November 25, 1991, to TOEMT
    (UK) of 5,500,000 ordinary shares of the Group in
    consideration of the contribution of shares in Trans Ocean
    Limited by TOEMT (UK) to the Group worth approximately
    $16 million, which 5,500,000 ordinary shares were then
    redeemed and/or transferred to Mr. Palatin and/or his
    nominee for no or no proper consideration;             
|
| | 2. | The transfer on or about December 31, 1991, to TOEMT
    (UK) of 90,000 preference shares (worth approximately
    $9 million) which were then transferred to Barton Holding
    Limited (a company allegedly controlled by Palatin) for no or no
    proper consideration, and a loan which the liquidator alleges
    not to have been repaid;                                                                     
|
| | 3. | The making of various payments (amounting to approximately
    $1 million) between approximately April 1993 and February
    1996 by CNV to third parties, including Mr. Palatin or
    entities in which he was interested and/or his associates, which
    payments were made otherwise than for any legitimate commercial
    purpose or any other purpose of TOEMT (UK)s business or
    interests;             
|
| | 4. | The making of improper cash withdrawals (amounting to in excess
    of $2 million), between approximately February 1991 and
    June 1999 from TOEMT (UK)s bank accounts, with the
    assistance of CNV, which withdrawals were allegedly for the
    benefit of Mr. Palatin and/or his wife rather than for any
    legitimate commercial purpose or other purpose of TOEMT
    (UK)s business or interests; and,
|
| | 5. | The diversion between 1991 and 1993 (with the assistance of CNV)
    of TOEMT (UK)s container business to TOEMT (Isle of Man),
    for no or for no proper consideration.                                                                                                                                                                                                                                           







13



---



##### Table of Contents











Purchase
of TOEMT Creditor Claims




14



---



##### Table of Contents














|         |                                                    
|-------- | ---------------------------------------------------
|Item 4  | Submission of Matters to a Vote of Security Holders



15



---



##### Table of Contents






PART II







|         |                                                                                                                      
|-------- | ---------------------------------------------------------------------------------------------------------------------
|Item 5  | Market for the Companys Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity
    Securities





|                   |                |             |   |        |     |  |   |        | 
|------------------ | -------------- | ----------- | - | ------ | --- |  | - | ------ | 
|                   |                | Price Range |  
|                   |                |             |  
|                   |                | High        |   |        | Low | 
|                   |                |             |   |        |     | 
|Calendar Year 2004 |                |             |   |        |     |  |   |       
|                   | First Quarter  |             | $ | 7.200  |     |  | $ | 5.000  | 
|                   | Second Quarter |             | $ | 6.980  |     |  | $ | 5.810  | 
|                   | Third Quarter  |             | $ | 9.600  |     |  | $ | 6.310  | 
|                   | Fourth Quarter |             | $ | 10.320 |     |  | $ | 7.850  | 
|Calendar Year 2005 |                |             |   |        |     |  |   |       
|                   | First Quarter  |             | $ | 13.879 |     |  | $ | 9.980  | 
|                   | Second Quarter |             | $ | 13.100 |     |  | $ | 10.810 | 
|                   | Third Quarter  |             | $ | 12.770 |     |  | $ | 10.350 | 
|                   | Fourth Quarter |             | $ | 12.890 |     |  | $ | 10.400 | 



|                  |  |               |      |  |      |   |      | 
|----------------- |  | ------------- | ---- |  | ---- | - | ---- | 
|                  |  | Calendar Year |     
|                  |  |               |     
|                  |  | 2005          |      |  | 2004 |  
|                  |  |               |      |  |      |  
|First Quarter     |  | $             |     |  |      | $ |     | 
|Second Quarter    |  | $             | 0.06 |  |      | $ | 0.03 | 
|Third Quarter     |  | $             | 0.07 |  |      | $ | 0.04 | 
|Fourth Quarter(1) |  | $             | 0.14 |  |      | $ | 0.10 | 




|    |                                                                                        
|--- | ---------------------------------------------------------------------------------------
|(1) | Declared in respect of fourth and first quarters. See additional
    disclosure herein.







16



---



##### Table of Contents











120-day


Equity
Compensation Plan Information






17



---



##### Table of Contents








|         |                        
|-------- | -----------------------
|Item 6  | Selected Financial Data



|                                                                                            |                                             |                                       |         |       |         |   |         |         |  |      |         |       |  |           |         |       |  |   |         |       | 
|------------------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------- | ------- | ----- | ------- | - | ------- | ------- |  | ---- | ------- | ----- |  | --------- | ------- | ----- |  | - | ------- | ----- | 
|                                                                                            |                                             | Years Ended December 31,              |        
|                                                                                            |                                             |                                       |        
|                                                                                            |                                             | 2005                                  |         |       |         |   | 2002    |         |  | 2001 |        
|                                                                                            |                                             | (1)(2)(3)(4)                          |         |       | 2004(5) |   |         | 2003(6) |  |      | (7)(8)  |       |  | (8)(9)10) |        
|                                                                                            |                                             |                                       |         |       |         |   |         |         |  |      |         |       |  |           |        
|                                                                                            |                                             | (in thousands, except per share data) |        
|Statements of Income Data:                                                                  |                                             |                                       |         |       |         |   |         |         |  |      |         |       |  |           |         |       |  |   |         |      
|Gross lease revenue                                                                         |                                             | $                                     | 139,024 |       |         | $ | 132,096 |         |  | $    | 117,501 |       |  | $         | 113,643 |       |  | $ | 120,345 |      
|Total revenues                                                                              |                                             |                                       | 148,290 |       |         |   | 140,508 |         |  |      | 126,263 |       |  |           | 119,323 |       |  |   | 131,688 |      
|Income before cumulative effect of change in accounting
    principle (see footnote 8)      |                                             |                                       | 7,802   |       |         |   | 8,865   |         |  |      | 4,190   |       |  |           | 2,309   |       |  |   | 3,401   |      
|Basic net income per share before cumulative effect of change in
    accounting principle   |                                             | $                                     | 1.06    |       |         | $ | 1.22    |         |  | $    | 0.57    |       |  | $         | 0.31    |       |  | $ | 0.43    |      
|                                                                                            |                                             |                                       |         |       |         |   |         |         |  |      |         |       |  |           |        
|Diluted net income per share before cumulative effect of change
    in accounting principle |                                             | $                                     | 0.98    |       |         | $ | 1.14    |         |  | $    | 0.55    |       |  | $         | 0.31    |       |  | $ | 0.42    |      
|                                                                                            |                                             |                                       |         |       |         |   |         |         |  |      |         |       |  |           |        
|Shares used in:                                                                             |                                             |                                       |         |       |         |   |         |         |  |      |         |       |  |           |         |       |  |   |         |      
|                                                                                            | - basic net income per share calculations   |                                       |         | 7,359 |         |   |         | 7,261   |  |      |         | 7,322 |  |           |         | 7,365 |  |   |         | 8,001 | 
|                                                                                            | - diluted net income per share calculations |                                       |         | 7,962 |         |   |         | 7,749   |  |      |         | 7,602 |  |           |         | 7,425 |  |   |         | 8,052 | 
|Cash dividends declared per common share                                                    |                                             | $                                     | 0.27    |       |         | $ | 0.17    |         |  | $    | 0.08    |       |  | $         | 0.04    |       |  |   |        |      
|Balance Sheet Data (at end of period):                                                      |                                             |                                       |         |       |         |   |         |         |  |      |         |       |  |           |         |       |  |   |         |      
|Cash and cash equivalents                                                                   |                                             | $                                     | 15,829  |       |         | $ | 17,579  |         |  | $    | 8,432   |       |  | $         | 5,626   |       |  | $ | 5,794   |      
|Total assets                                                                                |                                             |                                       | 271,732 |       |         |   | 271,749 |         |  |      | 238,037 |       |  |           | 236,303 |       |  |   | 251,402 |      
|Long-term debt and capital lease obligations                                                |                                             |                                       | 76,011  |       |         |   | 114,122 |         |  |      | 106,434 |       |  |           | 114,864 |       |  |   | 124,686 |      
|Total debt and capital lease obligations                                                    |                                             |                                       | 87,780  |       |         |   | 127,953 |         |  |      | 119,205 |       |  |           | 128,950 |       |  |   | 138,385 |      
|Shareholders equity                                                                        |                                             |                                       | 77,537  |       |         |   | 70,359  |         |  |      | 62,033  |       |  |           | 59,082  |       |  |   | 57,104  |      






| |     |                                                                                                                                                                                                                                                                                                                                                               
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | In 2005, the Group recorded a charge of $4.1 million in
    connection with TOEMT related legal claims made against the
    Group.                                                                                                                                                                                                                            
|
| | (2) | In 2005, the Group recorded a gain of $1.3 million on the
    completion of the sale of the Amersham Estate and the
    distribution of the amounts due to Cronos. See
    Item 7  Managements Discussion and
    Analysis of Financial Condition and Results of Operations
    herein.                                                                   
|
| | (3) | In 2005, the Group recognized $0.8 million of income on the
    recovery of an amount payable to a Managed Container Program.
    See Item 7  Managements Discussion
    and Analysis of Financial Condition and Results of
    Operations herein.                                                                                                        
|
| | (4) | In 2005, the Group recorded a one-time after-tax expense of
    $0.9 million relating to the restructuring of the
    Groups sales and marketing divisions. See
    Item 7  Managements Discussion and
    Analysis of Financial Condition and Results of Operations
    herein.                                                                         
|
| | (5) | In 2004, the Group reversed a $1.3 million provision that
    had originally been provided against a related party loan note
    in 1997. In December 2004, the Group concluded that the loan
    note was recoverable and would be repaid in full from the
    proceeds of the sale of the Amersham Estate. The loan note was
    repaid on February 2, 2005.

18



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##### Table of Contents





| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (6) | In 2003, the Group recorded a tax benefit of $2.7 million
    following the transfer of assets to an affiliate resident in a
    foreign jurisdiction. Under the prevailing tax legislation, the
    Group was able to complete the transaction without generating a
    recapture of tax depreciation. As a result, the deferred tax
    associated with these assets was credited to income. In
    addition, the Group incurred $0.5 million of breakage costs
    in connection with the refinancing of the assets.                                                                        
|
| | (7) | In 2002, the Group recorded a tax benefit of $2.5 million
    as a result of a settlement with an overseas tax authority.                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| | (8) | In December 2003, the Group adopted Interpretation No. 46
    Revised (FIN 46R), Consolidation of
    Variable Interest Entities. The Group applied FIN 46R
    to all entities that were subject to FIN 46R as of
    December 31, 2003, and determined that it was the primary
    beneficiary of a variable interest entity. Accordingly, Cronos
    applied FIN 46R by restating previously issued financial
    statements as of December 31, 2002, and for the year ended
    December 31, 2002, with a cumulative effect adjustment in
    the beginning of the first year restated.
|
| | (9) | In 2001, the Group recorded charges of $2 million relating
    to the impairment of certain long-lived assets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 



|     |                                                                                                                                                                                                                                    
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | In 2001, the Group recorded income of $6 million from
    recovery of related party loans resulting from the partial
    recovery of interest and principal under two promissory notes
    between the Group and a former chairman.

19



---



##### Table of Contents








| |          |                                                                                          
| | -------- | -----------------------------------------------------------------------------------------
| | Item 7  | Managements Discussion and Analysis of Financial
    Condition and Results of Operations







Overview
of Primary Revenue and Expense Items


Gross lease revenue


Equipment trading revenue and expenses




Commissions, fees and other operating income




20



---



##### Table of Contents





Direct operating expenses




| |   |                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Activity-relatedexpenses include agents costs and depot
    costs, such as repairs, maintenance and handling;                                                                                                                                    
|
| |  | Inventory-relatedexpenses relate to off-hire containers
    and comprise storage and repositioning costs. These costs are
    sensitive to the quantity of off-hire containers as well as the
    frequency at which containers are re-delivered;
|
| |  | Legal and otherexpenses include legal costs related to
    the recovery of containers, insurance and provisions for
    doubtful accounts.                                                                                                       

Payments to Managed Container Programs


Selling, general and administrative expenses


Segment profit or loss


21



---



##### Table of Contents





| |        
| | -------
| | Funding





Restructure of Funding Sources.


8-K




| |   |                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------
| |  | the maximum debt commitment available to the Joint Venture
    Program increased from $150 million to $300 million.

8-K




| |   |                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the Group increased its aggregate equity contribution commitment
    to the Joint Venture Program from $20 million to
    $30 million;                                                                                                                                                                    
|
| |  | the Group sold $73.8 million of equipment that had been
    financed in its Revolving Credit Facility (the Revolving
    Credit Facility) to the Joint Venture Program. This
    equipment was sold at book value, which approximated fair value,
    and accordingly no gain or loss arose on the sale;
|
| |  | The Group utilized part of the proceeds from the sale to fund an
    equity contribution of $7.3 million to the Joint Venture
    Program to finance the fixed asset acquisition;                                                                                                                         
|
| |  | the Group repaid a debt facility with a then outstanding balance
    of $16.2 million;                                                                                                                                                                                                                    
|
| |  | the Group repaid $48 million of Revolving Credit Facility
    debt reducing the balance outstanding to $21.1 million on
    August 1, 2005;                                                                                                                                                               
|
| |  | the maximum debt commitment available under the Revolving Credit
    Facility was reduced from $70 million to $45 million;
    and,                                                                                                                                                                       
|
| |  | the interest rate on the Revolving Credit Facility declined by
    25 basis points.                                                                                                                                                                                                                       



22



---



##### Table of Contents



Funding for Owned Containers.














Joint Venture Program.








23



---



##### Table of Contents









Private Container Programs.


US Limited Partnership Programs.








24



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##### Table of Contents





| |                
| | ---------------
| | Market Overview



|                                    |  |      |      |   |      |  |      |      |  |  |      |  
|----------------------------------- |  | ---- | ---- | - | ---- |  | ---- | ---- |  |  | ---- | -
|                                    |  | 2005 |      |   | 2004 |  |      | 2003 | 
|                                    |  |      |      |   |      |  |      |      | 
|Utilization at December 31          |  |      | 90.8 | % |      |  | 94.1 | %    |  |  | 88.8 | %
|Average utilization during the year |  |      | 92.4 | % |      |  | 91.8 | %    |  |  | 86.0 | %



|                        |                         |             |     |    |         |  |     |           |   |  |            |   |   |       |     |    |   |  |     |    |  
|----------------------- | ----------------------- | ----------- | --- | -- | ------- |  | --- | --------- | - |  | ---------- | - | - | ----- | --- | -- | - |  | --- | -- | -
|                        |                         | US          |     |    |         |  |     |           |   |  |           
|                        |                         | Limited     |     |    | Joint   |  |     | Private   |   |  |            |   |  
|                        |                         | Partnership |     |    | Venture |  |     | Container |   |  | Owned      |   |   | Total |    
|                        |                         | Programs    |     |    | Program |  |     | Programs  |   |  | Containers |   |   | Fleet |    
|                        |                         |             |     |    |         |  |     |           |   |  |            |   |   |       |    
|Dry cargo containers    |                         |             | 81  | %  |         |  | 54  | %         |   |  | 86         | % |   |       | 42  | %  |   |  | 65  | % 
|Specialized containers: |                         |             |     |    |         |  |     |           |   |  |            |   |   |       |     |    |   |  |     |   
|                        | Refrigerated containers |             |     | 14 | %       |  |     | 24        | % |  |            | 3 | % |       |     | 25 | % |  |     | 16 | %
|                        | Tank containers         |             |     | 5  | %       |  |     | 12        | % |  |            | 7 | % |       |     | 13 | % |  |     | 10 | %
|                        | Dry freight specials    |             |     |   |         |  |     | 10        | % |  |            | 4 | % |       |     | 20 | % |  |     | 9  | %
|                        |                         |             |     |    |         |  |     |           |   |  |            |   |   |       |    
|Total                   |                         |             | 100 | %  |         |  | 100 | %         |   |  | 100        | % |   |       | 100 | %  |   |  | 100 | % 
|                        |                         |             |     |    |         |  |     |           |   |  |            |   |   |       |    













25



---



##### Table of Contents











| |   |                                                                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Increasing demand for transportation of food products such as
    frozen fish, frozen meat and fresh fruit;                                                                                    
|
| |  | Increasing demand for tank containers as a result of growth in
    the volume of bulk liquid transportation within the chemical,
    pharmaceutical and food industries;                       
|
| |  | Increasing levels of conversion of cargo from non-containerized
    to containerized transportation in both the refrigerated and
    tank container markets; and,                              
|
| |  | Increasing levels of investment in heavy equipment and project
    cargo, particularly in Asia, as well as increased investment in
    car carriers by major car transportation shipping lines.







| |   |                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Shipping lines are experiencing increased pressure on operating
    margins due to increased fuel prices and lower freight rates. As
    new container ships continue to be added to the worlds
    fleet, the pressure on operating margins will continue as
    shipping lines are forced to lower their freight rates in order
    to utilize their increased capacity;
|
| |  | The growth in demand for consumer goods in the United States,
    Europe and other developed economies has slowed, and most
    forecasts are uncertain as to when this trend will reverse; and,                                                                                                                                                                           
|
| |  | Recent mergers among major shipping lines will most likely
    result in further fleet consolidations, allowing shipping lines
    to operate more efficiently in certain locations and trade
    routes. This will have a further dampening effect on the demand
    for leased containers.                                                                               



26



---



##### Table of Contents





| |                
| | ---------------
| | Container Fleet



|                        |                         |                                  |       |      |      |   |       |      |  |   |      |      | 
|----------------------- | ----------------------- | -------------------------------- | ----- | ---- | ---- | - | ----- | ---- |  | - | ---- | ---- | 
|                        |                         | Cronos Fleet Container Additions |      
|                        |                         | (in USD millions)                |      
|                        |                         | for the year ended December, 31  |      
|                        |                         |                                  |      
|                        |                         | 2005                             |       |      | 2004 |   |       | 2003 | 
|                        |                         |                                  |       |      |      |   |       |      | 
|Dry cargo containers    |                         | $                                | 46.5  |      |      | $ | 81.0  |      |  | $ | 40.8 |     
|Specialized containers: |                         |                                  |       |      |      |   |       |      |  |   |      |     
|                        | Refrigerated containers |                                  |       | 49.4 |      |   |       | 11.7 |  |   |      | 7.0  | 
|                        | Tank containers         |                                  |       | 30.4 |      |   |       | 14.3 |  |   |      | 4.0  | 
|                        | Dry freight specials    |                                  |       | 27.5 |      |   |       | 15.1 |  |   |      | 12.9 | 
|                        |                         |                                  |       |      |      |   |       |      | 
|Total                   |                         | $                                | 153.8 |      |      | $ | 122.1 |      |  | $ | 64.7 |     
|                        |                         |                                  |       |      |      |   |       |      | 



|                                |  |                                 |       |  |      |  |       |      |  |  |       |  |  |      |       |  |  |  |       | 
|------------------------------- |  | ------------------------------- | ----- |  | ---- |  | ----- | ---- |  |  | ----- |  |  | ---- | ----- |  |  |  | ----- | 
|                                |  | Cronos Fleet (in TEU thousands) |      
|                                |  | at December 31,                 |      
|                                |  |                                 |      
|                                |  | 2005                            |       |  | 2004 |  |       | 2003 |  |  | 2002  |  |  | 2001 |      
|                                |  |                                 |       |  |      |  |       |      |  |  |       |  |  |      |      
|US Limited Partnership Programs |  |                                 | 71.2  |  |      |  | 86.4  |      |  |  | 93.8  |  |  |      | 100.9 |  |  |  | 112.8 | 
|Joint Venture Program           |  |                                 | 130.3 |  |      |  | 68.2  |      |  |  | 37.4  |  |  |      | 9.9   |  |  |  |      | 
|Private Container Programs      |  |                                 | 158.1 |  |      |  | 161.1 |      |  |  | 163.3 |  |  |      | 180.2 |  |  |  | 187.1 | 
|Owned Containers                |  |                                 | 86.2  |  |      |  | 123.6 |      |  |  | 111.3 |  |  |      | 104.0 |  |  |  | 96.0  | 
|                                |  |                                 |       |  |      |  |       |      |  |  |       |  |  |      |      
|Total Fleet                     |  |                                 | 445.8 |  |      |  | 439.3 |      |  |  | 405.8 |  |  |      | 395.0 |  |  |  | 395.9 | 
|                                |  |                                 |       |  |      |  |       |      |  |  |       |  |  |      |      







27



---



##### Table of Contents



Year
Ended December 31, 2005 Compared to Year Ended
December 31, 2004


Overview






| |   |                                                                                                                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A charge of $4.1 million recorded in connection with the
    TOEMT litigation;                                                                                                                                                                       
|
| |  | Legal expenses of $2.4 million relating to Palatin and
    TOEMT litigation; and,                                                                                                                                                                    
|
| |  | Charges of $0.9 million (including the effect of income
    taxes) in respect of one-time termination benefits relating to
    involuntary employee terminations pursuant to a reorganization
    of the Groups marketing and operations structures.





| |   |                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Income of $1.3 million recognized on the recovery of
    amounts owed by a related party;                                                                                            
|
| |  | The recovery of $0.8 million payable to a Private Container
    Program; and,                                                                                                        
|
| |  | The reversal of a taxation provision of $0.4 million which
    had been provided against potential withholding taxes on the
    unremitted retained earnings of certain subsidiaries.



Analysis & Discussion


Gross lease revenue (GLR)


Direct operating expenses




| |   |                                                                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Repositioning expense declined by $1.2 million as the Group
    moved fewer containers from low to high demand locations
    reflecting the low volume of off-hire inventories and the strong
    market for container disposals; and,
|
| |  | Activity-related expenses declined by $1 million as the
    level of handling and repair work undertaken decreased in line
    with the reduced volumes of container redeliveries and off-hire
    inventories.                       

Operating segment information


|                             |                                          |             |       |         |         |   |       |           |   |   |            |         |   |       |        |         |   |   |        |         |  
|---------------------------- | ---------------------------------------- | ----------- | ----- | ------- | ------- | - | ----- | --------- | - | - | ---------- | ------- | - | ----- | ------ | ------- | - | - | ------ | ------- | -
|                             |                                          | US          |       |         |         |   |       |           |   |   |           
|                             |                                          | Limited     |       |         | Joint   |   |       | Private   |   |   |            |         |  
|                             |                                          | Partnership |       |         | Venture |   |       | Container |   |   | Owned      |         |   |      
|(in USD thousands)           |                                          | Programs    |       |         | Program |   |       | Programs  |   |   | Containers |         |   | Total |       
|                             |                                          |             |       |         |         |   |       |           |   |   |            |         |   |       |       
|Year ended December 31, 2005 |                                          |             |       |         |         |   |       |           |   |   |            |         |   |       |        |         |   |   |        |        
|                             | - gross lease revenue                    |             | $     | 23,512  |         |   | $     | 30,637    |   |   | $          | 47,368  |   |       | $      | 37,507  |   |   | $      | 139,024 |  
|                             | - direct operating expenses              |             |       | (3,587  | )       |   |       | (2,119    | ) |   |            | (7,250  | ) |       |        | (5,135  | ) |   |        | (18,091 | )
|                             |                                          |             |       |         |         |   |       |           |   |   |            |         |   |       |       
|                             | - net lease revenue                      |             |       | 19,925  |         |   |       | 28,518    |   |   |            | 40,118  |   |       |        | 32,372  |   |   |        | 120,933 |  
|                             | - direct financing lease income          |             |       |        |         |   |       |          |   |   |            |        |   |       |        | 1,757   |   |   |        | 1,757   |  
|                             | - payments to Managed Container Programs |             |       | (14,801 | )       |   |       | (26,025   | ) |   |            | (36,177 | ) |       |        |        |   |   |        | (77,003 | )
|                             | - container depreciation                 |             |       |        |         |   |       |          |   |   |            |        |   |       |        | (14,890 | ) |   |        | (14,890 | )
|                             | - container interest expense             |             |       |        |         |   |       |          |   |   |            |        |   |       |        | (6,266  | ) |   |        | (6,266  | )
|                             |                                          |             |       |         |         |   |       |           |   |   |            |         |   |       |       
|Segment profit               |                                          | $           | 5,124 |         |         | $ | 2,493 |           |   | $ | 3,941      |         |   | $     | 12,973 |         |   | $ | 24,531 |        
|                             |                                          |             |       |         |         |   |       |           |   |   |            |         |   |       |       

28



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##### Table of Contents



US Limited Partnership Programs:




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Net lease revenuefor this segment decreased by
    $1.7 million compared to the prior year. GLR declined by
    $3.2 million due primarily to the effect of the disposal of
    containers at the end of their useful economic life and the
    liquidation of three of the partnerships. Direct operating
    expenses declined by $1.4 million, reflecting lower
    inventory-related and activity-related costs.
|
| |  | Payments to US Limited Partnership Programsdeclined by
    $2.9 million when compared to 2004. The ratio of segment
    profit to net lease revenue increased to 26% in 2005, from 18%
    in 2004, as the management fee attributable to the cash
    generated by the Programs increased as cash collections and
    disposal activity increased.                                                                 

Joint Venture Program:




| |   |                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Net lease revenuefor this segment increased to
    $28.5 million in 2005 reflecting the significant investment
    in additional equipment for the program including the
    acquisition of $73.8 million of container fixed assets from
    the Group.
|
| |  | Payments to the Joint Venture Programincreased by
    $12.1 million, which is in line with the increase in net
    lease revenue for this segment.                                                                                                     

Private Container Programs:




| |   |                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Net lease revenueincreased by $1 million when
    compared to 2004 reflecting the decline in inventory-related and
    activity-related expenses.                                                                                                                         
|
| |  | Payments to Private Container Programswere
    $0.1 million lower than in 2004. The ratio of segment
    profit to net lease revenue increased to 10% in 2005, from 7% in
    2004. This was due to the expiration of a number of agreements
    with fixed payment terms.

Owned Containers:




| |   |                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Net lease revenuedeclined by $3.1 million due
    primarily to the sale of $73.8 million of container fixed
    assets to the Joint Venture Program in August 2005.
|
| |  | Container depreciationof $14.9 million in 2005 was
    $2.8 million lower than in 2004. The primary factors for
    the decline were:                              



| |   |                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | - | The effect of the sale of the container fixed assets to the
    Joint Venture Program in the third calendar quarter;                                                                             
|
| | - | The effect of the disposal of equipment at the end of its useful
    economic life more than offset the increase in depreciation
    attributable to new container additions; and,               
|
| | - | The effect of the change in the estimate of useful lives for
    tank, rolltrailer and flat rack products on October 1,
    2005, resulted in a $0.1 million decline in depreciation
    expense.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Container interest expenseof $6.3 million in 2005
    was $1.2 million higher than in 2004. The increase in
    interest expense was primarily attributable to increased US
    interest rates. In addition, the Group incurred
    $0.2 million of breakage costs that resulted from the
    restructure of the Revolving Credit Facility. The increase in
    interest was partially offset by the effect of the repayment of
    $64.2 million of debt utilizing part of the proceeds
    generated by the container fixed asset sale to the Joint Venture
    Program.

Equipment trading revenue


29



---



##### Table of Contents





Commissions, fees and other operating income




| |   |                                                                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | An increase of $0.7 million in the level of gains recorded
    on the disposal of fixed assets. This was due in part to the
    increased disposal proceeds realized on the sale of equipment at
    the end of its economic life (see discussion in Market
    Overview above);
|
| |  | A $0.6 million increase in design and consultancy fee
    income reflecting a project undertaken with a European customer;                                                                                                                                                        
|
| |  | A $0.4 million increase in fees earned on the disposal of
    containers owned by Managed Container Programs that again
    reflected the strong market for used containers; and,                                                                                                 
|
| |  | A $0.2 million increase in finance lease income due to an
    increase in the value of direct financing leases held by the
    Group.                                                                                                                                             

Gain on settlement of litigation:








Selling, general and administrative expenses




| |   |                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | An increase of $2 million in legal costs for TOEMT and
    Palatin litigation; and,                                                                                                              
|
| |  | $1.7 million of charges in respect of one-time termination
    benefits relating to involuntary employee terminations pursuant
    to reorganizations of the marketing and operations structures.





| |   |                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A $0.6 million decline in the expense recognized for a
    stock appreciation rights plan reflecting a smaller increase in
    the Group share price in 2005 than in 2004.

Recovery of amount payable to a Managed Container
Program:


30



---



##### Table of Contents













Provision for legal claims:


winding-up


31



---



##### Table of Contents





Equity in earnings of affiliate


Income Taxes






Year
Ended December 31, 2004 Compared to Year Ended
December 31, 2003


Overview






| |   |                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Growth in global container trade;                                                                                                                                       
|
| |  | Increased availability of funding for investment in new
    container production and, in particular, the growth and
    profitability of the Joint Venture Program; and,
|
| |  | Income recognized on the recovery of a related party loan note.                                                                                                         

Analysis & Discussion


Gross lease revenue


Direct operating expenses




| |   |                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------
| |  | Storage expenses declined by $2.4 million due to the
    reduction in off-hire container inventories;
|
| |  | Repositioning expense declined by $2.5 million (see
    discussion in Market Overview above).        

32



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Operating segment information


|                             |                                          |             |       |         |         |   |       |           |   |   |            |         |   |       |        |         |   |   |        |         |  
|---------------------------- | ---------------------------------------- | ----------- | ----- | ------- | ------- | - | ----- | --------- | - | - | ---------- | ------- | - | ----- | ------ | ------- | - | - | ------ | ------- | -
|                             |                                          | US          |       |         |         |   |       |           |   |   |           
|                             |                                          | Limited     |       |         | Joint   |   |       | Private   |   |   |            |         |  
|                             |                                          | Partnership |       |         | Venture |   |       | Container |   |   | Owned      |         |   |      
|(in USD thousands)           |                                          | Programs    |       |         | Program |   |       | Programs  |   |   | Containers |         |   | Total |       
|                             |                                          |             |       |         |         |   |       |           |   |   |            |         |   |       |       
|Year ended December 31, 2004 |                                          |             |       |         |         |   |       |           |   |   |            |         |   |       |        |         |   |   |        |        
|                             | - gross lease revenue                    |             | $     | 26,671  |         |   | $     | 16,349    |   |   | $          | 47,442  |   |       | $      | 41,634  |   |   | $      | 132,096 |  
|                             | - direct operating expenses              |             |       | (5,012  | )       |   |       | (1,058    | ) |   |            | (8,359  | ) |       |        | (6,134  | ) |   |        | (20,563 | )
|                             |                                          |             |       |         |         |   |       |           |   |   |            |         |   |       |       
|                             | - net lease revenue                      |             |       | 21,659  |         |   |       | 15,291    |   |   |            | 39,083  |   |       |        | 35,500  |   |   |        | 111,533 |  
|                             | - direct financing lease income          |             |       |        |         |   |       |          |   |   |            |        |   |       |        | 1,547   |   |   |        | 1,547   |  
|                             | - payments to Managed Container Programs |             |       | (17,675 | )       |   |       | (13,963   | ) |   |            | (36,323 | ) |       |        |        |   |   |        | (67,961 | )
|                             | - container depreciation                 |             |       |        |         |   |       |          |   |   |            |        |   |       |        | (17,716 | ) |   |        | (17,716 | )
|                             | - container interest expense             |             |       |        |         |   |       |          |   |   |            |        |   |       |        | (5,076  | ) |   |        | (5,076  | )
|                             |                                          |             |       |         |         |   |       |           |   |   |            |         |   |       |       
|Segment profit               |                                          | $           | 3,984 |         |         | $ | 1,328 |           |   | $ | 2,760      |         |   | $     | 14,255 |         |   | $ | 22,327 |        
|                             |                                          |             |       |         |         |   |       |           |   |   |            |         |   |       |       

US Limited Partnership Programs:




| |   |                                                                                                                                                                                                                                                                                                                                    
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Net lease revenuefor this segment increased by
    $2.3 million over the prior year. The improvement in fleet
    utilization resulted in increased GLR and lower
    inventory-related direct operating expenses. This more than
    offset the effect of the disposal of containers at the end of
    their useful economic life.
|
| |  | Payments to US Limited Partnership Programsincreased by
    $1.7 million, which is in line with the increase in net
    lease revenue for this segment.                                                                                                                                                                            

Joint Venture Program:




| |   |                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Net lease revenuefor this segment almost doubled to
    $15.3 million in 2004 reflecting the significant investment
    in additional equipment for the program.
|
| |  | Payments to the Joint Venture Programincreased by
    $6.8 million, which is in line with the increase in net
    lease revenue for this segment.               

Private Container Programs:




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Net lease revenueincreased by $4.9 million when
    compared to 2003. The improvement in fleet utilization resulted
    in a $2.5 million increase in GLR and a $2.4 million
    reduction in inventory-related direct operating expenses.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Payments to Private Container Programsincreased by
    $3.8 million over the prior year. The ratio of segment
    profit to net lease revenue increased to 7% in 2004 from 5% in
    2003. The level of payments to Private Container Programs with
    variable payment terms increased in line with net lease revenue.
    Under the variable payment basis, the amount payable to the
    Managed Container Program is based on the rentals to the ocean
    carriers after deducting direct operating expenses and the
    compensation earned by Cronos for managing the equipment. The
    level of payments to Private Container Programs with fixed
    payment terms declined as the Group amended the terms of a fixed
    payment agreement with a container owner in November 2004. The
    amended agreement which was effective from October 2004, is now
    accounted for as a capital lease obligation. Accordingly, the
    Group recorded an adjustment to container equipment and capital
    lease of approximately $3.2 million in the fourth quarter
    of 2004.

Segment profit on Owned Containers




| |   |                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | GLRincreased by $4.2 million reflecting the effect
    of the increased fleet size and the combined effect of the
    increase in utilization and per diem rates.

33



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Container depreciationof $17.7 million in 2004 was
    $0.4 higher than in 2003 as the increase in depreciation
    attributable to new container additions more than offset the
    effect of the disposal of equipment at the end of its economic
    life.
|
| |  | Container interest expenseof $5.1 million in 2004,
    was $0.6 million, or 10%, lower than in 2003. The main
    changes in interest expense were attributable to:                                                                                          



| |   |                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | - | An increase of $0.3 million due to higher interest rates
    during 2004;                                                                                        
|
| | - | A saving of $0.4 million resulting from the refinancing of
    approximately $9 million
    of fixed
    rate debt with variable rate debt in December 2003; and,
|
| | - | In December 2003, $0.5 million of breakage costs were
    incurred as a result of the refinancing of approximately
    $9 million of fixed rate debt.            

Equipment trading revenue


Commissions, fees and other operating income




| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A $0.7 million decline in unrealized exchange gains. In
    2003, the Group recorded $0.5 million of foreign exchange
    gains that were recognized primarily on Euro direct financing
    lease receivables;                                                               
|
| |  | An increase of $0.5 million on the gain recorded on the
    disposal of fixed assets. This was due in part to the increased
    disposal proceeds realised on the sale of equipment at the end
    of its economic life (see discussion in Market
    Overview above); and,
|
| |  | A $0.2 million increase in fees earned on the disposal of
    containers owned by Managed Container Programs that again
    reflected the strong market for used containers.                                                                                                 

Selling, general and administrative expenses




| |   |                                                                                                                                                                                                                         
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A $1.1 million increase in the expense recognized for a
    stock appreciation rights plan reflecting a larger increase in
    the Group share price in 2004 than in the prior year;                                    
|
| |  | A $0.3 million increase in professional services costs
    reflecting an increase in the level of corporate governance and
    compliance work undertaken; and,                                                         
|
| |  | A $0.6 million increase in manpower costs due in part to
    the recruitment of additional employees to support both the
    growth in the business and the additional corporate governance
    and compliance workload.

Recovery of related party loan note


34



---



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Equity in earnings of affiliate


Income Taxes


Liquidity and Capital Resources






day-to








35



---



##### Table of Contents









Cash
Flow Statements for the years ended December 31, 2005, 2004
and 2003


Operating Activities.












| |   |                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A $4.5 million increase in payments for selling general and
    administrative payments including legal costs incurred for
    Palatin and TOEMT litigation; and,                                                                                                        
|
| |  | The cash generated by operating activities in 2004 included
    additional receipts totaling almost $2 million related to
    payments received for an equipment trading transaction and the
    release of cash that had previously been held as a security
    deposit.





| |   |                                                       
| | - | ------------------------------------------------------
| |  | Increased collections of gross lease revenue;         
|
| |  | Reduced payments for direct operating costs; and,     
|
| |  | Increased receipts for equipment trading transactions.





| |   |                                                                         
| | - | ------------------------------------------------------------------------
| |  | Increased distributions to Managed Container Programs; and,             
|
| |  | Increased payments for selling, general and administrative
    expenses.

Investing Activities




| |   |                                                                                                                                                                                                                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The receipt of proceeds realized on the disposal of equipment
    amounting to $91.1 million. Of this, $73.8 million
    related to the sale of equipment to the Joint Venture Program,
    and the balance related to equipment sold at the end of its
    useful life. These proceeds were utilized primarily to repay
    related outstanding balances on debt and capital lease
    obligations.

36



---



##### Table of Contents







| |   |                                                                                                                                                                                         
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Payments of $55.3 million for the acquisition of new
    container and other equipment and investments of
    $4.3 million in container equipment placed on direct
    financing leases;
|
| |  | Investments of $11.1 million in the Joint Venture Program
    in order to provide the Groups share of equity funding for
    additional equipment acquisitions by the Program.         





| |   |                                                                                                                                                                               
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Payments of $29.7 million for new container and other
    equipment of which $5 million was sold to a Managed
    Container Program in the first quarter of 2004; and,        
|
| |  | Investments of $3.6 million in the Joint Venture Program in
    order to provide the Groups share of equity funding for
    additional equipment acquisitions by the Program.





| |   |                                                                                                                                                                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Realization of $16.7 million on the disposal of container
    equipment of which $11.7 million related to equipment at
    the end of its useful life, and $5 million related to the
    sale to the Managed Container Program. The proceeds received in
    both cases were utilized primarily to repay related outstanding
    balances on debt and capital lease obligations,





| |   |                                                                            
| | - | ---------------------------------------------------------------------------
| |  | Acquisition of $16.9 million of new container and other
    equipment; and,
|
| |  | $2.6 million of equity contributions to the Joint Venture
    Program.     





| |   |                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | $9.6 million of proceeds from the sale of container
    equipment, including $4.6 million of proceeds generated by
    a sale to the Joint Venture Program.

Financing Activities.




| |   |                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Proceeds of $49.8 million generated by debt and capital
    leases to fund the acquisition of container and other equipment;                                                                                                                                                                                                                                                                               
|
| |  | Repayments of $95.2 million to financial institutions,
    including a repayment of approximately $64.2 million from
    funds received on the equipment sale to the Joint Venture
    Program in the third quarter of 2005 and $31 million of
    further payments, including short term pre-payments of debt
    using surplus cash balances to reduce interest expense;                                 
|
| |  | Dividend payments of $1.7 million; and,                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | $2.7 million of net payments to restricted cash accounts.
    During the year, the Group realised $1.2 million in cash
    previously restricted in accordance with the terms of a number
    of financing facilities, which were renegotiated. In addition,
    the Group made payments of $3.9 into a restricted cash account
    under the terms of a letter of credit with a financial
    institution.





| |   |                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The receipt of $1.280 million from the recovery of a
    related party loan; and,                                                                                  
|
| |  | The receipt of $0.4 million upon the issuance of new shares
    pursuant to the terms of the 1999 Stock Option Plan and the
    Non-Employee Directors Equity Plan.





| |   |                                                                                                                      
| | - | ---------------------------------------------------------------------------------------------------------------------
| |  | Utilization of $21.6 million of debt and capital leases to
    fund the acquisition of container and other equipment;

37



---



##### Table of Contents





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Repayments of $25.4 million to financial institutions,
    including a paydown of approximately $5 million from funds
    received on the equipment sale to the Managed Container Program
    in the first quarter of 2004, $10 million of scheduled
    payments and $9.5 million of further payments, including
    short term pre-payments of debt using surplus cash balances to
    reduce interest expense;
|
| |  | Dividend payments of $0.8 million; and,                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | $0.5 million of payments to restricted cash accounts in
    accordance with the terms of a number of financing facilities.                                                                                                                                                                                                                                                                                       





| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The utilization of $35.6 million of revolving credit and
    term loan facilities to fund equipment acquisitions and to
    refinance $16.9 million of existing debt and capital lease
    obligations. The Group made additional repayments of
    $28 million of debt and capital lease obligations including
    a $4.6 million repayment in connection with an equipment
    sale to the Joint Venture Program and repurchased
    $0.3 million of its common shares.

Capital
Resources


Capital
Expenditures and Commitments








8-K








38



---



##### Table of Contents



Material Off-Balance Sheet
Arrangements, Transactions and Obligations


Joint Venture Program.








US Limited Partnership Programs  General Partner.










39



---



##### Table of Contents



Parent Guarantee under Agreements with Private Container
Programs.






Guarantees under Fixed Non-cancellable Operating Leases with
Private Container Programs.


Agreements with Private Container Programs  early
termination options.


Agreements with Private Container Programs  change
of control provisions.




40



---



##### Table of Contents



Non-Container Fixed Operating Leases Obligations.


Legal Settlement.




Primary Beneficiary.




Provision for legal claims.


41



---



##### Table of Contents



Contractual Obligations




|                                                                |  |                                      |        |                        |        |   |        |       |  |     |        |  |           |         |        |  |  |   |       | 
|--------------------------------------------------------------- |  | ------------------------------------ | ------ | ---------------------- | ------ | - | ------ | ----- |  | --- | ------ |  | --------- | ------- | ------ |  |  | - | ----- | 
|                                                                |  |                                      |        | Payments Due By Period |       
|                                                                |  |                                      |        |                        |       
|                                                                |  |                                      |        | Less than              |        |   | 1-3    |       |  | 3-5 |        |  | More than |        
|                                                                |  | Total                                |        |                        | 1 Year |   |        | Years |  |     | Years  |  |           | 5 Years |       
|                                                                |  |                                      |        |                        |        |   |        |       |  |     |        |  |           |         |       
|                                                                |  | (US dollar equivalent, in thousands) |       
|Long-term debt obligations - principal                          |  | $                                    | 58,767 |                        |        | $ | 5,790  |       |  | $   | 20,789 |  |           | $       | 25,503 |  |  | $ | 6,685 | 
|Long-term debt obligations - interest                           |  | $                                    | 12,836 |                        |        | $ | 3,727  |       |  | $   | 5,663  |  |           | $       | 2,710  |  |  | $ | 736   | 
|Capital lease obligations - principal                           |  | $                                    | 29,013 |                        |        | $ | 5,979  |       |  | $   | 10,716 |  |           | $       | 6,969  |  |  | $ | 5,349 | 
|Capital lease obligations - interest                            |  | $                                    | 4,689  |                        |        | $ | 1,465  |       |  | $   | 1,920  |  |           | $       | 937    |  |  | $ | 367   | 
|Fixed operating lease obligations to Managed Container Programs |  | $                                    | 11,654 |                        |        | $ | 1,313  |       |  | $   | 2,626  |  |           | $       | 7,715  |  |  |   |      | 
|Term lease rental obligations to Managed Container Programs     |  | $                                    | 94,859 |                        |        | $ | 33,501 |       |  | $   | 46,546 |  |           | $       | 14,248 |  |  | $ | 564   | 
|Amounts payable to container manufacturers                      |  | $                                    | 52,790 |                        |        | $ | 52,790 |       |  |     |       |  |           |         |       |  |  |   |      | 
|Container purchase commitments                                  |  | $                                    | 29,429 |                        |        | $ | 29,429 |       |  |     |       |  |           |         |       |  |  |   |      | 
|Provision for legal claims                                      |  | $                                    | 4,100  |                        |        | $ | 4,100  |       |  |     |       |  |           |         |       |  |  |   |      | 

Long-term debt obligations and capital lease obligations.


Fixed operating lease obligations to Managed Container
Programs.


Term lease rental obligations to Managed Container
Programs.


Amounts payable to container manufacturers.


Container purchase commitments.


Provision for legal claims.


42



---



##### Table of Contents



Critical Accounting Policies and Estimates




Container equipment  depreciable lives.




| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | Refrigerated container equipment  over 12 years
    to a residual value of 15%           
|
| |  | Tanks, rolltrailers and flat racks  over
    20 years to a residual value of 10%         
|
| |  | Dry cargo and all other container equipment  over
    15 years to a residual value of 10%



Container equipment  valuation.


Deferred Taxation.




Allowance for doubtful accounts.


Goodwill.


43



---



##### Table of Contents





Gross lease revenue  Managed Container
Programs.


US Limited Partnership Programs  FIN 46R.


New Accounting Pronouncements










04-5). 04-5


44



---



##### Table of Contents



04-5 04-5


Inflation




45



---



##### Table of Contents






Item 7A  Quantitative and Qualitative
Disclosures about Market Risk




|                                              |                                    |                                      |   |                                                              |      |          |   |       |  |  |      |        |  |      |   |        |      |  |   |            |  |  |   |        |  |  |   |        | 
|--------------------------------------------- | ---------------------------------- | ------------------------------------ | - | ------------------------------------------------------------ | ---- | -------- | - | ----- |  |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ---------- |  |  | - | ------ |  |  | - | ------ | 
|                                              |                                    |                                      |   | Expected Maturity Date of Debt and Capital Lease Obligations |     
|                                              |                                    |                                      |   |                                                              |     
|                                              |                                    |                                      |   |                                                              |      | 2011 and |  
|                                              |                                    | Total                                |   |                                                              | 2006 |          |   | 2007  |  |  | 2008 |        |  | 2009 |   |        | 2010 |  |   | thereafter | 
|                                              |                                    |                                      |   |                                                              |      |          |   |       |  |  |      |        |  |      |   |        |      |  |   |            | 
|                                              |                                    | (US dollar equivalent, in thousands) |  
|Long-term debt and capital lease obligations: |                                    |                                      |   |                                                              |      |          |   |       |  |  |      |        |  |      |   |        |      |  |   |            |  |  |   |        |  |  |   |       
|                                              | Variable rate US dollar facilities |                                      | $ | 77,758                                                       |      |          | $ | 9,039 |  |  | $    | 14,615 |  |      | $ | 12,810 |      |  | $ | 13,704     |  |  | $ | 16,874 |  |  | $ | 10,716 | 
|                                              | Average interest rate %            |                                      |   |                                                              |      |          |   | 6.4   |  |  |      | 6.4    |  |      |   | 6.4    |      |  |   | 6.4        |  |  |   | 6.4    |  |  |   | 6.3    | 
|                                              | Variable rate Euro facilities      |                                      | $ | 2,608                                                        |      |          | $ | 663   |  |  | $    | 226    |  |      | $ | 236    |      |  | $ | 245        |  |  | $ | 256    |  |  | $ | 982    | 
|                                              | Average interest rate %            |                                      |   |                                                              |      |          |   | 4.5   |  |  |      | 4.5    |  |      |   | 4.5    |      |  |   | 4.5        |  |  |   | 4.5    |  |  |   | 4.5    | 
|                                              | Fixed rate US dollar facilities    |                                      | $ | 7,414                                                        |      |          | $ | 2,067 |  |  | $    | 2,036  |  |      | $ | 1,582  |      |  | $ | 1,145      |  |  |   | 248    |  |  |   | 336    | 
|                                              | Average interest rate %            |                                      |   |                                                              |      |          |   | 6.6   |  |  |      | 6.7    |  |      |   | 6.8    |      |  |   | 6.8        |  |  |   | 6.8    |  |  |   | 6.8    | 

Interest rate risk:


Exchange rate risk: non-US non-US




Credit risk:




46



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##### Table of Contents





|                                 |                         |                                      |   |          |      |  |   |      |      |  |      |     |  |      |   |     |            |  |   |       |  |  |       |     |  |  |   |       |  |  |   |       | 
|-------------------------------- | ----------------------- | ------------------------------------ | - | -------- | ---- |  | - | ---- | ---- |  | ---- | --- |  | ---- | - | --- | ---------- |  | - | ----- |  |  | ----- | --- |  |  | - | ----- |  |  | - | ----- | 
|                                 |                         | Expected Maturity Date               |   |          |      |  |  
|                                 |                         |                                      |   |          |      |  |  
|                                 |                         |                                      |   | 2011 and |      |  |   |      | Fair | 
|                                 |                         | 2006                                 |   |          | 2007 |  |   | 2008 |      |  | 2009 |     |  | 2010 |   |     | thereafter |  |   | Total |  |  | Value |    
|                                 |                         |                                      |   |          |      |  |   |      |      |  |      |     |  |      |   |     |            |  |   |       |  |  |       |    
|                                 |                         | (US dollar equivalent, in thousands) |  
|Direct financing leases (EUR):   |                         |                                      |   |          |      |  |   |      |      |  |      |     |  |      |   |     |            |  |   |       |  |  |       |     |  |  |   |       |  |  |   |      
|                                 | - net lease receivables |                                      | $ | 1,063    |      |  | $ | 187  |      |  | $    | 120 |  |      |   |    |            |  |   |      |  |  |       |    |  |  | $ | 1,370 |  |  | $ | 1,589 | 
|Capital lease obligations (EUR): |                         |                                      |   |          |      |  |   |      |      |  |      |     |  |      |   |     |            |  |   |       |  |  |       |     |  |  |   |       |  |  |   |      
|                                 | variable rate (EUR)     |                                      | $ | 663      |      |  | $ | 226  |      |  | $    | 236 |  |      | $ | 245 |            |  | $ | 256   |  |  | $     | 982 |  |  | $ | 2,608 |  |  | $ | 2,608 | 
|                                 | average interest rate % |                                      |   | 4.5      |      |  |   | 4.5  |      |  |      | 4.5 |  |      |   | 4.5 |            |  |   | 4.5   |  |  |       | 4.5 |  |  |   | 4.5   |  |  |   |       | 

47



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##### Table of Contents






Item 8  Financial Statements and
Supplementary Data






| |                                                                                              
| | ---------------------------------------------------------------------------------------------
| | The financial statements listed in this Item 8 are set
    forth herein beginning on page F1:
|
| | Consolidated Statements of Income for the Years Ended
    December 31, 2005, 2004 and 2003;  





| |                                                                                                          
| | ---------------------------------------------------------------------------------------------------------
| | Consolidated Statements of Shareholders Equity for the
    Years Ended December 31, 2005, 2004 and 2003;
|
| | Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2005, 2004 and 2003.          






Item 9  Changes In and Disagreements with
Accountants on Accounting and Financial Disclosure







Item 9A  Controls and Procedures


13a-15







Item 9B  Other Information




48



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##### Table of Contents






PART III





Item 10  Directors and Executive Officers
of the Group




49



---



##### Table of Contents






PART IV







|          |                                           
|--------- | ------------------------------------------
|Item 15  | Exhibits and Financial Statement Schedules







| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | Consolidated Balance Sheets  At December 31,
    2005 and 2004                                         
|
| | Consolidated Statements of Income for the Years Ended
    December 31, 2005, 2004 and 2003              
|
| | Consolidated Statements of Shareholders Equity for the
    Years Ended December 31, 2005, 2004 and 2003
|
| | Consolidated Statements of Cash Flows for the Years Ended
    December 31, 2005, 2004 and 2003          







| |                                                                                                                                                                              
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The financial statements of CF Leasing Limited have been filed
    in accordance with
    Regulation S-X as
    a 50% entity accounted for by the equity method by the Group.





| |                                                                                                                                                                                                                                                                     
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The following exhibits are filed herewith or are incorporated by
    reference to exhibits previously filed with the Commission. The
    Company shall furnish copies of exhibits for a reasonable fee
    (covering the expense of furnishing copies) upon request.
|
| | Previously filed material contracts that are no longer in force
    or effect and that were entered into more than two years prior
    to the date of the filing of this report are not listed in this
    index.                                                   

|       |      |                     |  |                                                                                                                                                                                                                                                                                                                                                           
|------ | ---- | ------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |      | Exhibit Description
|       |      |                    
|       | 2.1  |                     |  | Purchase Agreement by and between Cronos Equipment (Bermuda)
    Limited (CEB) and CF Leasing Limited, dated as of
    September 18, 2002 (incorporated by reference to
    Exhibit 2.1 to the Companys Current Report on
    Form 8-K, dated September 18, 2002).                                                                                     
|       | 3.1  |                     |  | Co-ordinated Articles of Incorporation (incorporated by
    reference to Exhibit 1.1 to the Companys Annual
    Report on Form 20-F for the year ended December 31,
    1997 (File No. 0-24464)).                                                                                                                                                        
|       | 3.2  |                     |  | Policies and procedures with respect to the indemnification of
    directors and officers of the Company, as adopted by the Board
    of Directors on August 4, 1999 (incorporated by reference
    to Exhibit 3.2 to the Companys Registration Statement
    on Form S-3, dated November 24, 1999).                                                     
|       | 10.1 |                     |  | Guarantee, dated as of July 19, 2001, by and between the
    Group and Fortis Bank N.V. (Fortis), as agent and on
    behalf of itself (incorporated by reference to
    Exhibit 10.20 to the Companys Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2001).                                                                         
|       | 10.2 |                     |  | Amendment No. 1 to the Guarantee, dated as of July 19,
    2001, by and between the Group and Fortis, as agent and on
    behalf of itself (incorporated by reference to Exhibit 10.4
    to the Companys Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2003).                                                                   
|       | 10.3 |                     |  | Amendment Number 2, dated as of August 1, 2005, to the
    Amended and Restated Guaranty, dated as of July 19, 2001,
    by and among the Company, Fortis, HBU and NIB. (incorporated by
    reference to Exhibit 10.46 to the Companys Current
    Report on Form 8-K, dated August, 2005).                                                             
|       | 10.4 |                     |  | Loan Agreement, dated as of July 19, 2001, by and between
    Cronos Finance (Bermuda) Limited (CFBL) as issuer,
    and Fortis as agent on behalf of the noteholder, and itself, as
    the initial noteholder (incorporated by reference to
    Exhibit 10.21 to the Companys Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2001).
|       | 10.5 |                     |  | Amendment No. 1 to the Amended and Restated Loan Agreement
    dated as of August 6, 2001, by and between CFBL and Fortis
    (incorporated by reference to Exhibit 10.4 to the
    Companys Annual Report on Form 10-K for the year
    ended December 31, 2001).                                                                                       

50



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##### Table of Contents



|       |       |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                  
|------ | ----- | ------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |       | Exhibit Description
|       |       |                    
|       | 10.6  |                     |  | Amendment No. 2 to the Amended and Restated Loan Agreement
    dated as of November 20, 2001, by and between CFBL and
    Fortis (incorporated by reference to Exhibit 10.5 to the
    Companys Annual Report on Form 10-K for the year
    ended December 31, 2001).                                                                                                                           
|       | 10.7  |                     |  | Amendment No. 3, dated as of September 18, 2002, to
    the Amended and Restated Loan Agreement, dated as of
    July 19, 2001, by and between CFBL and Fortis,
    (incorporated by reference to Exhibit 10.22 to the
    Companys Current Report on Form 8-K, dated
    September 18, 2002).                                                                                                  
|       | 10.8  |                     |  | Amendment No. 4, dated as of March 7, 2003, to the
    Amended and Restated Loan Agreement, dated as of July 19,
    2001, by and between CFBL and Fortis, (incorporated by reference
    to Exhibit 10.7 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2002).                                                                                                 
|       | 10.9  |                     |  | Amendment No. 5, dated as of September 23, 2003, to
    the Amended and Restated Loan Agreement, dated as of
    July 19, 2001, by and between CFBL and Fortis (incorporated
    by reference to Exhibit 10.1 to the Companys
    Quarterly Report on Form 10-Q for the quarter ended
    September 30, 2003).                                                                                  
|       | 10.10 |                     |  | Management Agreement by and between CF Leasing Limited and
    Cronos Containers (Cayman) Limited, dated as of
    September 18, 2002 (incorporated by reference
    Exhibit 10.23 to the Companys Current Report on
    Form 8-K, dated September 18, 2002).                                                                                                                                   
|       | 10.11 |                     |  | Amendment No. 1, dated as of March 7, 2003 to the
    Management Agreement, dated as of September 18, 2002, by
    and between the CF Leasing Limited and Cronos Containers
    (Cayman) Limited, (incorporated by reference to
    Exhibit 10.9 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2002).                                                          
|       | 10.12 |                     |  | Amendment No. 2, dated as of October 15, 2003 to the
    Management Agreement, dated as of September 18, 2002, by
    and between the CF Leasing Limited and Cronos Containers
    (Cayman) Limited Fortis (incorporated by reference to
    Exhibit 10.5 to the Companys Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2003).                                          
|       | 10.13 |                     |  | Members Agreement, dated September 18, 2002, by and between
    CF Leasing Limited, Mees Pierson Transport & Logistics
    Holding B.V. and CEB, and joined by Cronos Containers (Cayman)
    Ltd, and by The Cronos Group.                                                                                                                                                                      
|       | 10.14 |                     |  | Amendment No. 1, dated as of June 15, 2004, to the
    Members Agreement, dated as of September 18, 2002, by and
    between CF Leasing Limited, FB Aviation & Intermodal Finance
    Holding B.V. (formerly known as Mees Pierson Transport &
    Logistics Holding B.V.) and CEB, and joined by Cronos Containers
    (Cayman) Ltd, and by The Cronos Group.                                   
|       | 10.15 |                     |  | Amendment No. 2, dated as of July 8, 2004, to the
    Members Agreement, dated as of September 18, 2002, by and
    between CF Leasing Limited, FB Aviation & Intermodal Finance
    Holding B.V., and CEB, and joined by Cronos Containers (Cayman)
    Ltd, and by The Cronos Group.                                                                                                           
|       | 10.16 |                     |  | Amendment No. 3, dated as of June 15, 2005 to the
    Members Agreement, dated September 18, 2002, among CF
    Leasing Ltd, FB Aviation & Intermodal Finance Holding
    BV and Cronos Containers (Cayman) Ltd. (incorporated by
    reference to Exhibit 10.2 to the Companys Quarterly
    Report on Form 10-Q for the quarter ended June 30,
    2005).                                     
|       | 10.17 |                     |  | Amendment Number 4, dated as of August 1, 2005, to
    Members Agreement, dated as of September 18, 2002, by and
    among CF Leasing, FB Aviation & Intermodal Holding B.V.
    and Cronos Equipment (Bermuda) Limited, and joined by The Cronos
    Group (the Company). (incorporated by reference
    Exhibit 10.56 to the Companys Current Report on
    Form 8-K, dated August 1, 2005).
|       | 10.18 |                     |  | Collateral Agreement dated as of November 16, 2001, by and
    between CEB, CFBL and Fortis (incorporated by reference to
    Exhibit 10.6 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2001).                                                                                                                                                                
|       | 10.19 |                     |  | Amendment No. 1 to the Collateral Agreement dated as of
    November 16, 2001, by and between CEB, CFBL and Fortis
    (incorporated by reference to Exhibit 10.3 to
    Companys Quarterly Report on Form 10-Q for the
    quarter ended September 30, 2003).                                                                                                                                  

51



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|       |       |                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------ | ----- | ------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |       | Exhibit Description
|       |       |                    
|       | 10.20 |                     |  | Grant of Security Interest (Patents) dated as of
    November 19, 2001, by and between CEB, CFBL and Fortis
    (incorporated by reference to Exhibit 10.7 to the
    Companys Annual Report on Form 10-K for the year
    ended December 31, 2001).                                                                                                                                                                               
|       | 10.21 |                     |  | Amended and restated Management Agreement, dated as of
    June 15, 2004, by and between the CF Leasing Limited and
    Cronos Containers (Cayman) Limited. (incorporated by reference
    to Exhibit 10.1 to the Companys Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2004).                                                                                                                                 
|       | 10.22 |                     |  | Amendment No. 1, dated as of June 15, 2005 to the
    Amended and Restated Management Agreement, dated as of
    June 15, 2004, by and between CF Leasing Ltd and Cronos
    Containers (Cayman) Ltd. (incorporated by reference to
    Exhibit 10.1 to the Companys Quarterly Report on
    Form 10-Q for the quarter ended June 30, 2005).                                                                                       
|       | 10.23 |                     |  | Amendment No. 1, dated as of September 23, 2004, to
    the Second Amended and Restated Loan Agreement, dated as of
    September 23, 2003, by and between Cronos Finance (Bermuda)
    Limited, Fortis Bank (Nederland) N.V., Hollandsche Bank-Unie
    N.V. and NIB Capital Bank N.V. (incorporated by reference to
    Exhibit 10.1 to the Companys Quarterly Report on
    Form 10-Q for the quarter ended September 30, 2004).
|       | 10.24 |                     |  | Third Amended and Restated Loan Agreement, dated as of
    August 1, 2005, among CFL, Fortis Bank (Nederland) N.V.
    (Fortis), NIB Capital Bank N.V. (NIB),
    and Hollandsche Bank-Unie N.V. (HBU). (incorporated
    by reference to Exhibit 10.57 to the Companys Current
    Report on Form 8-K, dated August, 2005).                                                                                                 
|       | 10.25 |                     |  | Amended and restated Master Loan Agreement, dated
    August 15, 1997, as amended and restated as of
    February 4, 2005, by and between Cronos Funding (Bermuda)
    Limited (CFB), as Issuer, and Fortis Bank
    (Nederland) N.V. (Fortis), as Agent (incorporated by
    reference to Exhibit 10.42 to the Companys Current
    Report on Form 8-K, dated February, 2005).                                                
|       | 10.26 |                     |  | CFB Secured Note, Class A, in the principal amount of
    $14,672,474, dated February 4, 2005 (incorporated by
    reference to Exhibit 10.43 to the Companys Current
    Report on Form 8-K, dated February, 2005).                                                                                                                                                                                                               
|       | 10.27 |                     |  | CFB Secured Note, Class B, in the principal amount of
    $4,000,000 dated February 4, 2005. (incorporated by
    reference to Exhibit 10.44 to the Companys Current
    Report on Form 8-K, dated February, 2005).                                                                                                                                                                                                                
|       | 10.28 |                     |  | CFB Secured Note, Class C, in the principal amount of
    $7,305,000 dated February 4, 2005 (incorporated by
    reference to Exhibit 10.45 to the Companys Current
    Report on Form 8-K, dated February, 2005).                                                                                                                                                                                                                 
|       | 10.29 |                     |  | Guarantee, dated as of February 4, 2005, by and between The
    Cronos Group and Fortis, as Agent (incorporated by reference to
    Exhibit 10.46 to the Companys Current Report on
    Form 8-K, dated February, 2005).                                                                                                                                                                                                           
|       | 10.30 |                     |  | CFL Secured Note in favor of Fortis in the principal amount of
    $15,000,000, dated August 1, 2005. (incorporated by
    reference to Exhibit 10.46 to the Companys Current
    Report on Form 8-K, dated August, 2005).                                                                                                                                                                                                         
|       | 10.31 |                     |  | CFL Secured Note in favor of NIB in the principal amount of
    $15,000,000, dated August 1, 2005. (incorporated by
    reference to Exhibit 10.46 to the Companys Current
    Report on Form 8-K, dated August, 2005).                                                                                                                                                                                                            
|       | 10.32 |                     |  | CFL Secured Note in favor of HBU in the principal amount of
    $15,000,000, dated August 1, 2005. (incorporated by
    reference to Exhibit 10.46 to the Companys Current
    Report on Form 8-K, dated August, 2005).                                                                                                                                                                                                            
|       | 10.33 |                     |  | Loan and Security Agreement, dated as of September 9, 2005,
    by and between Cronos Containers Inc (CCI) and Banc
    of America Leasing & Capital, LLC (BOA)
    (incorporated by reference to Exhibit 10.1 to the
    Companys Current Report on Form 8-K, dated
    September 9, 2005).                                                                                                                                   
|       | 10.34 |                     |  | Container Purchase and Sale Agreement, dated as of
    September 9, 2005, by and between CCI, as purchaser, and
    BOA, as seller, (incorporated by reference to Exhibit 10.2
    to the Companys Current Report on Form 8-K, dated
    September 9, 2005).                                                                                                                                                                       

52



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|       |       |                     |  |                                                                                                                                                                                                                     
|------ | ----- | ------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number |       | Exhibit Description
|       |       |                    
|       | 10.35 |                     |  | CCI Libor Note and Security Agreement, dated as of
    September 9, 2005, in favour of BOA (incorporated by
    reference to Exhibit 10.3 to the Companys Current
    Report on Form 8-K, dated September 9, 2005).
|       | 10.36 |                     |  | Guarantee, dated as of September 9, 2005, by The Cronos
    Group in favour of BOA (incorporated by reference to
    Exhibit 10.4 to the Companys Current Report on
    Form 8-K, dated September 9, 2005).        
|       | 10.37 |                     |  | Assignment Declaration from MKB Bank Rt. to Centrál Workout
    Pénzügyi Részvéntársaság
    (Central), dated March 27, 2006, as endorsed by
    Central to Cronos Containers N.V. (CNV).                       
|       | 10.38 |                     |  | Assignment of Assets from the Contrin Creditors (as defined
    therein), as assignors, and CNV, as assignee, dated as of
    March 21, 2006.                                                                       



| |       |  |  |                                                                                                                                                                                                                                                                                                                                                                                                  
| | ----- |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.39 |  |  | Stock Appreciation Rights Agreement by and between the Company
    and Peter J. Younger, dated as of October 13, 1999
    (incorporated by reference to Exhibit 10.1 to the
    Companys Registration Statement on Form S-3, dated
    November 24, 1999).                                                                                                                                      
| | 10.40 |  |  | 1999 Stock Option Plan (incorporated by reference to
    Exhibit 4.1 to the Companys Registration Statement on
    Form S-8, dated February 25, 2000).                                                                                                                                                                                                                                          
| | 10.41 |  |  | Employment Agreement by and between Cronos Containers Inc. and
    John M. Foy, dated April 1, 1999, as amended on
    December 1, 1999 (incorporated by reference to
    Exhibit 10.25 to the Companys Annual Report on
    Form 10-K for the period ended December 31, 1999).                                                                                                                 
| | 10.42 |  |  | Amendment, dated December 1, 2005, to the Employment
    Agreement between Cronos Containers Inc. and John M. Foy, dated
    April 1, 1999, as previously amended on December 1,
    1999, December 1, 2000, December 1, 2001,
    October 15, 2002 and November 5, 2002 (incorporated by
    reference to Exhibit 10.2 to the Companys Current
    Report on Form 8-K, dated December 1, 2005).
| | 10.43 |  |  | Service Agreement by and between Cronos Containers Limited and
    John C. Kirby, dated February 29, 2000 (incorporated by
    reference to Exhibit 10.18 to the Companys Annual
    Report on Form 10-K, for the year ended December 31,
    2002).                                                                                                                                            
| | 10.44 |  |  | Amendment, dated December 1, 2005, to the Service Agreement
    by and between Cronos Containers Limited and John Kirby, dated
    February 29, 2000, as previously amended on
    November 4, 2003 (incorporated by reference to
    Exhibit 10.3 to the Companys Current Report on
    Form 8-K, dated December 1, 2005).                                                                     
| | 10.45 |  |  | Service Agreement by and between Cronos Containers Limited and
    Frank P. Vaughan, dated April 20, 2000 (incorporated by
    reference to Exhibit 10.49 and 10.50 to the Companys
    Current Report on Form 8-K, dated July 14, 2005).                                                                                                                                                       
| | 10.46 |  |  | Amendment, dated December 1, 2005, to the Service Agreement
    by and between Cronos Containers Limited and Frank P. Vaughan,
    dated April 20, 2000 (incorporated by reference to
    Exhibit 10.1 to the Companys Current Report on
    Form 8-K, dated December 1, 2005).                                                                                                                 
| | 10.47 |  |  | Amendment to the 1999 Stock Option Plan, dated June 1, 2001
    (incorporated by reference to Exhibit 10.16 to the
    Companys Annual Report on Form 10-K for the period
    ended December 31, 2001).                                                                                                                                                                                         
| | 10.48 |  |  | Amended and Restated Employment Agreement between Cronos and
    Dennis J. Tietz, dated November 8, 2001 (incorporated by
    reference to Exhibit 10.17 to the Companys Annual
    Report on Form 10-K for the period ended December 31,
    2001).                                                                                                                                            
| | 10.49 |  |  | Amendment, dated April 1, 2004, to the Employment Agreement
    between Cronos and Dennis J. Tietz, dated November 8, 2001.                                                                                                                                                                                                                                                                      
| | 10.50 |  |  | Amended Employment Agreement between Cronos and Peter J.
    Younger, dated October 1, 2003.                                                                                                                                                                                                                                                                                                     
| | 10.51 |  |  | Amended and Restated Indemnification Agreement between Cronos
    and Charles Tharp, dated November 6, 2002 (incorporated by
    reference to Exhibit 10.27 to the Companys Annual
    Report on Form 10-K for the period ended December 31,
    2002).                                                                                                                                         
| | 10.52 |  |  | Amended and Restated Indemnification Agreement between Cronos
    and Maurice Taylor, dated November 6, 2002 (incorporated by
    reference to Exhibit 10.28 to the Companys Annual
    Report on Form 10-K for the period ended December 31,
    2002).                                                                                                                                        

53



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##### Table of Contents



| |       |  |  |                                                                                                                                                                                                                                                            
| | ----- |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.53 |  |  | Amended and Restated Indemnification Agreement between Cronos
    and Dennis J. Tietz, dated November 6, 2002 (incorporated
    by reference to Exhibit 10.29 to the Companys Annual
    Report on Form 10-K for the period ended December 31,
    2002). 
| | 10.54 |  |  | Amended and Restated Indemnification Agreement between Cronos
    and Peter J. Younger, dated November 6, 2002 (incorporated
    by reference to Exhibit 10.30 to the Companys Annual
    Report on Form 10-K for the period ended December 31,
    2002).
| | 10.55 |  |  | Indemnification Agreement between Cronos and S. Nicholas Walker,
    dated November 6, 2002 (incorporated by reference to
    Exhibit 10.31 to the Companys Annual Report on
    Form 10-K for the period ended December 31, 2002).                       
| | 10.56 |  |  | Indemnification Agreement between Cronos and Robert M. Melzer,
    dated November 6, 2002 (incorporated by reference to
    Exhibit 10.32 to the Companys Annual Report on
    Form 10-K for the period ended December 31, 2002).                         
| | 10.57 |  |  | Indemnification Agreement between Cronos Containers Limited and
    John C. Kirby, dated November 22, 2002 (incorporated by
    reference to Exhibit 10.33 to the Companys Annual
    Report on Form 10-K for the period ended December 31,
    2002).    
| | 10.58 |  |  | Indemnification Agreement between Cronos Containers Inc. and
    John M. Foy, dated November 1, 2002 (incorporated by
    reference to Exhibit 10.34 to the Companys Annual
    Report on Form 10-K for the period ended December 31,
    2002).          
| | 10.59 |  |  | Stock Option Agreement between Cronos and Charles Tharp, dated
    January 10, 2003 (incorporated by reference to
    Exhibit 10.36 to the Companys Annual Report on
    Form 10-K for the period ended December 31, 2002).                               
| | 10.60 |  |  | Stock Option Agreement between Cronos and Maurice Taylor, dated
    January 10, 2003 (incorporated by reference to
    Exhibit 10.37 to the Companys Annual Report on
    Form 10-K for the period ended December 31, 2002).                              
| | 10.61 |  |  | Stock Option Agreement between Cronos and S. Nicholas Walker,
    dated January 10, 2003 (incorporated by reference to
    Exhibit 10.38 to the Companys Annual Report on
    Form 10-K for the period ended December 31, 2002).                          
| | 10.62 |  |  | Stock Option Agreement between Cronos and Robert M. Melzer,
    dated January 10, 2003 (incorporated by reference to
    Exhibit 10.39 to the Companys Annual Report on
    Form 10-K for the period ended December 31, 2002).                            

|               |      |  |  |                                                                                                                           |  |  |  | 
|-------------- | ---- |  |  | ------------------------------------------------------------------------------------------------------------------------- |  |  |  | 
|Other Exhibits |      | 
|               | 21.1 |  |  | List of principal subsidiaries and affiliates at
    December 31, 2005.                                                   |  |  |  | 
|               | 23.1 |  |  | Consent of Independent Registered Public Accounting Firm dated
    March 29, 2006.                                        |  |  |  | 
|               | 31.1 |  |  | Rule 13a-14 Certification.                                                                                                |  |  |  | 
|               | 31.2 |  |  | Rule 13a-14 Certification.                                                                                                |  |  |  | 
|               | 32.1 |  |  | Certification pursuant to 18 U.S.C. § 1350, as
    adopted pursuant to Section 906 of the Sarbanes-Oxley Act
    of 2002. |  |  |  | 

54



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##### Table of Contents



SIGNATURES






| |                 
| | ----------------
| | The Cronos Group



| |     |                    
| | --- | -------------------
| | By: | /s/ Dennis J. Tietz

| |                                              
| | ---------------------------------------------
| | _____________________________________________
| | Dennis J. Tietz                              
| | Chairman of the Board and                    
| | Chief Executive Officer                      



|          |  |                                                        |  |                                                                                     |  |               
|--------- |  | ------------------------------------------------------ |  | ----------------------------------------------------------------------------------- |  | --------------
|Signature |  | Title                                                  |  | Date                                                                               
|          |  |                                                        |  |                                                                                    
|         
|By        |  | /s/ Dennis J. TietzDennis J. Tietz                     |  | Chairman of the Board and Chief Executive Officer
    (Principal Executive Officer) |  | March 29, 2006
|         
|By        |  | /s/ Peter J. YoungerPeter J. Younger                   |  | Director, President and Chief Operating Officer                                     |  | March 29, 2006
|         
|By        |  | /s/ Frank P. VaughanFrank P. Vaughan                   |  | Chief Financial Officer (Principal Financial and Accounting
    Officer)            |  | March 29, 2006
|         
|By        |  | /s/ Maurice TaylorMaurice Taylor                       |  | Director                                                                            |  | March 29, 2006
|         
|By        |  | /s/ Stephen Nicholas
    WalkerStephen Nicholas Walker |  | Director                                                                            |  | March 29, 2006
|         
|By        |  | /s/ Robert M. MelzerRobert M. Melzer                   |  | Director                                                                            |  | March 29, 2006

55



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##### Table of Contents



FINANCIAL STATEMENTS  Item 15 (a)(1) and
(a)(2)


|       |  |                                                                                                                                                                              |  |      |      | 
|------ |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---- | 
|       |  |                                                                                                                                                                              |  | Page |     
|       |  |                                                                                                                                                                              |  |      |     
|(a)(1) |  | The Cronos Group                                                                                                                                                             |  |      |      | 
|       |  | Report of Independent Registered Public
    Accounting Firm                                                                                                                  |  |      | F-2  | 
|       |  | Consolidated Statements of Income for the
    Years Ended December 31, 2005, 2004 and 2003                                                                                   |  |      | F-3  | 
|       |  | Consolidated Balance Sheets  At
    December 31, 2005 and 2004                                                                                                              |  |      | F-4  | 
|       |  | Consolidated Statements of Cash Flows for
    the Years Ended December 31, 2005, 2004 and 2003                                                                               |  |      | F-6  | 
|       |  | Consolidated Statements of
    Shareholders Equity for the Years Ended December 31,
    2005, 2004 and 2003                                                                 |  |      | F-8  | 
|       |  | Notes to Consolidated Financial
    Statements                                                                                                                               |  |      | F-9  | 
|(a)(2) |  | Financial Statement Schedules                                                                                                                                                |  |      |      | 
|       |  | The financial statements of CF Leasing
    Limited have been filed in accordance with Regulation S-X
    as a 50% entity accounted for by the equity method by the
    Group |  |      | F-42 | 



---



##### Table of Contents



THE CRONOS GROUP


Consolidated financial statements as of December 31,
2005 and 2004


and for the years ended December 31, 2005, 2004 and
2003


and Report of Independent Registered Public Accounting
Firm


F-1



---



##### Table of Contents






REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















F-2



---



##### Table of Contents



THE CRONOS GROUP





CONSOLIDATED STATEMENTS OF INCOME


For the years ended December 31, 2005, 2004 and 2003


(US dollar amounts in thousands, except per share amounts)


|                                                                   |                                                         |      |         |        |      |   |         |        |  |   |         |        |  
|------------------------------------------------------------------ | ------------------------------------------------------- | ---- | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ | -
|                                                                   |                                                         | 2005 |         |        | 2004 |   |         | 2003   | 
|                                                                   |                                                         |      |         |        |      |   |         |        | 
|Gross lease revenue                                                |                                                         | $    | 139,024 |        |      | $ | 132,096 |        |  | $ | 117,501 |       
|Equipment trading revenue                                          |                                                         |      | 2,210   |        |      |   | 4,698   |        |  |   | 4,991   |       
|Commissions, fees and other operating income:                      |                                                         |      |         |        |      |   |         |        |  |   |         |       
|                                                                   | - Related parties                                       |      |         | 802    |      |   |         | 953    |  |   |         | 1,116  |  
|                                                                   | - Unrelated parties                                     |      |         | 4,577  |      |   |         | 2,641  |  |   |         | 2,525  |  
|                                                                   | - Gain on settlement of litigation                      |      |         | 1,333  |      |   |         |       |  |   |         |       |  
|Interest income                                                    |                                                         |      | 344     |        |      |   | 120     |        |  |   | 130     |       
|                                                                   |                                                         |      |         |        |      |   |         |        | 
|Total revenues                                                     |                                                         |      | 148,290 |        |      |   | 140,508 |        |  |   | 126,263 |       
|                                                                   |                                                         |      |         |        |      |   |         |        | 
|Direct operating expenses                                          |                                                         |      | 18,091  |        |      |   | 20,563  |        |  |   | 25,508  |       
|Payments to Managed Container Programs:                            |                                                         |      |         |        |      |   |         |        |  |   |         |       
|                                                                   | - Related parties                                       |      |         | 40,826 |      |   |         | 31,638 |  |   |         | 23,159 |  
|                                                                   | - Unrelated parties                                     |      |         | 36,177 |      |   |         | 36,323 |  |   |         | 32,571 |  
|Equipment trading expenses                                         |                                                         |      | 1,978   |        |      |   | 4,018   |        |  |   | 4,600   |       
|Amortization of intangible assets                                  |                                                         |      | 188     |        |      |   | 188     |        |  |   | 188     |       
|Depreciation                                                       |                                                         |      | 15,141  |        |      |   | 17,993  |        |  |   | 17,495  |       
|Selling, general and administrative expenses                       |                                                         |      | 21,909  |        |      |   | 18,834  |        |  |   | 15,791  |       
|Interest expense                                                   |                                                         |      | 6,186   |        |      |   | 5,178   |        |  |   | 5,754   |       
|Recovery of amount payable to Managed Container Program            |                                                         |      | (703    | )      |      |   |        |        |  |   |        |       
|Recovery of related party loan note                                |                                                         |      |        |        |      |   | (1,280  | )      |  |   |        |       
|Provision against legal claims                                     |                                                         |      | 4,100   |        |      |   |        |        |  |   |        |       
|                                                                   |                                                         |      |         |        |      |   |         |        | 
|Total expenses                                                     |                                                         |      | 143,893 |        |      |   | 133,455 |        |  |   | 125,066 |       
|                                                                   |                                                         |      |         |        |      |   |         |        | 
|Income before income taxes and equity in earnings of
    affiliate |                                                         |      | 4,397   |        |      |   | 7,053   |        |  |   | 1,197   |       
|Income taxes (provision) benefit                                   |                                                         |      | (864    | )      |      |   | (1,071  | )      |  |   | 1,494   |       
|Equity in earnings of unconsolidated affiliate                     |                                                         |      | 4,269   |        |      |   | 2,883   |        |  |   | 1,499   |       
|                                                                   |                                                         |      |         |        |      |   |         |        | 
|Net income                                                         |                                                         |      | 7,802   |        |      |   | 8,865   |        |  |   | 4,190   |       
|Other comprehensive income (loss):                                 |                                                         |      |         |        |      |   |         |        |  |   |         |       
|                                                                   | - change in fair value of forward exchange contracts    |      |         |       |      |   |         | 325    |  |   |         | (325   | )
|                                                                   | - change in fair value of derivatives held by affiliate |      |         | 650    |      |   |         | 311    |  |   |         | (81    | )
|                                                                   |                                                         |      |         |        |      |   |         |        | 
|Comprehensive income                                               |                                                         | $    | 8,452   |        |      | $ | 9,501   |        |  | $ | 3,784   |       
|                                                                   |                                                         |      |         |        |      |   |         |        | 
|Basic net income per common share                                  |                                                         | $    | 1.06    |        |      | $ | 1.22    |        |  | $ | 0.57    |       
|                                                                   |                                                         |      |         |        |      |   |         |        | 
|Diluted net income per common share                                |                                                         | $    | 0.98    |        |      | $ | 1.14    |        |  | $ | 0.55    |       
|                                                                   |                                                         |      |         |        |      |   |         |        | 





F-3



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##### Table of Contents



THE CRONOS GROUP





CONSOLIDATED BALANCE SHEETS


December 31, 2005 and 2004


(US dollar amounts in thousands, except per share amounts)


|                                                                                                                                          |  |      |         |  |      |   |         | 
|----------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- |  | ---- | - | ------- | 
|                                                                                                                                          |  | 2005 |         |  | 2004 |  
|                                                                                                                                          |  |      |         |  |      |  
|Assets                                                                                                                                    |  |      |         |  |      |   |         | 
|Cash and cash equivalents                                                                                                                 |  | $    | 15,829  |  |      | $ | 17,579  | 
|Restricted cash                                                                                                                           |  |      | 4,200   |  |      |   | 1,489   | 
|Amounts due from lessees, net                                                                                                             |  |      | 28,540  |  |      |   | 25,136  | 
|Amounts receivable from Managed Container Programs, including
    amounts due from related parties of $3,155 and $3,358,
    respectively |  |      | 3,391   |  |      |   | 3,386   | 
|New container equipment for resale                                                                                                        |  |      | 38,142  |  |      |   | 17,116  | 
|Net investment in direct financing leases, including amounts due
    within twelve months of $4,162 and $2,434, respectively              |  |      | 12,678  |  |      |   | 7,382   | 
|Investment in unconsolidated affiliates                                                                                                   |  |      | 31,358  |  |      |   | 15,364  | 
|Container equipment, net of accumulated depreciation of $75,493
    and $127,991, respectively                                            |  |      | 121,988 |  |      |   | 166,584 | 
|Other equipment, net of accumulated depreciation of $1,999 and
    $10,418, respectively                                                  |  |      | 1,130   |  |      |   | 963     | 
|Goodwill                                                                                                                                  |  |      | 11,038  |  |      |   | 11,038  | 
|Other intangible assets, net                                                                                                              |  |      | 345     |  |      |   | 533     | 
|Related party loan receivable                                                                                                             |  |      |        |  |      |   | 1,280   | 
|Other assets                                                                                                                              |  |      | 3,093   |  |      |   | 3,899   | 
|                                                                                                                                          |  |      |         |  |      |  
|Total assets                                                                                                                              |  | $    | 271,732 |  |      | $ | 271,749 | 
|                                                                                                                                          |  |      |         |  |      |  



F-4



---



##### Table of Contents



THE CRONOS GROUP





CONSOLIDATED BALANCE SHEETS


December 31, 2005 and 2004


(US dollar amounts in thousands, except per share amounts)


|                                                                                                                                                    |  |      |         |   |      |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                                                                                                                                    |  | 2005 |         |   | 2004 |  
|                                                                                                                                                    |  |      |         |   |      |  
|Liabilities and shareholders equity                                                                                                                |  |      |         |   |      |   |         |  
|Amounts payable to Managed Container Programs, including amounts
    payable to related parties of $15,295 and $11,742, respectively                |  | $    | 25,462  |   |      | $ | 22,034  |  
|Amounts payable to container manufacturers                                                                                                          |  |      | 52,790  |   |      |   | 27,838  |  
|Direct operating expense payables and accruals                                                                                                      |  |      | 5,432   |   |      |   | 5,592   |  
|Other amounts payable and accrued expenses                                                                                                          |  |      | 11,873  |   |      |   | 8,810   |  
|Debt and capital lease obligations, including amounts due within
    twelve months of $11,769 and $13,831, respectively                             |  |      | 87,780  |   |      |   | 127,953 |  
|Income taxes                                                                                                                                        |  |      | 209     |   |      |   | 155     |  
|Deferred income taxes                                                                                                                               |  |      | 2,965   |   |      |   | 3,083   |  
|Deferred income and deferred acquisition fees                                                                                                       |  |      | 7,684   |   |      |   | 5,925   |  
|                                                                                                                                                    |  |      |         |   |      |  
|Total liabilities                                                                                                                                   |  |      | 194,195 |   |      |   | 201,390 |  
|                                                                                                                                                    |  |      |         |   |      |  
|                                                                                                                                                   
|Commitments and contingencies                                                                                                                       |  |      |         |   |      |   |         |  
|                                                                                                                                                   
|Shareholders equity                                                                                                                                |  |      |         |   |      |   |         |  
|Common shares, par value $2 per share
    (25,000,000 shares authorized; shares issued and
    outstanding; 2005  7,519,959; 2004 
    7,381,349) |  |      | 15,040  |   |      |   | 14,763  |  
|Additional paid-in capital                                                                                                                          |  |      | 43,807  |   |      |   | 45,358  |  
|Common shares held in treasury (112,000)                                                                                                            |  |      | (297    | ) |      |   | (297    | )
|Accumulated other comprehensive income                                                                                                              |  |      | 880     |   |      |   | 230     |  
|Restricted retained earnings                                                                                                                        |  |      | 1,832   |   |      |   | 1,832   |  
|Unrestricted retained earnings                                                                                                                      |  |      | 16,275  |   |      |   | 8,473   |  
|                                                                                                                                                    |  |      |         |   |      |  
|Total shareholders equity                                                                                                                          |  |      | 77,537  |   |      |   | 70,359  |  
|                                                                                                                                                    |  |      |         |   |      |  
|Total liabilities and shareholders equity                                                                                                          |  | $    | 271,732 |   |      | $ | 271,749 |  
|                                                                                                                                                    |  |      |         |   |      |  



F-5



---



##### Table of Contents



THE CRONOS GROUP





CONSOLIDATED STATEMENTS OF CASH FLOWS


For the years ended December 31, 2005, 2004 and 2003


(US dollar amounts in thousands, except per share amounts)


|                                                                                      |                                                            |                     |         |         |        |   |         |        |       |   |         |        |        | 
|------------------------------------------------------------------------------------- | ---------------------------------------------------------- | ------------------- | ------- | ------- | ------ | - | ------- | ------ | ----- | - | ------- | ------ | ------ | 
|                                                                                      |                                                            | 2005                |         |         | 2004   |   |         | 2003   |      
|                                                                                      |                                                            |                     |         |         |        |   |         |        |      
|Cash flows from operating activities                                                  |                                                            |                     |         |         |        |   |         |        |       |   |         |       
|Net income                                                                            |                                                            | $                   | 7,802   |         |        | $ | 8,865   |        |       | $ | 4,190   |       
|Adjustments to reconcile net income to net cash provided by
    operating activities: |                                                            |                     |         |         |        |   |         |        |       |   |         |       
|                                                                                      | - depreciation and amortization                            |                     |         | 15,329  |        |   |         | 18,181 |       |   |         | 17,683 |       
|                                                                                      | - (decrease) increase in unamortized acquisition fees      |                     |         | (22     | )      |   |         | 218    |       |   |         | (640   | )     
|                                                                                      | - provision for losses on accounts receivable              |                     |         | 1,284   |        |   |         | 1,251  |       |   |         | 1,077  |       
|                                                                                      | - recovery of related party loan note                      |                     |         |        |        |   |         | (1,280 | )     |   |         |       |       
|                                                                                      | - provision against legal claims                           |                     |         | 4,100   |        |   |         |       |       |   |         |       |       
|                                                                                      | - (gain) loss on disposal of fixed assets                  |                     |         | (955    | )      |   |         | (211   | )     |   |         | 270    |       
|                                                                                      | - undistributed equity in earnings of affiliate            |                     |         | (4,269  | )      |   |         | (2,883 | )     |   |         | (1,499 | )     
|                                                                                      | - (decrease) increase in current and deferred income taxes |                     |         | (64     | )      |   |         | 257    |       |   |         | (2,555 | )     
|                                                                                      | - increase in new container equipment for resale           |                     |         | (21,026 | )      |   |         | (6,300 | )     |   |         | (8,246 | )     
|                                                                                      | - decrease (increase) in amounts receivable:               |                     |         |         |        |   |         |        |       |   |         |        |       
|                                                                                      |                                                            | - related parties   |         |         | 203    |   |         |        | 19    |   |         |        | 23     | 
|                                                                                      |                                                            | - unrelated parties |         |         | (1,453 | ) |         |        | 1,089 |   |         |        | 989    | 
|                                                                                      | - increase in amounts payable and accrued expenses:        |                     |         |         |        |   |         |        |       |   |         |        |       
|                                                                                      |                                                            | - related parties   |         |         | 3,553  |   |         |        | 2,401 |   |         |        | 1,098  | 
|                                                                                      |                                                            | - unrelated parties |         |         | 21,553 |   |         |        | 9,267 |   |         |        | 10,320 | 
|                                                                                      |                                                            |                     |         |         |        |   |         |        |      
|Net cash provided by operating activities                                             |                                                            |                     | 26,035  |         |        |   | 30,874  |        |       |   | 22,710  |       
|                                                                                      |                                                            |                     |         |         |        |   |         |        |      
|Cash flows from investing activities                                                  |                                                            |                     |         |         |        |   |         |        |       |   |         |       
|Purchase of container equipment                                                       |                                                            |                     | (54,837 | )       |        |   | (29,050 | )      |       |   | (16,545 | )     
|Purchase of other equipment                                                           |                                                            |                     | (440    | )       |        |   | (628    | )      |       |   | (324    | )     
|Investment in direct financing leases                                                 |                                                            |                     | (4,286  | )       |        |   | (57     | )      |       |   | (29     | )     
|Investments in related parties                                                        |                                                            |                     | (11,075 | )       |        |   | (3,600  | )      |       |   | (2,550  | )     
|Proceeds from sales of container and other equipment                                  |                                                            |                     | 91,059  |         |        |   | 16,698  |        |       |   | 9,632   |       
|Increase in restricted cash                                                           |                                                            |                     | (2,711  | )       |        |   | (456    | )      |       |   | (40     | )     
|                                                                                      |                                                            |                     |         |         |        |   |         |        |      
|Net provided by (used in) investing activities                                        |                                                            |                     | 17,710  |         |        |   | (17,093 | )      |       |   | (9,856  | )     
|                                                                                      |                                                            |                     |         |         |        |   |         |        |      



F-6



---



##### Table of Contents



THE CRONOS GROUP





CONSOLIDATED STATEMENTS OF CASH FLOWS


For the years ended December 31, 2005, 2004 and 2003


(US dollar amounts in thousands, except per share amounts)


|                                                      |                                                                      |      |         |       |      |   |         |        |  |   |         |       | 
|----------------------------------------------------- | -------------------------------------------------------------------- | ---- | ------- | ----- | ---- | - | ------- | ------ |  | - | ------- | ----- | 
|                                                      |                                                                      | 2005 |         |       | 2004 |   |         | 2003   | 
|                                                      |                                                                      |      |         |       |      |   |         |        | 
|Cash flows from financing activities                  |                                                                      |      |         |       |      |   |         |        |  |   |         |      
|Proceeds from issuance of term debt                   |                                                                      | $    | 49,778  |       |      | $ | 21,556  |        |  | $ | 35,649  |      
|Repayments of term debt and capital lease obligations |                                                                      |      | (95,222 | )     |      |   | (25,391 | )      |  |   | (44,854 | )    
|Dividends paid                                        |                                                                      |      | (1,688  | )     |      |   | (799    | )      |  |   | (583    | )    
|Recovery of related party loan                        |                                                                      |      | 1,280   |       |      |   |        |        |  |   |        |      
|Issue of common stock                                 |                                                                      |      | 357     |       |      |   |        |        |  |   |        |      
|Shares repurchased                                    |                                                                      |      |        |       |      |   |        |        |  |   | (260    | )    
|                                                      |                                                                      |      |         |       |      |   |         |        | 
|Net cash used in financing activities                 |                                                                      |      | (45,495 | )     |      |   | (4,634  | )      |  |   | (10,048 | )    
|                                                      |                                                                      |      |         |       |      |   |         |        | 
|Net (decrease) increase in cash and cash equivalents  |                                                                      |      | (1,750  | )     |      |   | 9,147   |        |  |   | 2,806   |      
|Cash and cash equivalents at beginning of year        |                                                                      |      | 17,579  |       |      |   | 8,432   |        |  |   | 5,626   |      
|                                                      |                                                                      |      |         |       |      |   |         |        | 
|Cash and cash equivalents at end of year              |                                                                      | $    | 15,829  |       |      | $ | 17,579  |        |  | $ | 8,432   |      
|                                                      |                                                                      |      |         |       |      |   |         |        | 
|Supplementary disclosure of cash flow information:    |                                                                      |      |         |       |      |   |         |        |  |   |         |      
|Cash paid during the year for:                        |                                                                      |      |         |       |      |   |         |        |  |   |         |      
|                                                      | - interest                                                           |      | $       | 5,227 |      |   | $       | 4,478  |  |   | $       | 4,765 | 
|                                                      | - income taxes                                                       |      |         | 1,104 |      |   |         | 1,126  |  |   |         | 1,189 | 
|Cash received during the year for:                    |                                                                      |      |         |       |      |   |         |        |  |   |         |      
|                                                      | - interest                                                           |      |         | 345   |      |   |         | 241    |  |   |         | 269   | 
|                                                      | - income taxes                                                       |      |         | 176   |      |   |         | 312    |  |   |         | 45    | 
|Retention deposit utilized to repay capital lease     |                                                                      |      |        |       |      |   |        |        |  |   | 2,743   |      
|Non-cash items:                                       |                                                                      |      |         |       |      |   |         |        |  |   |         |      
|                                                      | - container equipment contributed to the Joint Venture
    Program   |      |         |      |      |   |         |       |  |   |         | 999   | 
|                                                      | - container equipment acquired under capital leases                  |      |         | 5,188 |      |   |         | 12,583 |  |   |         | 1,812 | 
|                                                      | - container equipment transferred to direct financing leases         |      |         | 4,082 |      |   |         | 1,097  |  |   |         | 1,268 | 
|                                                      | - direct financing lease equipment acquired under capital
    leases |      |         | 523   |      |   |         |       |  |   |         | 391   | 



F-7



---



##### Table of Contents



THE CRONOS GROUP





CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY


For the years ended December 31, 2005, 2004 and 2003


(US dollar amounts in thousands, except per share amounts)


|                                                    |  |        |        |            |         |   |        |             |  |       |               |   |              |          |      |          |           |   |       |               |  |   |        |   |  |   |        |  
|--------------------------------------------------- |  | ------ | ------ | ---------- | ------- | - | ------ | ----------- |  | ----- | ------------- | - | ------------ | -------- | ---- | -------- | --------- | - | ----- | ------------- |  | - | ------ | - |  | - | ------ | -
|                                                    |  |        |        |            |         |   |        | Accumulated |  |       |               |   | Unrestricted |          |      |         
|                                                    |  |        |        | Additional |         |   | Common |             |  | other |               |   | Restricted   |          |      | retained |           |   | Total |              
|                                                    |  | Common |        |            | paid-in |   |        | shares held |  |       | comprehensive |   |              | retained |      |          | earnings  |   |       | shareholders | 
|                                                    |  | shares |        |            | capital |   |        | in treasury |  |       | (loss) income |   |              | earnings |      |          | (deficit) |   |       | equity        | 
|                                                    |  |        |        |            |         |   |        |             |  |       |               |   |              |          |      |          |           |   |       |               | 
|Balance, December 31, 2002                          |  | $      | 14,744 |            |         | $ | 47,125 |             |  | $     | (37           | ) |              | $        |     |          |           | $ | 1,832 |               |  | $ | (4,582 | ) |  | $ | 59,082 |  
|Net income                                          |  |        |        |            |         |   |        |             |  |       |               |   |              |          |      |          |           |   |       |               |  |   | 4,190  |   |  |   | 4,190  |  
|Retirement and cancellation of employee share grant |  |        |        |            |         |   | 10     |             |  |       |               |   |              |          |      |          |           |   |       |               |  |   |        |   |  |   | 10     |  
|Declaration of dividends                            |  |        |        |            |         |   | (583   | )           |  |       |               |   |              |          |      |          |           |   |       |               |  |   |        |   |  |   | (583   | )
|Purchase of treasury shares                         |  |        |        |            |         |   |        |             |  |       | (260          | ) |              |          |      |          |           |   |       |               |  |   |        |   |  |   | (260   | )
|Other comprehensive loss for year                   |  |        |        |            |         |   |        |             |  |       |               |   |              |          | (406 | )        |           |   |       |               |  |   |        |   |  |   | (406   | )
|                                                    |  |        |        |            |         |   |        |             |  |       |               |   |              |          |      |          |           |   |       |               | 
|Balance, December 31, 2003                          |  |        | 14,744 |            |         |   | 46,552 |             |  |       | (297          | ) |              |          | (406 | )        |           |   | 1,832 |               |  |   | (392   | ) |  |   | 62,033 |  
|Net income                                          |  |        |        |            |         |   |        |             |  |       |               |   |              |          |      |          |           |   |       |               |  |   | 8,865  |   |  |   | 8,865  |  
|Employee share grant                                |  |        |        |            |         |   | 10     |             |  |       |               |   |              |          |      |          |           |   |       |               |  |   |        |   |  |   | 10     |  
|Declaration of dividends                            |  |        |        |            |         |   | (1,235 | )           |  |       |               |   |              |          |      |          |           |   |       |               |  |   |        |   |  |   | (1,235 | )
|Issue of common shares                              |  |        | 20     |            |         |   | 32     |             |  |       |               |   |              |          |      |          |           |   |       |               |  |   |        |   |  |   | 52     |  
|Retirement of common shares                         |  |        | (1     | )          |         |   | (1     | )           |  |       |               |   |              |          |      |          |           |   |       |               |  |   |        |   |  |   | (2     | )
|Other comprehensive income for year                 |  |        |        |            |         |   |        |             |  |       |               |   |              |          | 636  |          |           |   |       |               |  |   |        |   |  |   | 636    |  
|                                                    |  |        |        |            |         |   |        |             |  |       |               |   |              |          |      |          |           |   |       |               | 
|Balance, December 31, 2004                          |  |        | 14,763 |            |         |   | 45,358 |             |  |       | (297          | ) |              |          | 230  |          |           |   | 1,832 |               |  |   | 8,473  |   |  |   | 70,359 |  
|Net income                                          |  |        |        |            |         |   |        |             |  |       |               |   |              |          |      |          |           |   |       |               |  |   | 7,802  |   |  |   | 7,802  |  
|Issue of common shares                              |  |        | 277    |            |         |   | 352    |             |  |       |               |   |              |          |      |          |           |   |       |               |  |   |        |   |  |   | 629    |  
|Stock based compensation                            |  |        |        |            |         |   | 94     |             |  |       |               |   |              |          |      |          |           |   |       |               |  |   |        |   |  |   | 94     |  
|Declaration of dividends                            |  |        |        |            |         |   | (1,997 | )           |  |       |               |   |              |          |      |          |           |   |       |               |  |   |        |   |  |   | (1,997 | )
|Other comprehensive income for year                 |  |        |        |            |         |   |        |             |  |       |               |   |              |          | 650  |          |           |   |       |               |  |   |        |   |  |   | 650    |  
|                                                    |  |        |        |            |         |   |        |             |  |       |               |   |              |          |      |          |           |   |       |               | 
|Balance, December 31, 2005                          |  | $      | 15,040 |            |         | $ | 43,807 |             |  | $     | (297          | ) |              | $        | 880  |          |           | $ | 1,832 |               |  | $ | 16,275 |   |  | $ | 77,537 |  
|                                                    |  |        |        |            |         |   |        |             |  |       |               |   |              |          |      |          |           |   |       |               | 



F-8



---



##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(US dollar amounts in thousands, except per share amounts)





1   Nature of operations and summary of
significant accounting policies


a)  Nature of operations


















b)  Basis of accounting and consolidation








F-9



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)




c)   Leases


i.   Group as lessor




Operating leases with customers.






Direct financing leases with customers.




ii.   Group as lessee


Operating leases.




F-10



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)








Capital leases.


d)  Equipment trading revenue and
expenses




e)  Commissions, fees and other operating
income






f)  Income taxes




F-11



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)


g)  Net income per common share








|                                                    |                                       |      |           |         |      |   |           |         |  |   |           |         | 
|--------------------------------------------------- | ------------------------------------- | ---- | --------- | ------- | ---- | - | --------- | ------- |  | - | --------- | ------- | 
|                                                    |                                       | 2005 |           |         | 2004 |   |           | 2003    | 
|                                                    |                                       |      |           |         |      |   |           |         | 
|Net income available for common shareholders        |                                       | $    | 7,802     |         |      | $ | 8,865     |         |  | $ | 4,190     |        
|                                                    |                                       |      |           |         |      |   |           |         | 
|Weighted average outstanding shares of common stock |                                       |      | 7,358,950 |         |      |   | 7,260,852 |         |  |   | 7,321,908 |        
|Dilutive effect of:                                 |                                       |      |           |         |      |   |           |         |  |   |           |        
|                                                    | - 1998 stock option                   |      |           | 187,183 |      |   |           | 113,627 |  |   |           | 75,000  | 
|                                                    | - warrants                            |      |           |        |      |   |           | 74,757  |  |   |           | 50,000  | 
|                                                    | - 1999 stock option plan              |      |           | 262,772 |      |   |           | 137,105 |  |   |           |        | 
|                                                    | - non employee directors equity plan |      |           | 134,528 |      |   |           | 163,365 |  |   |           | 154,746 | 
|                                                    | - 2005 equity incentive plan          |      |           | 18,500  |      |   |           |        |  |   |           |        | 
|                                                    |                                       |      |           |         |      |   |           |         | 
|Common shares and common share equivalents          |                                       |      | 7,961,933 |         |      |   | 7,749,706 |         |  |   | 7,601,654 |        
|                                                    |                                       |      |           |         |      |   |           |         | 
|Basic net income per share                          |                                       | $    | 1.06      |         |      | $ | 1.22      |         |  | $ | 0.57      |        
|                                                    |                                       |      |           |         |      |   |           |         | 
|Diluted net income per share                        |                                       | $    | 0.98      |         |      | $ | 1.14      |         |  | $ | 0.55      |        
|                                                    |                                       |      |           |         |      |   |           |         | 





h)  Cash equivalents




i)  Allowance for doubtful accounts




F-12



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)


j)  New container equipment for resale






k)  Investments








l)   Consolidation of variable interest
entities




m) Container equipment






| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| |  | Refrigerated container equipment  over 12 years
    to a residual value of 15%               
|
| |  | Tanks, rolltrailers and flat racks  over
    20 years to a residual value of 10%             
|
| |  | Dry cargo and all remaining container equipment  over
    15 years to a residual value of 10%



F-13



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)


n)  Other equipment




o)  Restricted cash




p)  Goodwill and other intangible assets






q)  Translation of foreign currencies






r)  Stock-based compensation






F-14



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)




|                              |                                                                                                                |      |   |       |      |  |   |       |   |  |   |       |  
|----------------------------- | -------------------------------------------------------------------------------------------------------------- | ---- | - | ----- | ---- |  | - | ----- | - |  | - | ----- | -
|                              |                                                                                                                | 2005 |   |       | 2004 |  |   | 2003  |  
|                              |                                                                                                                |      |   |       |      |  |   |       |  
|Net income:                   |                                                                                                                |      |   |       |      |  |   |       |   |  |   |      
|                              | - as reported                                                                                                  |      | $ | 7,802 |      |  | $ | 8,865 |   |  | $ | 4,190 |  
|                              | - add stock-based employee compensation included in
    reported net income, net of related tax effects        |      |   |      |      |  |   | 3     |   |  |   | 12    |  
|                              | - deduct stock-based compensation expense computed in
    accordance with SFAS 123, net of related tax effects |      |   |      |      |  |   | (21   | ) |  |   | (106  | )
|                              |                                                                                                                |      |   |       |      |  |   |       |  
|                              | - pro forma                                                                                                    |      | $ | 7,802 |      |  | $ | 8,847 |   |  | $ | 4,096 |  
|                              |                                                                                                                |      |   |       |      |  |   |       |  
|Basic net income per share:   |                                                                                                                |      |   |       |      |  |   |       |   |  |   |      
|                              | - as reported                                                                                                  |      | $ | 1.06  |      |  | $ | 1.22  |   |  | $ | 0.57  |  
|                              | - pro forma                                                                                                    |      | $ | 1.06  |      |  | $ | 1.22  |   |  | $ | 0.56  |  
|Diluted net income per share: |                                                                                                                |      |   |       |      |  |   |       |   |  |   |      
|                              | - as reported                                                                                                  |      | $ | 0.98  |      |  | $ | 1.14  |   |  | $ | 0.55  |  
|                              | - pro forma                                                                                                    |      | $ | 0.98  |      |  | $ | 1.14  |   |  | $ | 0.54  |  

s)  Accounting for warrants




t)  Asset impairment




u)  Derivative financial instruments




F-15



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)




.


v)  New pronouncements








04-5). 04-5 04-5 04-5


2   Selling, general & administrative
expenses




F-16



---



##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)




3   Operating segment data












F-17



---



##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)




|                                         |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |         |         |   |   |         |         |  
|---------------------------------------- | ---------------------------------------- | ----------- | ----- | ------- | ------- | - | ------ | --------- | - | - | ---------- | ------- | - | ----- | ------- | ------- | - | - | ------- | ------- | -
|                                         |                                          | US          |       |         |         |   |        |           |   |   |           
|                                         |                                          | Limited     |       |         | Joint   |   |        | Private   |   |   |            |         |  
|                                         |                                          | Partnership |       |         | Venture |   |        | Container |   |   | Owned      |         |   |      
|                                         |                                          | Programs    |       |         | Program |   |        | Programs  |   |   | Containers |         |   | Total |        
|                                         |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |        
|Year ended December 31, 2005             |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |         |         |   |   |         |        
|Items directly attributable to segments: |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |         |         |   |   |         |        
|                                         | - gross lease revenue                    |             | $     | 23,512  |         |   | $      | 30,637    |   |   | $          | 47,368  |   |       | $       | 37,507  |   |   | $       | 139,024 |  
|                                         | - direct operating expenses              |             |       | (3,587  | )       |   |        | (2,119    | ) |   |            | (7,250  | ) |       |         | (5,135  | ) |   |         | (18,091 | )
|                                         |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |        
|                                         | net lease revenue                        |             |       | 19,925  |         |   |        | 28,518    |   |   |            | 40,118  |   |       |         | 32,372  |   |   |         | 120,933 |  
|                                         | - direct financing lease income          |             |       |        |         |   |        |          |   |   |            |        |   |       |         | 1,757   |   |   |         | 1,757   |  
|                                         | - payments to Managed Container Programs |             |       | (14,801 | )       |   |        | (26,025   | ) |   |            | (36,177 | ) |       |         |        |   |   |         | (77,003 | )
|                                         | - container depreciation                 |             |       |        |         |   |        |          |   |   |            |        |   |       |         | (14,890 | ) |   |         | (14,890 | )
|                                         | - container interest expense             |             |       |        |         |   |        |          |   |   |            |        |   |       |         | (6,266  | ) |   |         | (6,266  | )
|                                         |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |        
|Segment profit                           |                                          | $           | 5,124 |         |         | $ | 2,493  |           |   | $ | 3,941      |         |   | $     | 12,973  |         |   | $ | 24,531  |        
|                                         |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |        
|Total assets                             |                                          | $           | 7,772 |         |         | $ | 43,041 |           |   | $ | 12,504     |         |   | $     | 208,415 |         |   | $ | 271,732 |        
|                                         |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |        
|Expenditure for segment assets           |                                          | $           | 74    |         |         | $ | 11,172 |           |   | $ | 150        |         |   | $     | 69,385  |         |   | $ | 80,781  |        
|                                         |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |        

|                                         |                                          |              |       |         |         |   |        |           |   |   |            |         |   |       |         |         |   |   |         |         |  
|---------------------------------------- | ---------------------------------------- | ------------ | ----- | ------- | ------- | - | ------ | --------- | - | - | ---------- | ------- | - | ----- | ------- | ------- | - | - | ------- | ------- | -
|                                         |                                          | US Limited   |       |         | Joint   |   |        | Private   |   |   |            |         |  
|                                         |                                          | Partnerships |       |         | Venture |   |        | Container |   |   | Owned      |         |   |      
|                                         |                                          | Programs     |       |         | Program |   |        | Programs  |   |   | Containers |         |   | Total |        
|                                         |                                          |              |       |         |         |   |        |           |   |   |            |         |   |       |        
|Year ended December 31, 2004             |                                          |              |       |         |         |   |        |           |   |   |            |         |   |       |         |         |   |   |         |        
|Items directly attributable to segments: |                                          |              |       |         |         |   |        |           |   |   |            |         |   |       |         |         |   |   |         |        
|                                         | - gross lease revenue                    |              | $     | 26,671  |         |   | $      | 16,349    |   |   | $          | 47,442  |   |       | $       | 41,634  |   |   | $       | 132,096 |  
|                                         | - direct operating expenses              |              |       | (5,012  | )       |   |        | (1,058    | ) |   |            | (8,359  | ) |       |         | (6,134  | ) |   |         | (20,563 | )
|                                         |                                          |              |       |         |         |   |        |           |   |   |            |         |   |       |        
|                                         | net lease revenue                        |              |       | 21,659  |         |   |        | 15,291    |   |   |            | 39,083  |   |       |         | 35,500  |   |   |         | 111,533 |  
|                                         | - direct financing lease income          |              |       |        |         |   |        |          |   |   |            |        |   |       |         | 1,547   |   |   |         | 1,547   |  
|                                         | - payments to Managed Container Programs |              |       | (17,675 | )       |   |        | (13,963   | ) |   |            | (36,323 | ) |       |         |        |   |   |         | (67,961 | )
|                                         | - container depreciation                 |              |       |        |         |   |        |          |   |   |            |        |   |       |         | (17,716 | ) |   |         | (17,716 | )
|                                         | - container interest expense             |              |       |        |         |   |        |          |   |   |            |        |   |       |         | (5,076  | ) |   |         | (5,076  | )
|                                         |                                          |              |       |         |         |   |        |           |   |   |            |         |   |       |        
|Segment profit                           |                                          | $            | 3,984 |         |         | $ | 1,328  |           |   | $ | 2,760      |         |   | $     | 14,255  |         |   | $ | 22,327  |        
|                                         |                                          |              |       |         |         |   |        |           |   |   |            |         |   |       |        
|Total assets                             |                                          | $            | 8,542 |         |         | $ | 21,117 |           |   | $ | 11,519     |         |   | $     | 230,571 |         |   | $ | 271,749 |        
|                                         |                                          |              |       |         |         |   |        |           |   |   |            |         |   |       |        
|Expenditure for segment assets           |                                          | $            | 120   |         |         | $ | 3,686  |           |   | $ | 219        |         |   | $     | 46,648  |         |   | $ | 50,673  |        
|                                         |                                          |              |       |         |         |   |        |           |   |   |            |         |   |       |        

F-18



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)


|                                         |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |         |         |   |   |         |         |  
|---------------------------------------- | ---------------------------------------- | ----------- | ----- | ------- | ------- | - | ------ | --------- | - | - | ---------- | ------- | - | ----- | ------- | ------- | - | - | ------- | ------- | -
|                                         |                                          | US          |       |         |         |   |        |           |   |   |           
|                                         |                                          | Limited     |       |         | Joint   |   |        | Private   |   |   |            |         |  
|                                         |                                          | Partnership |       |         | Venture |   |        | Container |   |   | Owned      |         |   |      
|                                         |                                          | Programs    |       |         | Program |   |        | Programs  |   |   | Containers |         |   | Total |        
|                                         |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |        
|Year ended December 31, 2003             |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |         |         |   |   |         |        
|Items directly attributable to segments: |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |         |         |   |   |         |        
|                                         | - gross lease revenue                    |             | $     | 26,558  |         |   | $      | 8,630     |   |   | $          | 44,901  |   |       | $       | 37,412  |   |   | $       | 117,501 |  
|                                         | - direct operating expenses              |             |       | (7,162  | )       |   |        | (753      | ) |   |            | (10,704 | ) |       |         | (6,889  | ) |   |         | (25,508 | )
|                                         |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |        
|                                         | net lease revenue                        |             |       | 19,396  |         |   |        | 7,877     |   |   |            | 34,197  |   |       |         | 30,523  |   |   |         | 91,993  |  
|                                         | - direct financing lease income          |             |       |        |         |   |        |          |   |   |            |        |   |       |         | 1,510   |   |   |         | 1,510   |  
|                                         | - payments to Managed Container Programs |             |       | (15,969 | )       |   |        | (7,190    | ) |   |            | (32,571 | ) |       |         |        |   |   |         | (55,730 | )
|                                         | - container depreciation                 |             |       |        |         |   |        |          |   |   |            |        |   |       |         | (17,282 | ) |   |         | (17,282 | )
|                                         | - container interest expense             |             |       |        |         |   |        |          |   |   |            |        |   |       |         | (5,665  | ) |   |         | (5,665  | )
|                                         |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |        
|Segment profit                           |                                          | $           | 3,427 |         |         | $ | 687    |           |   | $ | 1,626      |         |   | $     | 9,086   |         |   | $ | 14,826  |        
|                                         |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |        
|Total assets                             |                                          | $           | 8,838 |         |         | $ | 12,830 |           |   | $ | 11,096     |         |   | $     | 205,273 |         |   | $ | 238,037 |        
|                                         |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |        
|Expenditure for segment assets           |                                          | $           | 73    |         |         | $ | 3,573  |           |   | $ | 124        |         |   | $     | 18,880  |         |   | $ | 22,650  |        
|                                         |                                          |             |       |         |         |   |        |           |   |   |            |         |   |       |        



|                                                               |  |      |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                               |  | 2005 |         |   | 2004 |   |         | 2003 | 
|                                                               |  |      |         |   |      |   |         |      | 
|Segment profit                                                 |  | $    | 24,531  |   |      | $ | 22,327  |      |  | $ | 14,826  |  
|Equipment trading revenue                                      |  |      | 2,210   |   |      |   | 4,698   |      |  |   | 4,991   |  
|Unallocated commissions, fees and other operating income       |  |      | 3,622   |   |      |   | 2,047   |      |  |   | 2,131   |  
|Interest income                                                |  |      | 344     |   |      |   | 120     |      |  |   | 130     |  
|Equipment trading expenses                                     |  |      | (1,978  | ) |      |   | (4,018  | )    |  |   | (4,600  | )
|Amortization of intangible assets                              |  |      | (188    | ) |      |   | (188    | )    |  |   | (188    | )
|Non container depreciation                                     |  |      | (251    | ) |      |   | (277    | )    |  |   | (213    | )
|Selling, general and administrative expenses                   |  |      | (21,909 | ) |      |   | (18,834 | )    |  |   | (15,791 | )
|Gain on settlement of litigation                               |  |      | 1,333   |   |      |   |        |      |  |   |        |  
|Recovery of amount payable to Managed Container Program        |  |      | 703     |   |      |   |        |      |  |   |        |  
|Recovery of related party loan note                            |  |      |        |   |      |   | 1,280   |      |  |   |        |  
|Provision against legal claims                                 |  |      | (4,100  | ) |      |   |        |      |  |   |        |  
|Non container interest credit/(expense)                        |  |      | 80      |   |      |   | (102    | )    |  |   | (89     | )
|                                                               |  |      |         |   |      |   |         |      | 
|Income before income taxes and equity in earnings of affiliate |  | $    | 4,397   |   |      | $ | 7,053   |      |  | $ | 1,197   |  
|                                                               |  |      |         |   |      |   |         |      | 

F-19



---



##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)




|                                            |                                                            |      |         |         |      |   |         |         |  |   |         |         | 
|------------------------------------------- | ---------------------------------------------------------- | ---- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- | 
|                                            |                                                            | 2005 |         |         | 2004 |   |         | 2003    | 
|                                            |                                                            |      |         |         |      |   |         |         | 
|Revenues directly attributable to segments: |                                                            |      |         |         |      |   |         |         |  |   |         |        
|                                            | - gross lease revenue                                      |      | $       | 139,024 |      |   | $       | 132,096 |  |   | $       | 117,501 | 
|                                            | - direct financing lease income                            |      |         | 1,757   |      |   |         | 1,547   |  |   |         | 1,510   | 
|                                            |                                                            |      |         |         |      |   |         |         | 
|                                            |                                                            |      | 140,781 |         |      |   | 133,643 |         |  |   | 119,011 |        
|Other revenues:                             |                                                            |      |         |         |      |   |         |         |  |   |         |        
|                                            | - equipment trading revenue                                |      |         | 2,210   |      |   |         | 4,698   |  |   |         | 4,991   | 
|                                            | - unallocated commissions, fees and other operating income |      |         | 3,622   |      |   |         | 2,047   |  |   |         | 2,131   | 
|                                            | - interest income                                          |      |         | 344     |      |   |         | 120     |  |   |         | 130     | 
|Gain on settlement of litigation            |                                                            |      | 1,333   |         |      |   |        |         |  |   |        |        
|                                            |                                                            |      |         |         |      |   |         |         | 
|Total revenues                              |                                                            | $    | 148,290 |         |      | $ | 140,508 |         |  | $ | 126,263 |        
|                                            |                                                            |      |         |         |      |   |         |         | 





|                        |                           |      |         |        |      |   |         |        |  |   |         |        | 
|----------------------- | ------------------------- | ---- | ------- | ------ | ---- | - | ------- | ------ |  | - | ------- | ------ | 
|                        |                           | 2005 |         |        | 2004 |   |         | 2003   | 
|                        |                           |      |         |        |      |   |         |        | 
|Dry cargo containers    |                           | $    | 94,638  |        |      | $ | 91,511  |        |  | $ | 80,773  |       
|Specialized containers: |                           |      |         |        |      |   |         |        |  |   |         |       
|                        | - refrigerated containers |      |         | 19,890 |      |   |         | 20,613 |  |   |         | 20,829 | 
|                        | - tank containers         |      |         | 10,188 |      |   |         | 8,295  |  |   |         | 6,713  | 
|                        | - dry freight specials    |      |         | 14,308 |      |   |         | 11,677 |  |   |         | 9,186  | 
|                        |                           |      |         |        |      |   |         |        | 
|Gross lease revenue     |                           | $    | 139,024 |        |      | $ | 132,096 |        |  | $ | 117,501 |       
|                        |                           |      |         |        |      |   |         |        | 



|            |  |      |     |   |      |  |     |      |  |  |     |  
|----------- |  | ---- | --- | - | ---- |  | --- | ---- |  |  | --- | -
|            |  | 2005 |     |   | 2004 |  |     | 2003 | 
|            |  |      |     |   |      |  |     |      | 
|Europe      |  |      | 42  | % |      |  | 44  | %    |  |  | 43  | %
|Australasia |  |      | 37  | % |      |  | 33  | %    |  |  | 36  | %
|Other       |  |      | 21  | % |      |  | 23  | %    |  |  | 21  | %
|            |  |      |     |   |      |  |     |      | 
|Total       |  |      | 100 | % |      |  | 100 | %    |  |  | 100 | %
|            |  |      |     |   |      |  |     |      | 



F-20



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)




|  |                                       
|- | --------------------------------------
|4 | Items affecting fourth quarter results











|  |             
|- | ------------
|5 | Income taxes



|       |  |      |       |  |      |   |        |      |  |   |        |  
|------ |  | ---- | ----- |  | ---- | - | ------ | ---- |  | - | ------ | -
|       |  | 2005 |       |  | 2004 |   |        | 2003 | 
|       |  |      |       |  |      |   |        |      | 
|US     |  | $    | 1,159 |  |      | $ | (1,437 | )    |  | $ | (2,416 | )
|Non US |  |      | 3,238 |  |      |   | 8,490  |      |  |   | 3,613  |  
|       |  |      |       |  |      |   |        |      | 
|       |  | $    | 4,397 |  |      | $ | 7,053  |      |  | $ | 1,197  |  
|       |  |      |       |  |      |   |        |      | 



|                                           |            |      |      |      |      |   |       |      |   |   |        |        |  
|------------------------------------------ | ---------- | ---- | ---- | ---- | ---- | - | ----- | ---- | - | - | ------ | ------ | -
|                                           |            | 2005 |      |      | 2004 |   |       | 2003 |  
|                                           |            |      |      |      |      |   |       |      |  
|Current taxes:                             |            |      |      |      |      |   |       |      |   |   |        |       
|                                           | US Federal |      | $    | 9    |      |   | $     | 11   |   |   | $      | (5     | )
|                                           | US State   |      |      | 5    |      |   |       | (15  | ) |   |        | 93     |  
|                                           | Non US     |      |      | 968  |      |   |       | 706  |   |   |        | 760    |  
|                                           |            |      |      |      |      |   |       |      |  
|                                           |            |      | 982  |      |      |   | 702   |      |   |   | 848    |       
|                                           |            |      |      |      |      |   |       |      |  
|Deferred taxes:                            |            |      |      |      |      |   |       |      |   |   |        |       
|                                           | US Federal |      |      | (86  | )    |   |       | (25  | ) |   |        | 46     |  
|                                           | US State   |      |      | 96   |      |   |       | 51   |   |   |        | (41    | )
|                                           | Non US     |      |      | (128 | )    |   |       | 343  |   |   |        | (2,347 | )
|                                           |            |      |      |      |      |   |       |      |  
|                                           |            |      | (118 | )    |      |   | 369   |      |   |   | (2,342 | )     
|                                           |            |      |      |      |      |   |       |      |  
|Total provision (benefit) for income taxes |            | $    | 864  |      |      | $ | 1,071 |      |   | $ | (1,494 | )     
|                                           |            |      |      |      |      |   |       |      |  



F-21



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)




|                                                                       |  |      |       |   |      |   |        |      |  |   |        |  
|---------------------------------------------------------------------- |  | ---- | ----- | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                                       |  | 2005 |       |   | 2004 |   |        | 2003 | 
|                                                                       |  |      |       |   |      |   |        |      | 
|Tax at US federal rate of 34%                                          |  | $    | 1,495 |   |      | $ | 2,398  |      |  | $ | 406    |  
|Difference between US statutory rate and other taxed
    jurisdictions |  |      | 334   |   |      |   | 467    |      |  |   | (3,296 | )
|US state taxes (net of federal tax benefit)                            |  |      | 100   |   |      |   | 37     |      |  |   | 52     |  
|Effect of non-taxed income at US federal rate of 34%                   |  |      | (603  | ) |      |   | (2,305 | )    |  |   | 482    |  
|Valuation allowance                                                    |  |      | (551  | ) |      |   | 547    |      |  |   | 983    |  
|Other                                                                  |  |      | 89    |   |      |   | (73    | )    |  |   | (121   | )
|                                                                       |  |      |       |   |      |   |        |      | 
|Actual tax provision (benefit)                                         |  | $    | 864   |   |      | $ | 1,071  |      |  | $ | (1,494 | )
|                                                                       |  |      |       |   |      |   |        |      | 



|                                                                              |  |      |        |   |      |   |        |  
|----------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | -
|                                                                              |  | 2005 |        |   | 2004 |  
|                                                                              |  |      |        |   |      |  
|Assets                                                                        |  |      |        |   |      |   |        |  
|Acquisition fees                                                              |  | $    | 533    |   |      | $ | 591    |  
|Losses carried forward                                                        |  |      | 1,278  |   |      |   | 1,661  |  
|Partnership income taxable in different periods for book and tax
    purposes |  |      | 1,038  |   |      |   | 789    |  
|Disallowed interest expense carried forward                                   |  |      | 1,234  |   |      |   | 1,230  |  
|Alternative minimum tax credit                                                |  |      | 22     |   |      |   | 5      |  
|Other                                                                         |  |      | 877    |   |      |   | 343    |  
|Valuation allowance                                                           |  |      | (3,475 | ) |      |   | (4,026 | )
|                                                                              |  |      |        |   |      |  
|Total deferred income tax assets                                              |  |      | 1,507  |   |      |   | 593    |  
|                                                                              |  |      |        |   |      |  
|                                                                             
|Liabilities                                                                   |  |      |        |   |      |   |        |  
|Depreciation                                                                  |  |      | 4,472  |   |      |   | 3,254  |  
|Unremitted retained earnings of subsidiaries                                  |  |      |       |   |      |   | 422    |  
|                                                                              |  |      |        |   |      |  
|Total deferred income tax liabilities                                         |  |      | 4,472  |   |      |   | 3,676  |  
|                                                                              |  |      |        |   |      |  
|Net deferred income tax liabilities                                           |  | $    | 2,965  |   |      | $ | 3,083  |  
|                                                                              |  |      |        |   |      |  



|                    |  |   |     | 
|------------------- |  | - | --- | 
|2006                |  | $ | 76  | 
|2007                |  |   |    | 
|2008                |  |   | 22  | 
|2009                |  |   | 18  | 
|2010                |  |   |    | 
|2011 and thereafter |  |   | 834 | 
|                    |  |   |    
|Total               |  | $ | 950 | 
|                    |  |   |    

F-22



---



##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)










|  |                         
|- | ------------------------
|6 | Amounts due from lessees



| |                    
| | -------------------
| | a)  Group as lessor







|                    |  |   |         | 
|------------------- |  | - | ------- | 
|2006                |  | $ | 50,793  | 
|2007                |  |   | 40,181  | 
|2008                |  |   | 31,203  | 
|2009                |  |   | 19,406  | 
|2010                |  |   | 7,436   | 
|2011 and thereafter |  |   | 3,785   | 
|                    |  |   |        
|Total               |  | $ | 152,804 | 
|                    |  |   |        





F-23



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)


b)  Allowance for doubtful accounts




|                                |  |      |       |   |      |   |        |      |  |   |       |  
|------------------------------- |  | ---- | ----- | - | ---- | - | ------ | ---- |  | - | ----- | -
|                                |  | 2005 |       |   | 2004 |   |        | 2003 | 
|                                |  |      |       |   |      |   |        |      | 
|Beginning of year               |  | $    | 2,246 |   |      | $ | 2,296  |      |  | $ | 2,063 |  
|Provision for doubtful accounts |  |      | 1,284 |   |      |   | 1,251  |      |  |   | 1,077 |  
|Write-offs, net of recoveries   |  |      | (166  | ) |      |   | (1,301 | )    |  |   | (844  | )
|                                |  |      |       |   |      |   |        |      | 
|End of year                     |  | $    | 3,364 |   |      | $ | 2,246  |      |  | $ | 2,296 |  
|                                |  |      |       |   |      |   |        |      | 



|  |                                          
|- | -----------------------------------------
|7 | Net investment in direct financing leases



|                   |        |             |  |       |              |  |  |                |       |  |  |       |        | 
|------------------ | ------ | ----------- |  | ----- | ------------ |  |  | -------------- | ----- |  |  | ----- | ------ | 
|                   |        | Net lease   |  |       | Unearned     |  |  | Minimum future |      
|                   |        | receivables |  |       | lease income |  |  | lease rentals  |      
|                   |        |             |  |       |              |  |  |                |      
|December 31, 2005: |        |             |  |       |              |  |  |                |       |  |  |      
|                   | - 2006 |             |  | 4,162 |              |  |  | 1,409          |       |  |  | 5,571 |       
|                   | - 2007 |             |  | 3,071 |              |  |  | 903            |       |  |  | 3,974 |       
|                   | - 2008 |             |  | 2,735 |              |  |  | 483            |       |  |  | 3,218 |       
|                   | - 2009 |             |  | 1,872 |              |  |  | 194            |       |  |  | 2,066 |       
|                   | - 2010 |             |  | 838   |              |  |  | 28             |       |  |  | 866   |       
|                   |        |             |  |       |              |  |  |                |      
|                   |        | Total       |  | $     | 12,678       |  |  | $              | 3,017 |  |  | $     | 15,695 | 
|                   |        |             |  |       |              |  |  |                |      



|  |                                   
|- | ----------------------------------
|8 | New container equipment for resale



|                                                          |                                           |      |         |         |      |   |        |         |   |   |        |         |  
|--------------------------------------------------------- | ----------------------------------------- | ---- | ------- | ------- | ---- | - | ------ | ------- | - | - | ------ | ------- | -
|                                                          |                                           | 2005 |         |         | 2004 |   |        | 2003    |  
|                                                          |                                           |      |         |         |      |   |        |         |  
|Beginning of year                                         |                                           | $    | 17,116  |         |      | $ | 10,816 |         |   | $ | 2,570  |        
|Container purchases                                       |                                           |      | 107,587 |         |      |   | 89,618 |         |   |   | 47,054 |        
|Container disposals:                                      |                                           |      |         |         |      |   |        |         |   |   |        |        
|                                                          | - sold to US Limited Partnership Programs |      |         | (3,594  | )    |   |        | (3,239  | ) |   |        |        |  
|                                                          | - sold to the Joint Venture Program       |      |         | (64,146 | )    |   |        | (61,698 | ) |   |        | (37,751 | )
|                                                          | - sold to Private Container Programs      |      |         | (17,015 | )    |   |        | (14,890 | ) |   |        |        |  
|                                                          | - sold to other parties                   |      |         | (1,034  | )    |   |        | (3,413  | ) |   |        | (1,057  | )
|Transferred to long-term ownership of container equipment |                                           |      | (772    | )       |      |   | (78    | )       |   |   |       |        
|                                                          |                                           |      |         |         |      |   |        |         |  
|End of year                                               |                                           | $    | 38,142  |         |      | $ | 17,116 |         |   | $ | 10,816 |        
|                                                          |                                           |      |         |         |      |   |        |         |  



F-24



---



##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)




|  |                                          
|- | -----------------------------------------
|9 | Consolidation of variable interest entity









|   |                               
|-- | ------------------------------
|10 | Investments in related parties

|                                        |  |      |        |  |      |   |        | 
|--------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                        |  | 2005 |        |  | 2004 |  
|                                        |  |      |        |  |      |  
|Investment in Joint Venture Program     |  | $    | 31,341 |  |      | $ | 15,339 | 
|Other investments                       |  |      | 17     |  |      |   | 25     | 
|                                        |  |      |        |  |      |  
|Investment in unconsolidated affiliates |  | $    | 31,358 |  |      | $ | 15,364 | 
|                                        |  |      |        |  |      |  











F-25



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)






|                                    |  |              |        | 
|----------------------------------- |  | ------------ | ------ | 
|                                    |  | % Investment |       
|US Limited Partnership Program      |  | holding      |       
|                                    |  |              |       
|IEA Income Fund XI, L.P.            |  |              | 0.003% | 
|IEA Income Fund XII, L.P.           |  |              | 0.001% | 
|Cronos Global Income Fund XIV, L.P. |  |              | 0.002% | 
|Cronos Global Income Fund XV, L.P.  |  |              | 0.001% | 
|Cronos Global Income Fund XVI, L.P. |  |              | 0.003% | 
|Cronos Containers Partners I, L.P.  |  |              | 0.001% | 



F-26



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)




|                                                      |  |      |        |  |      |   |        | 
|----------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | 
|                                                      |  | 2005 |        |  | 2004 |  
|                                                      |  |      |        |  |      |  
|Beginning of year                                     |  | $    | 15,364 |  |      | $ | 8,570  | 
|Investment in joint ventures                          |  |      | 11,075 |  |      |   | 3,600  | 
|Equity in earnings of affiliates                      |  |      | 4,269  |  |      |   | 2,883  | 
|Change in fair value of interest rate swap agreements |  |      | 650    |  |      |   | 311    | 
|                                                      |  |      |        |  |      |  
|End of year                                           |  | $    | 31,358 |  |      | $ | 15,364 | 
|                                                      |  |      |        |  |      |  

11 Container and other equipment




|                           |  |   |          |  
|-------------------------- |  | - | -------- | -
|Cost                       |  |   |          |  
|Balance, December 31, 2003 |  | $ | 270,970  |  
|Additions                  |  |   | 46,388   |  
|Disposals                  |  |   | (22,783  | )
|                           |  |   |         
|Balance, December 31, 2004 |  |   | 294,575  |  
|Additions                  |  |   | 64,457   |  
|Disposals                  |  |   | (161,551 | )
|                           |  |   |         
|Balance, December 31, 2005 |  | $ | 197,481  |  
|                           |  |   |         
|Accumulated depreciation   |  |   |          |  
|Balance, December 31, 2003 |  | $ | 115,466  |  
|Depreciation expense       |  |   | 17,716   |  
|Disposals                  |  |   | (5,191   | )
|                           |  |   |         
|Balance, December 31, 2004 |  | $ | 127,991  |  
|Depreciation expense       |  |   | 14,890   |  
|Disposals                  |  |   | (67,388  | )
|                           |  |   |         
|Balance, December 31, 2005 |  | $ | 75,493   |  
|                           |  |   |         
|Book value                 |  |   |          |  
|December 31, 2005          |  | $ | 121,988  |  
|                           |  |   |         
|December 31, 2004          |  | $ | 166,584  |  
|                           |  |   |         





F-27



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)


12 Goodwill and intangible assets




|                           |  |          |        |  |         |   |       |       |  |   |        | 
|-------------------------- |  | -------- | ------ |  | ------- | - | ----- | ----- |  | - | ------ | 
|                           |  | Goodwill |        |  | Patents |   |       | Total | 
|                           |  |          |        |  |         |   |       |       | 
|Cost                       |  |          |        |  |         |   |       |       |  |   |        | 
|Balance, December 31, 2003 |  | $        | 16,231 |  |         | $ | 2,096 |       |  | $ | 18,327 | 
|Additions                  |  |          |       |  |         |   |      |       |  |   |       | 
|                           |  |          |        |  |         |   |       |       | 
|Balance, December 31, 2004 |  |          | 16,231 |  |         |   | 2,096 |       |  |   | 18,327 | 
|Additions                  |  |          |       |  |         |   |      |       |  |   |       | 
|                           |  |          |        |  |         |   |       |       | 
|Balance, December 31, 2005 |  | $        | 16,231 |  |         | $ | 2,096 |       |  | $ | 18,327 | 
|                           |  |          |        |  |         |   |       |       | 
|Accumulated amortization   |  |          |        |  |         |   |       |       |  |   |        | 
|Balance, December 31, 2003 |  | $        | 5,193  |  |         | $ | 1,375 |       |  | $ | 6,568  | 
|Amortization expense       |  |          |       |  |         |   | 188   |       |  |   | 188    | 
|                           |  |          |        |  |         |   |       |       | 
|Balance, December 31, 2004 |  |          | 5,193  |  |         |   | 1,563 |       |  |   | 6,756  | 
|Amortization expense       |  |          |       |  |         |   | 188   |       |  |   | 188    | 
|                           |  |          |        |  |         |   |       |       | 
|Balance, December 31, 2005 |  | $        | 5,193  |  |         | $ | 1,751 |       |  | $ | 6,944  | 
|                           |  |          |        |  |         |   |       |       | 
|Book value                 |  |          |        |  |         |   |       |       |  |   |        | 
|December 31, 2005          |  | $        | 11,038 |  |         | $ | 345   |       |  | $ | 11,383 | 
|                           |  |          |        |  |         |   |       |       | 
|December 31, 2004          |  | $        | 11,038 |  |         | $ | 533   |       |  | $ | 11,571 | 
|                           |  |          |        |  |         |   |       |       | 



i.   Goodwill












F-28



---



##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)




ii.  Patents






|      |  |   |     | 
|----- |  | - | --- | 
|2006  |  |   | 188 | 
|2007  |  |   | 157 | 
|      |  |   |    
|Total |  | $ | 345 | 
|      |  |   |    

13  Hedging transactions and derivative financial
instruments






14  Other assets




|                                                        |  |      |       |  |      |   |       | 
|------------------------------------------------------- |  | ---- | ----- |  | ---- | - | ----- | 
|                                                        |  | 2005 |       |  | 2004 |  
|                                                        |  |      |       |  |      |  
|Unamortized loan origination fees                       |  | $    | 1,276 |  |      | $ | 1,480 | 
|Prepaid expenses                                        |  |      | 834   |  |      |   | 827   | 
|Deposits for leasehold properties and other items       |  |      | 286   |  |      |   | 254   | 
|Amounts receivable under equipment trading transactions |  |      | 78    |  |      |   | 364   | 
|Sales tax receivables                                   |  |      | 77    |  |      |   | 267   | 
|Other                                                   |  |      | 542   |  |      |   | 707   | 
|                                                        |  |      |       |  |      |  
|Total                                                   |  | $    | 3,093 |  |      | $ | 3,899 | 
|                                                        |  |      |       |  |      |  

F-29



---



##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)


15  Debt and lease obligations








|                                  |                 |      |        |        |      |                    |         |                    |  |  |  |                       | 
|--------------------------------- | --------------- | ---- | ------ | ------ | ---- | ------------------ | ------- | ------------------ |  |  |  | --------------------- | 
|                                  |                 |      |        |        |      | Interest rate % at |        
|                                  |                 | 2005 |        |        | 2004 |                    |         | December 2005/2004 | 
|                                  |                 |      |        |        |      |                    |         |                    | 
|Debt:                             |                 |      |        |        |      |                    |         |                    |  |  |  |                      
|                                  |  floating rate |      | $      | 54,065 |      |                    | $       | 97,883             |  |  |  | 5.3  6.5 / 3.4  5.1 | 
|                                  |  fixed rate    |      |        | 4,702  |      |                    |         |                   |  |  |  | 6.8 /                | 
|Obligations under capital leases: |                 |      |        |        |      |                    |         |                    |  |  |  |                      
|                                  |  floating rate |      |        | 26,300 |      |                    |         | 26,130             |  |  |  | 4.0  6.4 / 3.7  5.1 | 
|                                  |  fixed rate    |      |        | 2,713  |      |                    |         | 3,940              |  |  |  | 6.4 / 6.2  6.4       | 
|                                  |                 |      |        |        |      |                    |         |                    | 
|Total                             |                 | $    | 87,780 |        |      | $                  | 127,953 |                    |  |  |  |                      
|                                  |                 |      |        |        |      |                    |         |                    | 

a)   Debt






F-30



---



##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)








|                    |  |   |        | 
|------------------- |  | - | ------ | 
|2006                |  | $ | 5,790  | 
|2007                |  |   | 10,446 | 
|2008                |  |   | 10,343 | 
|2009                |  |   | 10,870 | 
|2010                |  |   | 14,633 | 
|2011 and thereafter |  |   | 6,685  | 
|                    |  |   |       
|Total               |  | $ | 58,767 | 
|                    |  |   |       

b)  Capital lease obligations






|                    |  |           |        |  |          |   |       |       |  |   |        | 
|------------------- |  | --------- | ------ |  | -------- | - | ----- | ----- |  | - | ------ | 
|                    |  | Principal |        |  | Interest |   |       | Total | 
|                    |  |           |        |  |          |   |       |       | 
|2006                |  | $         | 5,979  |  |          | $ | 1,465 |       |  | $ | 7,444  | 
|2007                |  |           | 6,431  |  |          |   | 1,113 |       |  |   | 7,544  | 
|2008                |  |           | 4,285  |  |          |   | 807   |       |  |   | 5,092  | 
|2009                |  |           | 4,224  |  |          |   | 566   |       |  |   | 4,790  | 
|2010                |  |           | 2,745  |  |          |   | 371   |       |  |   | 3,116  | 
|2011 and thereafter |  |           | 5,349  |  |          |   | 367   |       |  |   | 5,716  | 
|                    |  |           |        |  |          |   |       |       | 
|Total               |  | $         | 29,013 |  |          | $ | 4,689 |       |  | $ | 33,702 | 
|                    |  |           |        |  |          |   |       |       | 



c)  Operating leases  Group as
lessee






F-31



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)








|                    |  |            |        |       |           |   |        |          |  |   |         | 
|------------------- |  | ---------- | ------ | ----- | --------- | - | ------ | -------- |  | - | ------- | 
|                    |  |            |        | Fixed |           |   | Total  |         
|                    |  | Contingent |        |       | operating |   |        | minimum  | 
|                    |  | lease      |        |       | leases    |   |        | lease    | 
|                    |  | payments   |        |       | payments  |   |        | payments | 
|                    |  |            |        |       |           |   |        |          | 
|2006                |  | $          | 33,501 |       |           | $ | 1,313  |          |  | $ | 34,814  | 
|2007                |  |            | 26,295 |       |           |   | 1,313  |          |  |   | 27,608  | 
|2008                |  |            | 20,251 |       |           |   | 1,313  |          |  |   | 21,564  | 
|2009                |  |            | 11,480 |       |           |   | 1,313  |          |  |   | 12,793  | 
|2010                |  |            | 2,768  |       |           |   | 6,402  |          |  |   | 9,170   | 
|2011 and thereafter |  |            | 564    |       |           |   |       |          |  |   | 564     | 
|                    |  |            |        |       |           |   |        |          | 
|Total               |  | $          | 94,859 |       |           | $ | 11,654 |          |  | $ | 106,513 | 
|                    |  |            |        |       |           |   |        |          | 

16  Deferred income and deferred acquisition
fees




|                          |  |      |       |  |      |   |       | 
|------------------------- |  | ---- | ----- |  | ---- | - | ----- | 
|                          |  | 2005 |       |  | 2004 |  
|                          |  |      |       |  |      |  
|Advance billings          |  | $    | 4,363 |  |      | $ | 2,582 | 
|Deferred acquisition fees |  |      | 3,321 |  |      |   | 3,343 | 
|                          |  |      |       |  |      |  
|                          |  | $    | 7,684 |  |      | $ | 5,925 | 
|                          |  |      |       |  |      |  



|                    |  |   |       | 
|------------------- |  | - | ----- | 
|2006                |  | $ | 655   | 
|2007                |  |   | 548   | 
|2008                |  |   | 370   | 
|2009                |  |   | 296   | 
|2010                |  |   | 227   | 
|2011 and thereafter |  |   | 1,225 | 
|                    |  |   |      
|Total               |  | $ | 3,321 | 
|                    |  |   |      

F-32



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)


17  Commitments and contingencies


i.   Commitments




ii.  Parent Guarantee under Agreements with
Private Container Programs








iii.  Guarantees under fixed non-cancellable
operating leases




iv.   Agreements with Private Container
Programs  early termination options




v.   Agreements with Private Container
Programs  change of control provisions




F-33



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)




vi.  Joint Venture Program  change of
control provisions




vii. TOEMT




TOEMT Liquidators Challenge to New York Judgment
Deficiency.


F-34



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)








8-K






F-35



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)


viii. Provision for legal claims






winding-up winding-up






|   |              
|-- | -------------
|18 | Common shares

|                               |  |      |           |  |      |  |           |      |  |  |           |  
|------------------------------ |  | ---- | --------- |  | ---- |  | --------- | ---- |  |  | --------- | -
|                               |  | 2005 |           |  | 2004 |  |           | 2003 | 
|                               |  |      |           |  |      |  |           |      | 
|Common shares outstanding:     |  |      |           |  |      |  |           |      |  |  |           |  
|At beginning of year           |  |      | 7,269,349 |  |      |  | 7,260,080 |      |  |  | 7,360,080 |  
|New common shares issued       |  |      | 138,610   |  |      |  | 9,769     |      |  |  |          |  
|Common shares held in treasury |  |      |          |  |      |  |          |      |  |  | (100,000  | )
|Common shares retired          |  |      |          |  |      |  | (500      | )    |  |  |          |  
|                               |  |      |           |  |      |  |           |      | 
|At end of year                 |  |      | 7,407,959 |  |      |  | 7,269,349 |      |  |  | 7,260,080 |  
|                               |  |      |           |  |      |  |           |      | 





F-36



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)
















19  Stock-Based Compensation




i.   1998 stock option




F-37



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)




ii.  1999 stock option plan




iii.  The non-employee directors equity
plan








iv.  2005 equity incentive plan




F-38



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)




v.   Stock grant




vi.  Stock appreciation rights






Summary of Stock Option Activity Under All Plans


|                           |  |                                  |         |          |       |   |       |        |          |  |         |  |  |          |       |  |       |  |         |  |  |   |       | 
|-------------------------- |  | -------------------------------- | ------- | -------- | ----- | - | ----- | ------ | -------- |  | ------- |  |  | -------- | ----- |  | ----- |  | ------- |  |  | - | ----- | 
|                           |  | For the years ended December 31, |        
|                           |  |                                  |        
|                           |  | 2005                             |         |          | 2004  |   |       | 2003   |         
|                           |  |                                  |         |          |       |   |       |        |         
|                           |  |                                  |         | Weighted |       |   |       |        | Weighted |  |         |  |  | Weighted |      
|                           |  |                                  |         | Average  |       |   |       |        | Average  |  |         |  |  | Average  |      
|                           |  |                                  |         | Exercise |       |   |       |        | Exercise |  |         |  |  | Exercise |      
|                           |  | Shares                           |         |          | Price |   |       | Shares |          |  | Price   |  |  | Shares   |       |  | Price | 
|                           |  |                                  |         |          |       |   |       |        |          |  |         |  |  |          |       |  |       | 
|Outstanding on January 1   |  |                                  | 980,504 |          |       | $ | 4.732 |        |          |  | 980,504 |  |  | $        | 4.732 |  |       |  | 980,000 |  |  | $ | 4.733 | 
|Granted                    |  |                                  |        |          |       |   |      |        |          |  |        |  |  |          |      |  |       |  | 504     |  |  | $ | 3.577 | 
|Exercised (retired)        |  |                                  | (78,000 | )        |       | $ | 4.591 |        |          |  |        |  |  |          |      |  |       |  |        |  |  |   |      | 
|                           |  |                                  |         |          |       |   |       |        |          |  |         |  |  |          |       |  |       | 
|Outstanding on December 31 |  |                                  | 902,504 |          |       | $ | 4.741 |        |          |  | 980,504 |  |  | $        | 4.732 |  |       |  | 980,504 |  |  | $ | 4.732 | 
|                           |  |                                  |         |          |       |   |       |        |          |  |         |  |  |          |       |  |       | 
|Exercisable on December 31 |  |                                  | 902,000 |          |       | $ | 4.74  |        |          |  | 913,918 |  |  | $        | 4.73  |  |       |  | 728,750 |  |  | $ | 4.71  | 
|                           |  |                                  |         |          |       |   |       |        |          |  |         |  |  |          |       |  |       | 



F-39



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)




vi.  Fair value disclosures






|                        |  |      |      |  
|----------------------- |  | ---- | ---- | -
|                        |  | 2003 |     
|                        |  |      |     
|Expected term in years  |  |      | 10   |  
|Risk free interest rate |  |      | 3.8  | %
|Volatility              |  |      | 11.7 | %
|Dividends               |  |      | 0    | %

20  Restricted retained earnings




21  Related party transactions




i




ii


iii.


F-40



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##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands, except per share amounts)


22  Quarterly financial data (unaudited)


|                                    |  |     |        |  |     |   |        |     |  |   |        |  |  |   |        |  
|----------------------------------- |  | --- | ------ |  | --- | - | ------ | --- |  | - | ------ |  |  | - | ------ | -
|                                    |  | 1st |        |  | 2nd |   |        | 3rd |  |   | 4th    | 
|                                    |  |     |        |  |     |   |        |     |  |   |        | 
|2005 quarterly financial data       |  |     |        |  |     |   |        |     |  |   |        |  |  |   |        |  
|Total revenues                      |  | $   | 36,534 |  |     | $ | 38,177 |     |  | $ | 36,663 |  |  | $ | 36,916 |  
|Net income                          |  | $   | 3,629  |  |     | $ | 3,477  |     |  | $ | 2,193  |  |  | $ | (1,497 | )
|Basic net income per common share   |  | $   | 0.50   |  |     | $ | 0.47   |     |  | $ | 0.30   |  |  | $ | (0.21  | )
|Diluted net income per common share |  | $   | 0.46   |  |     | $ | 0.44   |     |  | $ | 0.27   |  |  | $ | (0.19  | )

|                                    |  |     |        |  |     |   |        |     |  |   |        |  |  |   |        | 
|----------------------------------- |  | --- | ------ |  | --- | - | ------ | --- |  | - | ------ |  |  | - | ------ | 
|                                    |  | 1st |        |  | 2nd |   |        | 3rd |  |   | 4th    | 
|                                    |  |     |        |  |     |   |        |     |  |   |        | 
|2004 quarterly financial data       |  |     |        |  |     |   |        |     |  |   |        |  |  |   |        | 
|Total revenues                      |  | $   | 34,036 |  |     | $ | 34,027 |     |  | $ | 35,348 |  |  | $ | 37,097 | 
|Net income                          |  | $   | 789    |  |     | $ | 2,070  |     |  | $ | 2,036  |  |  | $ | 3,970  | 
|Basic net income per common share   |  | $   | 0.11   |  |     | $ | 0.29   |     |  | $ | 0.28   |  |  | $ | 0.54   | 
|Diluted net income per common share |  | $   | 0.10   |  |     | $ | 0.27   |     |  | $ | 0.26   |  |  | $ | 0.51   | 

F-41



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##### Table of Contents



CF LEASING LIMITED





Financial statements as of December 31, 2005 and 2004


and for the years ended December 31, 2005, 2004 and
2003


and Report of Independent Registered Public Accounting
Firm


F-42



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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
















F-43



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##### Table of Contents



CF LEASING LIMITED


BALANCE SHEETS


December 31, 2005 and 2004


(US dollar amounts in thousands)


|                                                                                                                            |              |      |         |       |      |   |         |       | 
|--------------------------------------------------------------------------------------------------------------------------- | ------------ | ---- | ------- | ----- | ---- | - | ------- | ----- | 
|                                                                                                                            |              | 2005 |         |       | 2004 |  
|                                                                                                                            |              |      |         |       |      |  
|Assets                                                                                                                      |              |      |         |       |      |   |         |      
|Cash and cash equivalents                                                                                                   |              | $    | 4,143   |       |      | $ | 2,015   |      
|Restricted cash                                                                                                             |              |      | 2,834   |       |      |   | 946     |      
|Amounts receivable from a related party                                                                                     |              |      | 7,502   |       |      |   | 2,736   |      
|Net investment in direct financing leases, including amounts due
    within twelve months of $7,800 and $4,125 respectively |              |      | 28,919  |       |      |   | 17,641  |      
|Container equipment, net of accumulated depreciation of $18,029
    and $9,945 respectively                                 |              |      | 210,652 |       |      |   | 104,506 |      
|                                                                                                                            | Other assets |      |         | 5,191 |      |   |         | 2,701 | 
|                                                                                                                            |              |      |         |       |      |  
|Total assets                                                                                                                |              | $    | 259,241 |       |      | $ | 130,545 |      
|                                                                                                                            |              |      |         |       |      |  
|Liabilities and shareholders equity                                                                                        |              |      |         |       |      |   |         |      
|Amounts payable to a related party                                                                                          |              |      | 537     |       |      |   | 226     |      
|Other amounts payable and accrued expenses                                                                                  |              |      | 437     |       |      |   | 256     |      
|Loan notes issued to affiliate and other parties                                                                            |              |      | 195,583 |       |      |   | 99,383  |      
|                                                                                                                            |              |      |         |       |      |  
|Total liabilities                                                                                                           |              |      | 196,557 |       |      |   | 99,865  |      
|                                                                                                                            |              |      |         |       |      |  
|Shareholders equity                                                                                                        |              |      |         |       |      |   |         |      
|Common shares, par value $1 per share (24,000 shares
    authorised, issued and outstanding)                                |              |      | 24      |       |      |   | 24      |      
|Additional paid-in capital                                                                                                  |              |      | 43,469  |       |      |   | 21,319  |      
|Accumulated other comprehensive income                                                                                      |              |      | 1,761   |       |      |   | 462     |      
|Retained earnings                                                                                                           |              |      | 17,430  |       |      |   | 8,875   |      
|                                                                                                                            |              |      |         |       |      |  
|Total shareholders equity                                                                                                  |              |      | 62,684  |       |      |   | 30,680  |      
|                                                                                                                            |              |      |         |       |      |  
|Total liabilities and shareholders equity                                                                                  |              | $    | 259,241 |       |      | $ | 130,545 |      
|                                                                                                                            |              |      |         |       |      |  



F-44



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##### Table of Contents



CF LEASING LIMITED


STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


For the years ended December 31, 2005, 2004 and 2003


(US dollar amounts in thousands)


|                                                      |  |      |        |  |      |   |        |      |  |   |       |  
|----------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ----- | -
|                                                      |  | 2005 |        |  | 2004 |   |        | 2003 | 
|                                                      |  |      |        |  |      |   |        |      | 
|Container investment revenue                          |  | $    | 25,940 |  |      | $ | 14,042 |      |  | $ | 7,184 |  
|Fees and other income                                 |  |      | 2,929  |  |      |   | 1,560  |      |  |   | 894   |  
|                                                      |  |      |        |  |      |   |        |      | 
|Total revenues                                        |  |      | 28,869 |  |      |   | 15,602 |      |  |   | 8,078 |  
|                                                      |  |      |        |  |      |   |        |      | 
|Depreciation                                          |  |      | 11,860 |  |      |   | 5,969  |      |  |   | 3,330 |  
|Selling, general and administrative expenses          |  |      | 142    |  |      |   | 164    |      |  |   | 90    |  
|Interest expense                                      |  |      | 8,312  |  |      |   | 3,703  |      |  |   | 1,660 |  
|                                                      |  |      |        |  |      |   |        |      | 
|Total expenses                                        |  |      | 20,314 |  |      |   | 9,836  |      |  |   | 5,080 |  
|                                                      |  |      |        |  |      |   |        |      | 
|Net income                                            |  |      | 8,555  |  |      |   | 5,766  |      |  |   | 2,998 |  
|Other comprehensive income (loss):                    |  |      |        |  |      |   |        |      |  |   |       |  
|Change in fair value of interest rate swap agreements |  |      | 1,299  |  |      |   | 624    |      |  |   | (162  | )
|                                                      |  |      |        |  |      |   |        |      | 
|Comprehensive income                                  |  | $    | 9,854  |  |      | $ | 6,390  |      |  | $ | 2,836 |  
|                                                      |  |      |        |  |      |   |        |      | 



F-45



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##### Table of Contents



CF LEASING LIMITED


STATEMENTS OF CASH FLOWS


For the years ended December 31, 2005, 2004 and 2003


(US dollar amounts in thousands)


|                                                                                      |                                                                   |      |          |        |      |   |         |        |   |   |         |        |  
|------------------------------------------------------------------------------------- | ----------------------------------------------------------------- | ---- | -------- | ------ | ---- | - | ------- | ------ | - | - | ------- | ------ | -
|                                                                                      |                                                                   | 2005 |          |        | 2004 |   |         | 2003   |  
|                                                                                      |                                                                   |      |          |        |      |   |         |        |  
|Cash flows from operating activities                                                  |                                                                   |      |          |        |      |   |         |        |   |   |         |       
|Net income                                                                            |                                                                   | $    | 8,555    |        |      | $ | 5,766   |        |   | $ | 2,998   |       
|Adjustments to reconcile net income to net cash provided by
    operating activities: |                                                                   |      |          |        |      |   |         |        |   |   |         |       
|                                                                                      | - Depreciation                                                    |      |          | 11,860 |      |   |         | 5,969  |   |   |         | 3,330  |  
|                                                                                      | - Gain on disposal of fixed assets                                |      |          | (406   | )    |   |         | (185   | ) |   |         | (17    | )
|                                                                                      | - (Increase) decrease in amounts receivable                       |      |          |        |      |   |         |        |   |   |         |        |  
|                                                                                      | - related parties                                                 |      |          | (4,766 | )    |   |         | (1,386 | ) |   |         | (94    | )
|                                                                                      | - unrelated parties                                               |      |          | 8,973  |      |   |         | 1,020  |   |   |         | (1,055 | )
|                                                                                      | - Increase (decrease) in amounts payable to unrelated
    parties |      |          |        |      |   |         |        |   |   |         |        |  
|                                                                                      | - related parties                                                 |      |          | 311    |      |   |         | (47    | ) |   |         | 82     |  
|                                                                                      | - unrelated parties                                               |      |          | 181    |      |   |         | 180    |   |   |         | 48     |  
|                                                                                      |                                                                   |      |          |        |      |   |         |        |  
|Net cash provided by operating activities                                             |                                                                   |      | 24,708   |        |      |   | 11,317  |        |   |   | 5,292   |       
|                                                                                      |                                                                   |      |          |        |      |   |         |        |  
|Cash flows from investing activities                                                  |                                                                   |      |          |        |      |   |         |        |   |   |         |       
|Purchase of container equipment                                                       |                                                                   |      | (122,454 | )      |      |   | (49,644 | )      |   |   | (38,253 | )     
|Investment in equipment acquired for direct financing leases                          |                                                                   |      | (20,226  | )      |      |   | (12,760 | )      |   |   | (5,689  | )     
|Increase in restricted cash deposits                                                  |                                                                   |      | (1,888   | )      |      |   | (525    | )      |   |   | (201    | )     
|Proceeds from sales of container equipment                                            |                                                                   |      | 3,638    |        |      |   | 566     |        |   |   | 205     |       
|                                                                                      |                                                                   |      |          |        |      |   |         |        |  
|Net cash used in investing activities                                                 |                                                                   |      | (140,930 | )      |      |   | (62,363 | )      |   |   | (43,938 | )     
|                                                                                      |                                                                   |      |          |        |      |   |         |        |  
|Cash flows from financing activities                                                  |                                                                   |      |          |        |      |   |         |        |   |   |         |       
|Proceeds from issuance of term debt                                                   |                                                                   |      | 96,200   |        |      |   | 44,541  |        |   |   | 32,640  |       
|Additional paid in capital                                                            |                                                                   |      | 22,150   |        |      |   | 7,150   |        |   |   | 6,099   |       
|                                                                                      |                                                                   |      |          |        |      |   |         |        |  
|Net cash provided by financing activities                                             |                                                                   |      | 118,350  |        |      |   | 51,691  |        |   |   | 38,739  |       
|                                                                                      |                                                                   |      |          |        |      |   |         |        |  
|Net increase in cash and cash equivalents                                             |                                                                   |      | 2,128    |        |      |   | 645     |        |   |   | 93      |       
|Cash and cash equivalents at beginning of year                                        |                                                                   |      | 2,015    |        |      |   | 1,370   |        |   |   | 1,277   |       
|                                                                                      |                                                                   |      |          |        |      |   |         |        |  
|Cash and cash equivalents at end of year                                              |                                                                   | $    | 4,143    |        |      | $ | 2,015   |        |   | $ | 1,370   |       
|                                                                                      |                                                                   |      |          |        |      |   |         |        |  
|Supplementary disclosure of cash flow information:                                    |                                                                   |      |          |        |      |   |         |        |   |   |         |       
|Cash paid during the year for:                                                        |                                                                   |      |          |        |      |   |         |        |   |   |         |       
|                                                                                      | - interest                                                        |      | $        | 7,557  |      |   | $       | 3,380  |   |   | $       | 1,433  |  
|Cash received during the year for:                                                    |                                                                   |      |          |        |      |   |         |        |   |   |         |       
|                                                                                      | - interest                                                        |      | $        | 49     |      |   |         |       |   |   |         |       |  
|Non-cash items:                                                                       |                                                                   |      |          |        |      |   |         |        |   |   |         |       
|                                                                                      | - container equipment contributed as equity                       |      |          |       |      |   |         |       |   |   | $       | 999    |  
|                                                                                      | - container equipment transferred to direct finance leases        |      | $        | 1,216  |      |   | $       | 353    |   |   |         |       |  
|                                                                                      | - change in fair value of interest rate swap agreements           |      | $        | 1,299  |      |   | $       | 624    |   |   | $       | (162   | )



F-46



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##### Table of Contents



CF LEASING LIMITED


STATEMENTS OF SHAREHOLDERS EQUITY


For the years ended December 31, 2005, 2004 and 2003


(US dollar amounts in thousands)


|                                                 |  |        |    |            |         |             |        |               |  |   |          |       |  |               |        |  |  |   |        |  
|------------------------------------------------ |  | ------ | -- | ---------- | ------- | ----------- | ------ | ------------- |  | - | -------- | ----- |  | ------------- | ------ |  |  | - | ------ | -
|                                                 |  |        |    |            |         | Accumulated |        |               |  |   |         
|                                                 |  |        |    | Additional |         |             | other  |               |  |   |          | Total | 
|                                                 |  | Common |    |            | paid-in |             |        | comprehensive |  |   | Retained |       |  | shareholders |       
|                                                 |  | shares |    |            | capital |             |        | (loss) income |  |   | earnings |       |  | equity        |       
|                                                 |  |        |    |            |         |             |        |               |  |   |          |       |  |               |       
|Balance, December 31, 2002                       |  | $      | 24 |            |         | $           | 7,071  |               |  |   |          |       |  | $             | 111    |  |  | $ | 7,206  |  
|Capital contributions                            |  |        |    |            |         |             | 7,098  |               |  |   |          |       |  |               |        |  |  |   | 7,098  |  
|Net income                                       |  |        |    |            |         |             |        |               |  |   |          |       |  |               | 2,998  |  |  |   | 2,998  |  
|Reduction in fair value of financial derivatives |  |        |    |            |         |             |        |               |  |   | (162     | )     |  |               |        |  |  |   | (162   | )
|                                                 |  |        |    |            |         |             |        |               |  |   |          |       |  |               |       
|Balance, December 31, 2003                       |  | $      | 24 |            |         | $           | 14,169 |               |  | $ | (162     | )     |  | $             | 3,109  |  |  | $ | 17,140 |  
|Capital contributions                            |  |        |    |            |         |             | 7,150  |               |  |   |          |       |  |               |        |  |  |   | 7,150  |  
|Net income                                       |  |        |    |            |         |             |        |               |  |   |          |       |  |               | 5,766  |  |  |   | 5,766  |  
|Increase in fair value of financial derivatives  |  |        |    |            |         |             |        |               |  |   | 624      |       |  |               |        |  |  |   | 624    |  
|                                                 |  |        |    |            |         |             |        |               |  |   |          |       |  |               |       
|Balance, December 31, 2004                       |  | $      | 24 |            |         | $           | 21,319 |               |  | $ | 462      |       |  | $             | 8,875  |  |  | $ | 30,680 |  
|Capital contributions                            |  |        |    |            |         |             | 22,150 |               |  |   |          |       |  |               |        |  |  |   | 22,150 |  
|Net income                                       |  |        |    |            |         |             |        |               |  |   |          |       |  |               | 8,555  |  |  |   | 8,555  |  
|Increase in fair value of financial derivatives  |  |        |    |            |         |             |        |               |  |   | 1,299    |       |  |               |        |  |  |   | 1,299  |  
|                                                 |  |        |    |            |         |             |        |               |  |   |          |       |  |               |       
|Balance, December 31, 2005                       |  | $      | 24 |            |         | $           | 43,469 |               |  | $ | 1,761    |       |  | $             | 17,430 |  |  | $ | 62,684 |  
|                                                 |  |        |    |            |         |             |        |               |  |   |          |       |  |               |       

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##### Table of Contents



CF LEASING LIMITED


NOTES TO THE FINANCIAL STATEMENTS


(US dollar amounts in thousands)


1.   Summary of significant accounting
policies




a)  Nature of operations










b)  Basis of accounting






c)  Leases


Operating leases.


F-48



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##### Table of Contents



CF LEASING LIMITED


NOTES TO THE FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands)








Direct financing leases with customers.




d)  Fees and other income




e)  Taxation




f)  Cash and cash equivalents




g)  Container equipment






| |   |                                                                                               
| | - | ----------------------------------------------------------------------------------------------
| |  | Refridgerated container equipment  over 12 years
    to a residual value of 15%              
|
| |  | Tanks, rolltrailers and flat racks  over
    20 years to a residual value of 10%             
|
| |  | Dry cargo and all remaining container equipment  over
    15 years to a residual value of 10%



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##### Table of Contents



CF LEASING LIMITED


NOTES TO THE FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands)




h)  Asset impairment


.


i)  Fair value of financial instruments




j)  Derivative financial instruments








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##### Table of Contents



CF LEASING LIMITED


NOTES TO THE FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands)


k)  Translation of foreign currencies






l)   Restricted cash




m) New pronouncements




2.   Net investment in direct financing
leases




|                  |  |             |        |  |                |   |       |                |  |   |        | 
|----------------- |  | ----------- | ------ |  | -------------- | - | ----- | -------------- |  | - | ------ | 
|                  |  | Net Lease   |        |  | Unearned Lease |   |       | Minimum Future | 
|                  |  | Receivables |        |  | Income         |   |       | Lease Rentals  | 
|                  |  |             |        |  |                |   |       |                | 
|December 31, 2005 |  |             |        |  |                |   |       |                |  |   |        | 
|2006              |  | $           | 7,800  |  |                | $ | 2,793 |                |  | $ | 10,593 | 
|2007              |  |             | 8,358  |  |                |   | 1,871 |                |  |   | 10,229 | 
|2008              |  |             | 6,142  |  |                |   | 1,029 |                |  |   | 7,171  | 
|2009              |  |             | 4,424  |  |                |   | 463   |                |  |   | 4,887  | 
|2010              |  |             | 2,195  |  |                |   | 258   |                |  |   | 2,453  | 
|                  |  |             |        |  |                |   |       |                | 
|Total             |  | $           | 28,919 |  |                | $ | 6,414 |                |  | $ | 35,333 | 
|                  |  |             |        |  |                |   |       |                | 

3.   Container investment revenue




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##### Table of Contents



CF LEASING LIMITED


NOTES TO THE FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands)




|                    |  |   |        | 
|------------------- |  | - | ------ | 
|2006                |  | $ | 23,786 | 
|2007                |  |   | 19,630 | 
|2008                |  |   | 14,879 | 
|2009                |  |   | 8,316  | 
|2010                |  |   | 2,282  | 
|2011 and thereafter |  |   | 556    | 
|                    |  |   |       
|Total               |  | $ | 69,449 | 
|                    |  |   |       

4.   Container equipment


|                           |  |   |         |  
|-------------------------- |  | - | ------- | -
|Cost                       |  |   |         |  
|Balance, December 31, 2003 |  | $ | 65,639  |  
|Additions                  |  |   | 49,644  |  
|Disposals                  |  |   | (832    | )
|                           |  |   |        
|Balance, December 31, 2004 |  |   | 114,451 |  
|Additions                  |  |   | 122,454 |  
|Disposals                  |  |   | (8,224  | )
|                           |  |   |        
|Balance, December 31, 2005 |  | $ | 228,681 |  
|                           |  |   |        
|Accumulated depreciation   |  |   |         |  
|Balance, December 31, 2003 |  | $ | 4,074   |  
|Depreciation expense       |  |   | 5,969   |  
|Disposals                  |  |   | (98     | )
|                           |  |   |        
|Balance, December 31, 2004 |  |   | 9,945   |  
|Depreciation expense       |  |   | 11,860  |  
|Disposals                  |  |   | (3,776  | )
|                           |  |   |        
|Balance, December 31, 2005 |  | $ | 18,029  |  
|                           |  |   |        
|Book value                 |  |   |         |  
|December 31, 2005          |  | $ | 210,652 |  
|                           |  |   |        
|December 31, 2004          |  | $ | 104,506 |  
|                           |  |   |        

5.   Other assets




|                                                |  |      |       |  |      |   |       | 
|----------------------------------------------- |  | ---- | ----- |  | ---- | - | ----- | 
|                                                |  | 2005 |       |  | 2004 |  
|                                                |  |      |       |  |      |  
|Unamortised loan origination fees               |  | $    | 3,418 |  |      | $ | 2,227 | 
|Increase in fair value of financial derivatives |  |      | 1,761 |  |      |   | 462   | 
|Other                                           |  |      | 12    |  |      |   | 12    | 
|                                                |  |      |       |  |      |  
|Total                                           |  | $    | 5,191 |  |      | $ | 2,701 | 
|                                                |  |      |       |  |      |  

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##### Table of Contents



CF LEASING LIMITED


NOTES TO THE FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands)


6.   Debt








|                             |  |      |         |  |      |                    |        |                         |  |  |                  | 
|---------------------------- |  | ---- | ------- |  | ---- | ------------------ | ------ | ----------------------- |  |  | ---------------- | 
|                             |  |      |         |  |      | Interest Rate % at |       
|                             |  | 2005 |         |  | 2004 |                    |        | December 31, 2005/ 2004 | 
|                             |  |      |         |  |      |                    |        |                         | 
|Floating rate debt           |  | $    | 98,372  |  |      | $                  | 22,077 |                         |  |  | 6.0/ 3.4         | 
|Fixed rate debt (see note 7) |  |      | 97,211  |  |      |                    | 77,306 |                         |  |  | 3.9-6.3/ 3.8-5.7 | 
|                             |  |      |         |  |      |                    |        |                         | 
|Total debt                   |  | $    | 195,583 |  |      | $                  | 99,383 |                         |  |  |                  | 
|                             |  |      |         |  |      |                    |        |                         | 



|                  |  |   |         | 
|----------------- |  | - | ------- | 
|2006              |  | $ | 16,339  | 
|2007              |  |   | 19,035  | 
|2008              |  |   | 19,035  | 
|2009              |  |   | 19,035  | 
|2010              |  |   | 19,035  | 
|2011 & thereafter |  |   | 103,104 | 
|                  |  |   |        
|Total             |  | $ | 195,583 | 
|                  |  |   |        

7.   Derivative accounting policies




F-53



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##### Table of Contents



CF LEASING LIMITED


NOTES TO THE FINANCIAL STATEMENTS (continued)


(US dollar amounts in thousands)










8.   Related party transactions




|                        |       |       |   |        |         |  |   |        |        | 
|----------------------- | ----- | ----- | - | ------ | ------- |  | - | ------ | ------ | 
|                        |       | 2005  |   |        | 2004    | 
|                        |       |       |   |        |         | 
|Container acquisitions: |       |       |   |        |         |  |   |       
|                        | - CAY |       | $ | 63,175 |         |  | $ | 61,698 |       
|                        | - CFL |       |   | 73,750 |         |  |   |       |       
|                        |       |       |   |        |         | 
|                        |       | Total |   | $      | 136,925 |  |   | $      | 61,698 | 
|                        |       |       |   |        |         | 



|                                                                |  |      |        |  |      |   |        |      |  |   |       | 
|--------------------------------------------------------------- |  | ---- | ------ |  | ---- | - | ------ | ---- |  | - | ----- | 
|                                                                |  | 2005 |        |  | 2004 |   |        | 2003 | 
|                                                                |  |      |        |  |      |   |        |      | 
|Container investment revenue earned from CAY                    |  | $    | 25,940 |  |      | $ | 14,042 |      |  | $ | 7,184 | 
|Fortis interest expense (acting as agent for the loan facility) |  |      | 8,312  |  |      |   | 3,703  |      |  |   | 1,660 | 
|                                                                |  |      |        |  |      |   |        |      | 
|Total                                                           |  | $    | 34,252 |  |      | $ | 17,745 |      |  | $ | 8,844 | 
|                                                                |  |      |        |  |      |   |        |      | 

9.   Amounts receivable from a related
party




10. Amount payable to a related party




F-54