##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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Form 10-K



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(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, 2001

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE


SECURITIES EXCHANGE ACT OF 1934


For the transition period
from:                     to

Commission file number: 0-24464

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.)

16, ALLÉE MARCONI, BOITE POSTALE 260,
L-2120 LUXEMBOURG

(Address of principal executive offices)(zip
code)


Registrants telephone number, including
area codes:

(352) 453145




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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

(Title of Class)


Indicate by check mark whether the Registrant
(1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past
90 days.  YES x  NO o

Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to be best of
Registrants knowledge, in definitive proxy or information
statements incorporated by reference in PART III of this
Form 10-K or any amendment to this
Form 10-K.   x

The aggregate market value of voting stock of the
registrant held by non-affiliates as of March 18, 2002
(Common Shares) was approximately $29,458,320.

The number of Common Shares outstanding as of
March 21, 2002:

|       |  |                             
|------ |  | ----------------------------
|Class  |  | Number of Shares Outstanding
|       |  |                             
|Common |  | 7,364,580                   

Portions of the following documents have been
incorporated by reference into this report.

|                                                       |  |                            
|------------------------------------------------------ |  | ---------------------------
|Document                                               |  | Parts in Which Incorporated
|                                                       |  |                            
|Proxy Statement for Annual Meeting to be held in
	2002 |  | Part III                   



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TABLE OF CONTENTS



|              |                                                                                                 |  |  |  |  |  |  | 
|------------- | ----------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|              | INTRODUCTORY NOTE                                                                              
|PART I       
|              | Item 1 -- Description of Business                                                              
|              | Item 2 -- Properties                                                                           
|              | Item 3 -- Legal Proceedings                                                                    
|              | Item 4 -- Submission of Matters to a Vote of Security Holders                                  
|PART II      
|              | Item 5 -- Market for the Companys Common Equity and Related Stockholder Matters               
|              | Item 6 -- Selected Financial Data                                                              
|              | Item 7 -- Managements Discussion and Analysis of Financial Condition and Results of Operations
|              | Item 7A -- Quantitative and Qualitative Disclosures about Market Risk                          
|              | Item 8 -- Financial Statements and Supplementary Data                                          
|              | Item 9 -- Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 
|PART III     
|PART IV      
|              | Item 14 -- Exhibits, Financial Statement Schedules, and Reports on Form 8-K                    
|Exhibit 10.4 
|Exhibit 10-5 
|Exhibit 10.6 
|Exhibit 10.7 
|Exhibit 10.16
|Exhibit 10.17
|Exhibit 10.18
|Exhibit 10.19
|Exhibit 10.20
|Exhibit 10.21
|Exhibit 21.1 
|Exhibit 23.1 



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##### Table of Contents



TABLE OF CONTENTS

The Cronos Group

|                  |  |   |    |                                                                                        |  |      |    | 
|----------------- |  | - | -- | -------------------------------------------------------------------------------------- |  | ---- | -- | 
|                  |  |   |    |                                                                                        |  | Page
|                  |  |   |    |                                                                                        |  |     
|Introductory Note |  |   | ii |                                                                                       
|                 
|PART I           
|Item 1            |  |  |    | Description of Business                                                                |  |      | 1  | 
|Item 2            |  |  |    | Properties                                                                             |  |      | 9  | 
|Item 3            |  |  |    | Legal Proceedings                                                                      |  |      | 9  | 
|Item 4            |  |  |    | Submission of Matters to a Vote of Security
	Holders                                   |  |      | 11 | 
|                 
|PART II          
|Item 5            |  |  |    | Market for the Companys Common Equity and
	Related Stockholder Matters                |  |      | 12 | 
|Item 6            |  |  |    | Selected Financial Data                                                                |  |      | 13 | 
|Item 7            |  |  |    | Managements Discussion and Analysis of
	Financial Condition and Results of Operations |  |      | 14 | 
|Item 7A           |  |  |    | Quantitative and Qualitative Disclosures about
	Market Risk                            |  |      | 23 | 
|Item 8            |  |  |    | Financial Statements and Supplementary Data                                            |  |      | 23 | 
|Item 9            |  |  |    | Changes In and Disagreements With Accountants on
	Accounting and Financial Disclosure  |  |      | 23 | 
|                 
|PART III         
|                 
|PART IV          
|Item 14           |  |  |    | Exhibits, Financial Statement Schedules, and
	Reports on Form 8-K                      |  |      | 25 | 

i



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INTRODUCTORY NOTE

Unless the context indicates otherwise, the
Company means The Cronos Group and, where
appropriate, includes its subsidiaries and predecessors, while
Cronos or the Group means The Cronos
Group together with its subsidiaries and predecessors.

TEU means twenty-foot equivalent
units, the standard unit of physical measurement in the
container industry. All references herein to $ or
Dollars are to United States dollars.

All statements in this report regarding the
market for the Companys container leasing services and the
Companys revenues, expenses, and financial condition, and
any statement containing the words anticipate,
believe, plan, estimate,
expect, intend, or other similar
expressions, constitute forward-looking statements. Our actual
results of operations may differ materially from those contained
in any forward-looking statement. This cautionary statement
applies to all forward-looking statements wherever they appear
in this report.

An investment in the common shares of the Company
involves a high degree of risk. The principal risks that attend
the Company and its business include the following:



| |                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Cronos is heavily dependent upon third-parties to
	supply it with the capital needed to acquire containers; such
	capital may not be available to the Group to enable it to expand
	its fleet of containers.                                                                                                                            
|
| | The Group is in a dispute with a group of
	container owners, who have filed two lawsuits against the Group,
	one in Luxembourg claiming damages of $2.6 million, plus
	interest and costs, and the second, in the United Kingdom,
	claiming damages of $0.5 million, plus interest and costs.                                           
|
| | The Company settled a Securities and Exchange
	Commission (SEC) investigation in November 1999. The
	Company agreed to cease and desist from committing or causing
	any future violation of certain antifraud, reporting, record
	keeping, and internal control provisions of the Federal
	securities laws.                           
|
| | The market for the Companys outstanding
	common shares is not liquid. The Companys six largest
	groups of shareholders control approximately 74% of its
	outstanding common shares. For 2001, the average daily trading
	volume in the Companys shares was 2,617 shares, or
	approximately 0.04% of the Companys outstanding shares.
|
| | The Group is subject to other risks in the
	operation of its business. For a discussion of the container
	leasing industry and the Groups business, see
	Description of Business and Managements
	Discussion and Analysis of Financial Condition and Results of
	Operations herein.                                               

For a discussion of the Groups legal
proceedings, see Legal Proceedings herein. For a
discussion of the Groups commitments and contingencies,
see Note 13, Commitments and Contingencies, to
the Companys Consolidated Financial Statements. For a
discussion of the market for the Companys common shares,
see Market for the Companys Common Equity and
Related Shareholder Matters herein.

ii



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##### Table of Contents






PART I




Item 1  Description of
Business

Introduction

The Company is a limited liability company
(société anonyme)organized in Luxembourg with
its registered office at 16, Allée Marconi, Boite
Postale 260, L-2120 Luxembourg (telephone
(352) 453145). The Company is registered with the
Luxembourg Registrar of Companies under registration number
R.C.S. Lux. B. 27489. Cronos Containers Limited, the
Companys principal container leasing subsidiary, is a
UK corporation located at Orchard Lea, Winkfield Lane,
Winkfield, Windsor, Berkshire, SL4 4RU, England.

Cronos is the successor to Intermodal Equipment
Associates (IEA) and Leasing Partners International
(LPI). IEA began managing and leasing dry cargo
containers in 1978, primarily under master leases. LPI was
established in 1983 to manage and lease refrigerated containers.
In 1990, LPI acquired IEA and the companies combined their
operations under the new name Cronos. In December 1995 and
January 1996, the Company and Barton Holding Ltd., a selling
shareholder, sold in a public offering (the Public
Offering) 3,643,000 common shares of the Company.

Cronos is one of the worlds leading lessors
(by aggregate TEU capacity) of intermodal marine containers. It
owns and manages a fleet of dry cargo, refrigerated, tank and
dry freight special containers. Dry freight specials represent a
small but growing segment of the world container fleet, which
include rolltrailers, cellular palletwide containers
(CPCs), flatrack and open top containers. Through an
extensive global network of offices and agents, Cronos leases
both its own and other owners containers to over 450 ocean
carriers and transport operators, including all of the 25
largest ocean carriers.

Industry
Background

A marine cargo container is a reusable metal
container designed for the efficient carriage of cargo with a
minimum of exposure to loss through damage or theft. Containers
are manufactured to conform to world-wide standards of container
dimensions and container ship fittings adopted by the
International Standards Organization (ISO) in 1968.
The standard container is either 20 long x 8 wide x
86 high (one TEU) or 40 long x 8 wide x
86 high (two TEU). Standardization of the
construction, maintenance and handling of containers allows
containers to be picked up, dropped off, stored and repaired
effectively throughout the world. This standardization is the
foundation on which the container industry has developed.

Standard dry cargo containers are rectangular
boxes with no moving parts, other than doors and are typically
made of steel. They are constructed to carry a wide variety of
cargoes ranging from heavy industrial raw materials to
light-weight finished goods. Specialized containers such as
refrigerated and tank containers are utilized for the transport
of temperature-sensitive goods and for the carriage of liquid
cargo. CPCs provide shipping lines with a container with extra
width for the carriage of unitized or palletized cargoes. Dry
cargo containers currently constitute approximately 87% (in TEU)
of the world-wide container fleet. Refrigerated containers and
tank containers currently constitute approximately 7% (in TEU)
of the world-wide container fleet, with open-tops and other
specialized containers constituting the remaining 6%. See
Fleet Profile below.

One of the primary benefits of containerization
has been the ability of the shipping industry to effectively
lower freight rates due to the efficiencies created by
standardized intermodal containers. Containers can be handled
much more efficiently than loose cargo and are typically shipped
via several modes of transportation, including truck, rail and
ship. Containers require loading and unloading only once and
remain sealed until arrival at the final destination,
significantly reducing transport time, labor and handling costs
and losses due to damage and theft. Efficient movement of
containerized cargo between ship and shore reduces the amount of
time that a ship must spend in port and reduces the transit time
of freight moves.

The logistical advantages and reduced freight
rates brought about by containerization have been major
catalysts for world trade growth since the late 1960s, resulting
in increased demand for containers. The worlds container
fleet has grown from an estimated 270,000 TEU in 1969 to
approximately 16 million TEU by the end of 2001.

1



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The container leasing business is cyclical, and
depends largely upon the rate of increase in the volume of world
trade. The container leasing industry has experienced cyclical
downturns during the last sixteen years.

Benefits of
Leasing

Leasing companies own approximately 47% of the
worlds container fleet with the balance owned
predominantly by shipping lines. Shipping lines, which
traditionally operate on tight profit margins, often supplement
their owned fleet of containers by leasing a portion of their
equipment from container leasing companies, and in doing so,
achieve the following financial and operational benefits:



| |                                                                                                                                                                         
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Leasing allows the shipping lines to utilize 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;                                                      
|
| | Leasing enables shipping lines to expand their
	routes and market shares at a relatively low cost without making
	a permanent commitment to support their new structure;
|
| | Leasing allows shipping lines to respond to
	changing seasonal and trade route demands, thereby optimizing
	their capital investment and storage costs.                 

Types of
Leases

Direct financing leasesare usually long-term in nature and
require relatively low levels of customer service. They
ordinarily require fixed payments over a defined period and
provide customers with an option to purchase the subject
containers at the end of the lease term. Per diem rates
typically include an element of repayment of capital and
therefore are higher than rates charged under either term or
master leases.

Master leasesare
leases under which a customer reserves the right to lease a
certain number of containers as needed under a general agreement
between the lessor and the lessee. Such leases provide customers
with greater flexibility by allowing customers to pick-up and
drop-off containers where and when needed, subject to
restrictions and availability, on pre-agreed terms. The
commercial terms of master leases are negotiated annually.
Master leases also define the number of containers that may be
returned within each calendar month, the return locations and
applicable drop-off charges. Due to the increased flexibility
they offer, master leases usually command higher per diem rates
and generate more ancillary fees (including pick-up, drop-off,
handling and off-hire fees) than term leases. Ocean carriers
generally use master leases to help manage trade imbalances
(where more containerized cargo moves in one direction than
another) by picking up a container in one port and dropping it
off at another location after one or more legs of a voyage.

Term leasesare for
a fixed period of time and include both long-and short-term
commitments, with most extending from three to five years. Term
lease agreements may contain early termination penalties that
apply in the event of early redelivery. In most cases, however,
equipment is not returned prior to the expiration of the lease.
Term leases provide greater revenue stability to the lessor, but
at lower lease rates than master leases. Ocean carriers use
long-term leases when they have a need for identified containers
for a specified term. They differ from master leases in that
they define the number of containers to be leased and the lease
term.

The percentage of equipment on term leases as
compared to master leases varies widely among leasing companies,
depending upon each companys strategy on margins,
operating costs and cash flows.

Lease rates depend on several factors including
the type of lease, length of term, maintenance provided, type
and age of the equipment and market conditions.

Company
Strategy

Cronos focuses primarily on providing flexible
term and master leases to the worlds top ocean carriers,
across a broad range of dry and specialized containers.

2



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Lease
Profile

Cronos offers flexible leasing arrangements
primarily through master leases on dry cargo containers.

|                 |              |                                         |     |              |      |      |     |          |      |  |     |     |      |  |     |     |      | 
|---------------- | ------------ | --------------------------------------- | --- | ------------ | ---- | ---- | --- | -------- | ---- |  | --- | --- | ---- |  | --- | --- | ---- | 
|                 |              |                                        
|                 |              | Percentage of Fleet by Lease Type as of
|                 |              | December 31, 2001                      
|                 |              |                                        
|                 |              |                                         |     | Dry Freight 
|Type of Lease    |              | Dry Cargo                               |     | Refrigerated |      | Tank |     | Specials
|                 |              |                                         |     |              |      |      |     |         
|Master           |              |                                         | 63% |              |      |      | 40% |          |      |  | 58% |     |      |  | 49% |    
|Term             |              |                                         |     |              |      |      |     |          |      |  |     |     |      |  |     |    
|                 |  short-term |                                         |     | 5%           |      |      |     | 4%       |      |  |     | 6%  |      |  |     | 11% |     
|                 |  long-term  |                                         |     | 27%          |      |      |     | 53%      |      |  |     | 36% |      |  |     | 32% |     
|Direct Financing |              |                                         | 5%  |              |      |      | 3%  |          |      |  | %  |     |      |  | 8%  |    
|                 |              |                                         |     |              |      |      |     |          |      |  |     |     |      |  |     |    
|                 |              | Total                                   |     |              | 100% |      |     |          | 100% |  |     |     | 100% |  |     |     | 100% | 
|                 |              |                                         |     |              |      |      |     |          |      |  |     |     |      |  |     |    

The terms and conditions of the Groups
leases provide that customers are responsible for paying all
taxes and service charges arising from container use,
maintaining the containers in good and safe operating condition
while on lease and paying for repairs, excluding ordinary wear
and tear, upon redelivery. Some leases provide for a
damage protection plan whereby lessees, for an
additional payment (which may be in the form of a higher per
diem rate), are relieved of the responsibility of paying some of
the repair costs upon redelivery of the containers. The Group
has historically provided this service on a limited basis to
selected customers. Repairs provided under such plans are
carried out by the same depots, under the same procedures, as
are repairs to containers not covered by such plans. Customers
are also required to insure leased containers against physical
damage, loss and against third-party liability for loss, damage,
bodily injury or death.

Customers

Cronos is not dependent upon any particular
customer or group of customers. None of the Groups
customers accounts for more than 10% of its revenue and the ten
largest customers accounted for approximately 35% of the total
TEU fleet-on-hire. The majority of Cronos customers are
billed and pay in United States dollars.

Cronos sets maximum credit limits for all
customers, limiting the number of containers leased to each
customer according to established credit criteria. Cronos
continually tracks its credit exposure to each customer.
Cronos credit committee meets quarterly to analyze the
performance of existing customers and to recommend actions to be
taken in order to minimize credit risks. Cronos uses specialist
third-party credit information services and reports prepared by
local staff to assess credit applications.

The Group may be subject to unexpected loss in
rental revenue from container lessees that default under their
container lease agreements.

Fleet
Profile

Cronos focuses on supplying to its customers
high-quality containers, manufactured to specifications that
exceed ISO standards and designed to minimize repair and
operating costs. Cronos operates primarily dry cargo and
refrigerated containers but, since 1993, it has diversified into
tanks and other specialized containers. Cronos believes that
this fleet diversification enables it to increase business with
its customers by supplying a wide range of their equipment
requirements.

Dry cargo containers are the most commonly used
type of container in the shipping industry. Over 99% of
Cronos dry cargo fleet is constructed of all Corten®
steel (i.e.,Corten® roofs, walls, doors and
undercarriage), which is a high-tensile steel yielding greater
damage and corrosion resistance than mild steel.

Refrigerated containers are used to transport
temperature-sensitive products, such as meat, fruit, vegetables
and photographic film. All of Cronos refrigerated
containers have high-grade stainless steel interiors. The
majority of Cronos 20 refrigerated containers have
high-grade stainless steel walls, while most of the 40
refrigerated containers are steel framed with aluminum outer
walls to reduce weight. As with the dry cargo containers, all
refrigerated containers are designed to minimize repair and
maintenance and maximize damage resistance. Cronos
refrigerated containers are designed and manufactured to include
the latest generation refrigeration equipment, with the most
recently built units controlled by modular microprocessors.

3



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Cronos tank containers, both owned and
managed, are constructed and maintained in accordance with
strict international codes for the world-wide transport and
storage of bulk liquids on both land and sea. These codes
include ISO, International Maritime Organization
(IMO) and ASME VIII Pressure Vessel Design Code. The
fleet comprises both IMO1 and IMO2 type tanks, enabling them to
carry highly flammable, corrosive, toxic and oxidizing
substances as well as non hazardous cargoes such as food stuffs
and oils. They range in capacity from 17,500 litre to 31,000
litre and are generally insulated and equipped with heating
(steam or electrical) or alternatively, a refrigeration system.

Cronos diversified into dry freight specials in
1996, when it acquired Intermodal Leasing AB, a Swedish company
with a fleet of approximately 800 rolltrailers, a type of
heavy-duty chassis used for moving cargo onto and off ships.
Cronos markets this product on a world-wide basis through its
network of offices and agents, and has increased its rolltrailer
fleet to 2,540 TEU at the end of 2001. Cronos owns the patents
for the CPC, a specialized container designed specifically for
the carriage of European coastal cargo on Euro or
metric pallets. CPCs allow for the side-by-side
stowage of pallets which is not possible in a standard ISO
container, therefore increasing the load capacity per container.
Since 1996, Cronos has added 5,388 TEU of CPCs into its
container fleet net of disposals.

During 2001, the size of the Groups total
fleet decreased by 3,300 TEU representing new container
production of 8,500 TEU net of disposals of 11,800 TEU. Total
new container production in 2001 represented an investment of
$32.7 million. Over 66%, or $22 million, of the new
container investment, was invested in refrigerated containers.
Of the balance of new container purchases, $3.8 million was
invested in dry cargo containers, $4.3 million was in
invested in CPCs, $1.3 million was invested in
rolltrailers, and the remaining $1.3 million was invested
in open top and flatrack containers.

|                      |                            |                                 |       |      |  |      |       |      |  |      |       |     |  |  |       |     |  |  |       |     | 
|--------------------- | -------------------------- | ------------------------------- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | --- |  |  | ----- | --- |  |  | ----- | --- | 
|                      |                            |                                
|                      |                            | Cronos Fleet (in TEU thousands)
|                      |                            | at December 31,                
|                      |                            |                                
|                      |                            | 2001                            |       | 2000 |  | 1999 |       | 1998 |  | 1997
|                      |                            |                                 |       |      |  |      |       |      |  |     
|Dry Cargo             |                            |                                 | 368.4 |      |  |      | 375.9 |      |  |      | 346.6 |     |  |  | 337.8 |     |  |  | 345.9 |    
|Refrigerated          |                            |                                 | 13.9  |      |  |      | 12.5  |      |  |      | 13.6  |     |  |  | 14.7  |     |  |  | 16.0  |    
|Tank                  |                            |                                 | 2.3   |      |  |      | 2.0   |      |  |      | 2.0   |     |  |  | 2.0   |     |  |  | 2.0   |    
|Dry Freight Specials: |                            |                                 |       |      |  |      |       |      |  |      |       |     |  |  |       |     |  |  |       |    
|                      | CPCs                       |                                 |       | 5.4  |  |      |       | 3.3  |  |      |       | 3.1 |  |  |       | 2.4 |  |  |       | 2.4 | 
|                      | Rolltrailer                |                                 |       | 2.5  |  |      |       | 2.5  |  |      |       | 1.9 |  |  |       | 2.2 |  |  |       | 2.0 | 
|                      | Other Dry Freight Specials |                                 |       | 3.4  |  |      |       | 3.0  |  |      |       | 2.7 |  |  |       | 2.3 |  |  |       | 1.5 | 
|                      |                            |                                 |       |      |  |      |       |      |  |      |       |     |  |  |       |     |  |  |       |    
|Total Fleet           |                            |                                 | 395.9 |      |  |      | 399.2 |      |  |      | 369.9 |     |  |  | 361.4 |     |  |  | 369.8 |    
|                      |                            |                                 |       |      |  |      |       |      |  |      |       |     |  |  |       |     |  |  |       |    

Purchasing
Policy

Cronos purchasing policy is driven by
capital availability, market requirements and anticipated future
demand, including demand generated by trade growth and the
replacement of containers retired from fleets around the world.
The Group believes that the world-wide manufacturing capacity
for all container types is adequate to meet its current and
near-term requirements.

In recent years, China has emerged as the primary
location for almost all types of container manufacturing.
Refrigeration units, which represent approximately half of the
cost of a refrigerated container, are purchased from Thermo King
and Carrier Transicold, the primary suppliers of container
refrigeration units based in the United States. These units are
shipped to the container manufacturer for installation into the
container.

All of the tank containers in the Cronos fleet
have been purchased from manufacturers based in the United
Kingdom, South Africa and Belgium.

Repair and
Maintenance

All containers are inspected and repaired when
redelivered by customers who are obligated to pay for all damage
repairs, excluding wear and tear, according to standardized
industry guidelines. Some customers are relieved of the
responsibility for paying some repair costs upon redelivery of
containers, as described under

4



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##### Table of Contents



Description of Business  Types
of Leases. Depots in major port areas perform repair and
maintenance that is verified by either independent surveyors or
the Cronos technical and operations staff.


Before any repair or refurbishment is authorized
on older containers in the Cronos fleet, the Cronos technical
and operations staff review the age, condition and type of
container and its suitability for continued leasing. Cronos
compares the cost of such repair or refurbishment with the
prevailing market resale price that might be obtained for that
container and makes the appropriate decision whether to repair
or sell the container. Cronos is authorized to make this
decision for most of the owners for whom it manages equipment
and makes these decisions by applying the same standards to the
managed containers as to its own containers.

Disposition of
Used Containers

Cronos estimates that the period for which a
container may be used as a leased marine cargo container ranges
from 12 to 15 years.

Cronos disposes of used containers in a
world-wide market in which buyers include wholesalers,
mini-storage operators, construction companies and others. The
market for used containers generally depends on new container
prices, the quantity of containers targeted for disposal and the
overall lease market for containers at a particular location.

Operations

Cronos sales and marketing operations are
conducted through Cronos Containers Limited (CCL), a
wholly-owned subsidiary based in the United Kingdom. CCL is
supported in this role by area offices and dedicated agents
located in San Francisco; New Jersey; Antwerp; Genoa;
Gothenburg; Singapore; Hong Kong; Sydney; Tokyo; Taipei; Seoul;
Rio de Janeiro; Shanghai and Madras.

Cronos also maintains agency relationships with
20 independent agents around the world, who are generally paid a
commission based upon revenues generated in the region or the
number of containers that are leased from their area. These
agents are located in jurisdictions where the volume of
Cronos business necessitates a presence in the area but is
not sufficient to justify a fully-functioning Cronos office or
dedicated agent. Agents provide marketing support to the area
offices covering the region, together with limited operational
support.

In addition, Cronos relies on the services of
over 300 independently-owned and operated depots around the
world to inspect, repair, maintain and store containers while
off-hire. The Groups area offices authorize all container
movements into and out of the depot and supervise all repairs
and maintenance performed by the depot. The Groups
technical staff set the standards for repair of the Cronos fleet
throughout the world and monitor the quality of depot repair
work. The depots provide a link to the Groups operations,
as the redelivery of a container into a depot is the point at
which the container is off-hired from one customer and repaired
in preparation for re-leasing to the next customer.

Cronos global network is integrated with
its computer system and provides 24-hour communication between
offices, agents and depots. The system allows Cronos to manage
and control its fleet on a global basis, providing Cronos with
the responsiveness and flexibility necessary to service the
master lease market effectively. This system is an integral part
of Cronos service, as it processes information received
from the various offices, generates billings to lessees and
produces a wide range of reports on all aspects of the
Groups leasing activities. The system records the life
history of each container, including the length of time on-hire,
repair costs, as well as port activity trends, leasing activity
and equipment data per customer. The operations and marketing
data is fully interfaced with Cronos finance and
accounting system to provide revenue, cost and asset information
to management and staff around the world.

Competition

Competition among container leasing companies is
based upon several factors, including the location and
availability of inventory, lease rates, the type, quality and
condition of the containers, the quality and flexibility of the
service offered, the availability of suitable financing and the
confidence in and professional relationship between the customer
and the lessor. Other factors include the speed with which a
leasing company can prepare its containers for lease and the
ease with which a lessee believes it can do business with a
lessor or its local area office. Not all container leasing
companies compete in the same market as some supply only dry

5



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cargo containers and not specialized containers.
Cronos has historically targeted three particular markets: the
master lease dry cargo container market, the refrigerated
container market and the tank container market. In recent years,
however, the Group has expanded into other specialized container
products and other types of leases.


Cronos competes with various container leasing
companies in the markets in which it conducts business,
including Transamerica Leasing, GE Seaco, Triton Container
International Ltd., Textainer Corp. and others. Mergers and
acquisitions have been a feature of the container leasing
industry for over a decade and the leasing market is essentially
comprised of three distinct groups: the very large (in TEU
terms) market leaders Transamerica Leasing and GE Seaco, who
between them, with fleets of around 1.1 million TEU each in
mid-2001, control in excess of one third of the total leased
fleet; a substantial middle tier of companies possessing fleets
in the 185,000 to 950,000 TEU range, and the smaller more
specialist fleet operators. In recent years, several major
leasing companies, as well as numerous smaller ones, have been
acquired by competitors. Cronos believes that the current trend
towards consolidation in the container leasing industry will
continue, up to a point. There appears to be an upper limit to
the size of the optimum fleet, beyond which dis-economies of
scale and/or barriers against further market share development
become apparent. Furthermore, ocean carriers have a tendency to
support a number of lessors simultaneously in order to maximize
competition and increase the number of available locations for
redelivery of containers. Economies of scale, world-wide
operations, diversity, size of fleet and financial strength are
increasingly important to the successful operation of a
container leasing business. Additionally, as containerization
continues to grow, as regions such as China, South America and
the Indian sub-continent generate an increasing volume of
containerized cargo, customers may demand more flexibility from
leasing companies, particularly regarding per diem rates,
pick-up and drop-off locations, and the availability of
containers.

In recent years, Cronos and other lessors have
developed certain internet based applications. For Cronos, these
applications allow customer access to make on-line product
inquiries. The Group is continuing to develop this side of its
business and will introduce other internet options as suitable
applications are identified.

Some of Cronos competitors have greater
financial resources than Cronos and may be more capable of
offering lower per diem rates on a larger fleet. In Cronos
experience, however, ocean carriers will generally lease
containers from more than one leasing company in order to
minimize dependence on a single supplier. Furthermore, by having
as many suppliers as possible, the carrier is able to maximize
the number of off-hires and off-hire locations available, as
typically each supplier may limit the number of containers which
can be off-hired by location. The advantage to the carrier is
that this prevents the carrier from being burdened with an
excess number of off-hired containers, which incur both storage
and per diem charges, in a low demand market.

Operating
Segments

Cronos has three operating segments which are
determined based on source of container funding:



| |                                                                           
| | --------------------------------------------------------------------------
| | 1. US Public Limited Partnerships (US
	Limited Partnerships),           
|
| | 2. Other Managed Container Owners
	(Other Managed Container Owners), and
|
| | 3. Owned Containers (Owned
	Containers).                                

Cronos has used various financing programs within
its three segments. These financing programs enable Cronos to
expand its fleet without being dependent upon any single source
of financing. Cronos believes it is important to diversify its
financing sources both by market and type of financial
instrument. This diversification reduces its reliance on
individual financial markets and provides for a more balanced
financing structure.

The following chart summarizes the composition of
the Cronos fleet (based on original equipment cost) at
December 31 for each of the years indicated:

|                               |       |      |     |      |  |      |     |      |  |      |     |      |  |  |     |      |  |  |     |      | 
|------------------------------ | ----- | ---- | --- | ---- |  | ---- | --- | ---- |  | ---- | --- | ---- |  |  | --- | ---- |  |  | --- | ---- | 
|                               |       | 2001 |     | 2000 |  | 1999 |     | 1998 |  | 1997
|                               |       |      |     |      |  |      |     |      |  |     
|US Limited Partnerships        |       |      | 29% |      |  |      | 31% |      |  |      | 33% |      |  |  | 34% |      |  |  | 35% |     
|Other Managed Container Owners |       |      | 45% |      |  |      | 45% |      |  |      | 45% |      |  |  | 41% |      |  |  | 40% |     
|Owned Containers               |       |      | 26% |      |  |      | 24% |      |  |      | 22% |      |  |  | 25% |      |  |  | 25% |     
|                               |       |      |     |      |  |      |     |      |  |      |     |      |  |  |     |      |  |  |     |     
|                               | Total |      |     | 100% |  |      |     | 100% |  |      |     | 100% |  |  |     | 100% |  |  |     | 100% | 
|                               |       |      |     |      |  |      |     |      |  |      |     |      |  |  |     |      |  |  |     |     

6



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As of December 31, 2001, no single owner,
other than the Group, held more than 13% of the Cronos fleet
(based on original equipment cost).

All containers, whether owned or managed, are
leased as part of a single global fleet, without regard to
ownership. No customer generates more than 10% of a
segments revenues or of the total revenues of the Group.
The Group evaluates the performance of its operating segments
based on operating profit or loss. Substantially all of the
Groups lease revenue is earned on containers used in
global trade routes. This revenue is deemed to be earned based
on the physical location of the containers while on lease.
Accordingly, the Group believes that it does not possess
discernible geographic reporting segments as defined in
Statement of Financial Accounting Standards (SFAS)
No. 131, Disclosures about Segments of an Enterprise
and Related Information. See Note 2 to the 2001
Consolidated Financial Statements.

Segment revenues from external customers,
operating profit or loss and total assets are disclosed in the
Groups Financial Statements and are incorporated herein by
reference.

US Limited
Partnerships

Cronos raised capital through investment
syndication activities from 1979 to 1997 by organizing and
sponsoring public limited partnership offerings. Cronos
sponsored 16 public limited partnerships and raised over
$478 million from over 37,000 investors, providing the
means to purchase 181,000 TEU of dry cargo containers, 3,500 TEU
of refrigerated containers and 300 TEU of tank containers. A
majority of the limited partners in a partnership can remove the
general partner, thereby terminating the agreement with Cronos.
However, upon any such removal, the general partner is entitled
to payment, generally over five years, of the present fair
market value of its interest in the partnership.

The US Limited Partnerships provide compensation
to Cronos consisting of the following fees and commissions:



| |   |                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Acquisition fees:equal to 5% of the original cost of
	equipment purchased by the partnerships, recognized over a
	12-year period;                                                                                                                                          
|
| |  | Base management fees:equal to 7% of gross lease revenue;                                                                                                                                                                                                                   
|
| |  | General partner share:equal to 5% of distributable cash
	generated by the partnerships operating activities;                                                                                                                                                              
|
| |  | Incentive fees:equal to 15% of distributable cash
	after the limited partners have received a return of their
	adjusted capital contributions and distributions in an amount
	equal to a cumulative compounded rate between 8 to 10% per annum
	(depending on the program);
|
| |  | Reimbursed administrative expenses:for certain overhead and operating
	expenses.                                                                                                                                                                                           

Management and acquisition fees earned by the
Group, were $6.4 million, $8.3 million, and
$8.6 million for the years ended December 31, 2001,
2000 and 1999, respectively.

Other Managed
Container Owners

In addition to US Limited Partnerships, Cronos
manages containers pursuant to agreements negotiated directly
with corporations, partnerships and private individuals located
in Europe, Asia, the United States and South Africa.
Cronos obligations to investors in the partnerships and to
Other Managed Container Owners are substantially similar. The
terms of the agreements vary from 1 to 15 years and take
two principal forms.

Under the first form of agreement, Cronos
generally earns compensation consisting of management fees of
between 5% and 20% of the net lease revenue generated by the
containers. In addition, Cronos has historically earned an
acquisition fee under these agreements of approximately 2.5% to
5% of the aggregate original equipment cost of the equipment
managed for the owners where Cronos has negotiated the purchase
of the equipment. In certain cases, an incentive fee may also be
earned.

Acquisition fees under the agreements are
generally recognized in Cronos statements of operations
over periods ranging from 7 to 15 years, representing the
life of the agreements to which they relate.

The containers managed for these owners may be
combined into pools with containers of similar age and type and
managed pursuant to generally similar management agreements. The
owners of the containers in

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each pool share revenues and expenses, which are
allocated pro rata in order to minimize the effect of possible
over-utilization or under-utilization of any particular
containers. Pooling was designed to minimize conflicts of
interest and promote administrative convenience.


Revenues and expenses are allocated among owners
based upon the aggregate original equipment cost of the
containers owned by each owner and the number of days that such
containers were in the pool, compared to the total aggregate
original equipment cost of all containers in the pool and the
total number of days in the period.

Under the second form of agreement, the container
owner is entitled to a fixed payment for a specified term (see
Item 7  Managements Discussion and
Analysis of Financial Condition and Results of Operations,
herein). Minimum lease payments on the agreements, which have
fixed payment terms are presented in Note 11(c) to the
Groups 2001 Consolidated Financial Statements.

Approximately 47% (based on original equipment
cost) of the agreements with Other Managed Container Owners
contain early termination options, whereby the container owner
may terminate the agreement if certain performance thresholds
are not achieved. At December 31, 2001, approximately 35%
(based on original equipment cost) of agreements were eligible
for early termination. Cronos believes that early termination of
these agreements by the Other Managed Container Owners is
unlikely.

Approximately 45% (based on original equipment
cost) of agreements with Other Managed Container Owners provide
that a change in ownership of the Group, without the prior
consent of the container owner, may constitute an event of
default under the agreement. In substantially all of these
agreements, the consent of the container owners may not be
unreasonably withheld. In the event that consent is not
obtained, 34% of agreements may require the Group to transfer
possession of the equipment to another equipment manager. Such
transfer of possession may result in the Group incurring certain
costs. The remaining 11% of agreements may require the Group to
purchase the equipment from the container owners pursuant to the
terms of their respective agreements, generally a stipulated
percentage (determined by age of the equipment) of the original
cost of the equipment.

Total fees earned by the Group from Other Managed
Container Owners were $3 million, $7.4 million and
$5.9 million for the years ended December 31, 2001,
2000 and 1999, respectively.

Owned
Containers

Cronos uses various forms of debt funding to
finance its owned fleet including bank loans and capital leases.
Container ownership provides the Group with the ability to
generate lease revenues over the life of the container, matched
with relatively fixed costs of interest and depreciation
expenses. From time to time, Cronos also owns containers on a
temporary basis until such time that the containers are sold to
its US Limited Partnerships and Other Managed Container Owner
programs. Most containers targeted for transfer to managed
programs are purchased new by Cronos, and sold to a managed
container owner within six months. This strategy allows Cronos
more flexibility to negotiate and buy containers strategically,
based on market conditions and later sell these containers after
the initial lease profile is established for a particular group
of containers.

Environmental

Countries that are signatories to the Montreal
Protocol on the environment agreed in November 1992 to restrict
the use of environmentally destructive refrigerants, banning
production (but not use) of chlorofluorocarbon compounds
(CFCs) beginning in January 1996. CFCs are used in
the operation, insulation and manufacture of refrigerated
containers. All of Cronos refrigerated containers
purchased since June 1993 use non-CFC refrigerant gas in the
operation and insulation of the containers, although a reduced
quantity of CFCs are still used in the container manufacturing
process. The replacement refrigerant used in the Groups
new refrigerated containers may also become subject to similar
governmental regulations. During 2001, Cronos conducted a review
of the majority of its owned containers that were manufactured
in 1992 and earlier. As a result of this review, a
$2 million impairment charge was recorded against the
carrying value of 1,307 containers. This review has targeted
owned off-hire containers for immediate disposal. Owned
containers that are currently on a lease will be disposed of
when they are off-hired. In the past the Group has retrofitted
certain refrigerated containers with non-CFC refrigerants.
Cronos has decided not to retrofit any further

8



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##### Table of Contents



containers. In the unlikely event that any such
further retrofitting expenses should be required, they would not
be material to the financial position or results of operations
of the Group. The environmental impact of refrigerant gases has
become increasingly prominent. On January 1, 2001, it
became illegal for environmentally destructive refrigerants to
be handled, other than for disposal, in almost all countries
that are members of the European Union.


Employees

As of December 31, 2001, Cronos had 83
employees world-wide; 23 were located in the United States,
45 in Europe and 15 in Asia and Australia combined.
None of Cronos employees is covered by a collective
bargaining agreement.

Insurance

Cronos lease agreements typically require
lessees to obtain insurance to cover all risks of physical
damage and loss of the equipment under lease, as well as public
liability and property damage insurance. However, the precise
nature and amount of the insurance carried by each ocean carrier
varies from lessee to lessee.

In addition, Cronos has purchased secondary
insurance effective in the event that a lessee fails to have
adequate primary coverage. This insurance covers liability
arising out of bodily injury and/or property damage as a result
of the ownership and operation of the containers, as well as
insurance against loss or damage to the containers, loss of
lease revenues in certain cases and costs of container recovery
and repair in the event that a customer goes into bankruptcy.
Cronos believes that the nature and amounts of its insurance are
customary in the container leasing industry and subject to
standard industry deductions and exclusions.




Item 2 
Properties

Cronos leases approximately 7,000 square feet of
office space in Windsor, England, which was leased back
following the sale of the property in June 2000. Cronos
container leasing operations are located at this office. The
lease at this location expires in June 2002, and Cronos intends
to relocate its leasing operations to another building nearby,
where it currently leases approximately 6,300 square feet.
Cronos also leases approximately 12,160 square feet of office
space (of which approximately 4,260 square feet is sub-let) in
San Francisco, California, where its US Limited Partnership
activities are based. Cronos also conducts container leasing
operations from offices in New Jersey; Genoa; Gothenburg;
Hong Kong; Singapore and Sydney generally under
shorter-term leases of varying durations. The containers owned
and managed by Cronos are described under
Item 1 Description of Business 
Company Strategy  Fleet Profile, Operating
Segments  US Limited Partnerships, Other Managed
Container Owners and Owned Containers, above. As of
December 31, 2001, Cronos owned 56,201 TEU of dry
cargo containers 8,053 TEU of refrigerated containers,
5,388 TEU of CPCs, 1,858 TEU of rolltrailers,
728 EU of tank containers, and 884 TEU of other
specialized equipment. As of December 31, 2001, Cronos
managed a total of 312,169 TEU of dry cargo containers,
5,807 TEU of refrigerated containers, 682 TEU of
rolltrailers, 1,588 TEU of tank containers, and 2,565 TEU
of other specialized equipment.




Item 3  Legal
Proceedings

Dispute with the
Contrin Group

The Group manages containers for investment
entities sponsored by or affiliated with Contrin
Holding S.A., a Luxembourg holding company (collectively,
Contrin). Approximately 1% (measured by TEUs) of the
Groups fleet of containers is owned by Contrin. The Group
is in litigation with Contrin over funds that Contrin claims to
have remitted to Cronos for the purchase of containers. Contrin
claims that in 1994 it transmitted $2.6 million to Cronos
for the purchase of containers. The Group did not receive these
funds and believes that the funds were diverted to an account
controlled by Stefan M. Palatin, a former chairman and
chief executive officer of the Company, and that this was known
or should have been known by Contrin.

On August 8, 2000, Contrin, through its
affiliate, Contrin Worldwide Container Leasing GmbH
(CWC), filed an action in the Luxembourg District
Court against the Company, seeking recovery of
$2.6 million, together with interest and costs. On
January 10, 2001, the Company responded to CWCs

9



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##### Table of Contents



complaint, (i) requesting that the District
Court dismiss the proceeding for lack of jurisdiction over the
dispute, and (ii) denying Contrins claims on the
merits. Since January 10, 2001, each party has supplemented
their pleadings to respond to assertions made by the other
party. The Company anticipates that a final hearing will be held
by the Court during 2002.


To preserve its rights of indemnity in the face
of Contrins claims, the Group, on June 1, 2000, filed
a protective claim in the High Court of Justice, London,
England, against Mr. Palatin and his wife. By its claim,
the Group seeks to establish that the Palatins are liable to the
Group for any liability which the Group may have to Contrin
arising out of the 1994 transfers. On March 29, 2001, the
Group secured a freezing injunction from the High
Court of Justice in aid of its claim against the Palatins. By
the injunction, the Palatins are prohibited from selling,
charging, or otherwise disposing of their interest in an estate
the Group believes is beneficially owned by the Palatins in
Amersham, England. The injunction also extends to Klamath
Enterprises, S.A. (Klamath), a Panamanian
company and the record owner of the estate. The Palatins have
contested the jurisdiction of the High Court of Justice over
them, and have filed an affidavit with the Court asserting that
the estate is owned by Pontino SA, a Panamanian company, in
which they disclaim any interest. The Group believes that the
High Court of Justice has jurisdiction to hear its claim against
the Palatins and that their disclaimer of any beneficial
interest in the Amersham estate is not credible. After agreeing
in the summer of 2001 to a temporary stay of the action in
anticipation of a ruling on the Companys motion to
dismiss, pending in Luxembourg in the CWC action described
above, the Group notified the Palatins counsel, on
December 14, 2001, that it was electing to lift the stay
and to resume prosecution of the action against the Palatins.
The Palatins have renewed their application to the Court
contesting jurisdiction of the Court over them or, in the
alternative, have requested a stay of any further prosecution of
the action pending resolution of a criminal proceeding pending
in Vienna, Austria, against Mr. Palatin. Under the
parties briefing schedule a hearing on the Palatins
motion is scheduled to be heard sometime after May 1, 2002.

On July 13, 2000, the Group also filed a
protective claim against Barclays Bank PLC
(Barclays) in the High Court of Justice, London,
England. Barclays was the bank that received the
$2.6 million from Contrin. By its claim, the Group seeks a
declaration that Barclays is liable to the Group for
$2.6 million, plus interest and costs, arising out of
Contrins 1994 transfer to an account with Barclays in the
name of Mrs. Palatin. In February 2001, the Group obtained
an order from the Court requiring the production of documents by
Barclays. The Group and Barclays have agreed to a stay of the
action while the Group evaluates the documentation produced by
Barclays.

On August 2, 2001, CWC filed a separate
claim against Cronos Containers N.V. (CNV), a
wholly-owned Netherlands Antilles subsidiary of the Company, in
the High Court of Justice, London, England. By its claim, CWC
asserts that CNV, wrongfully and in violation of the container
management agreement between CWC and CNV, failed to distribute
to CWC $0.5 million in distributions for the second through
fourth calendar quarters of 1996. CWC seeks recovery of this
sum, plus interest.

On December 31, 2001, CNV filed its defense
to CWCs claim, denying CWCs claims and denying that
CNV is liable to CWC in any amount. Concurrently with the filing
of its defense to CWCs claims, CNV filed a separate claim
against the Palatins and Klamath, seeking recovery of
$0.5 million from the Palatins that CNV alleges was
misappropriated from CNV by Mr. Palatin.

Collection of
Palatin Notes

As reported by the Company in its Quarterly
Report on Form 10-Q for the quarter ended June 30,
2001, on May 8, 2001, the Massachusetts Superior Court
entered its judgement against Mr. Palatin and Klamath,
affirming the default judgement secured on February 8, 2000
in the New York State Supreme Court by a subsidiary of the
Company, Cronos Equipment (Bermuda) Limited (CEB)
against Mr. Palatin in the amount of $6.6 million. The
Court further ordered the Groups transfer agent to cancel
1,793,798 outstanding common shares of the Company owned of
record by Klamath (the Klamath Shares), beneficially
owned by Mr. Palatin, in partial satisfaction of the New
York State Supreme Court judgement, and to transfer the Klamath
Shares on the books and records of the transfer agent to CEB.
The Groups transfer agent promptly canceled the Klamath
Shares and issued a new stock certificate for 1,793,798 common
shares of the Company to CEB. The Court also ordered
Mr. Palatin and Klamath to pay CEBs fees and
expenses, including attorneys fees, incurred in securing
the final judgement.

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From and after May 8, 2001, the Klamath
Shares, representing 19.6% of the 9,158,378 common shares of the
Company issued and outstanding prior to May 8, are no
longer deemed outstanding common shares of the Company. CEB, as
the holder of the Klamath Shares, will not be entitled to vote
at any meeting of the Companys shareholders or on any
matter put to the shareholders for approval, and will not be
entitled to any dividends or other distributions the Company
declares on its outstanding common shares.

Under Luxembourg law, the Group has three years
to resell the Klamath Shares. If the shares are not resold
within three years, then they are automatically canceled. The
Group may also, under Luxembourg law, seek shareholder approval
for the retirement and cancelation of the shares. The Group does
not presently intend to resell the shares but to cancel and
retire them, either by seeking shareholder approval for a
cancelation and retirement of the shares or by allowing the time
within which to resell the shares to lapse.

As of May 8, 2001, the amount owed by
Mr. Palatin to CEB under the New York judgement totalled
$7.3 million, representing the amount of the judgement
($6.6 million) plus interest thereon at 9% per annum. The
Group reduced the amount owed by Mr. Palatin to CEB under
the judgement to $6 million as a result of the cancelation
of the Klamath Shares, leaving a balance due under the judgement
of $1.3 million as of May 8, 2001. Any future amounts
received from the settlement will be recorded as income when
received.

On November 23, 2001, CEB filed its claim
against Mr. Palatin in the High Court of Justice, London,
England, for the purpose of collecting the remaining balance due
to CEB under the New York judgement. CEB will seek to enforce
the claim against the estate that the Group believes is
beneficially owned by Mr. Palatin in Amersham, England.




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

Not Applicable

11



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##### Table of Contents






PART II




Item 5  Market for the
Companys Common Equity and Related Stockholder
Matters

As of March 15, 2002, there were outstanding
7,364,580 common shares. They were held of record by
approximately 266 holders.

Prior to December 1995, there was no trading
market for the Companys common shares. Subsequent to the
Companys public offering, the common shares were quoted
and traded over-the-counter on the NASDAQ National Market System
under the symbol CRNSF. In March 1999, the Company
announced that it would comply with the reporting requirements
applicable generally to US public companies and would therefore
trade under the symbol CRNS. There is no trading
market for the common shares outside the United States. The
table below shows the high and low reported closing prices for
the common shares on the NASDAQ National Market System for the
last two years for the quarterly periods ending on the dates
indicated. Closing prices are market quotations and reflect
inter dealer prices, without retail mark up, mark down or
commission and may not necessarily represent actual transactions.

|                   |  |             |       |     |  |   |       | 
|------------------ |  | ----------- | ----- | --- |  | - | ----- | 
|                   |  |            
|                   |  | Price Range
|                   |  |            
|                   |  | High        |       | Low
|                   |  |            
|                   |  |            
|March 31, 2000     |  | $           | 6.875 |     |  | $ | 5.000 | 
|June 30, 2000      |  | $           | 5.375 |     |  | $ | 4.375 | 
|September 30, 2000 |  | $           | 5.313 |     |  | $ | 4.500 | 
|December 31, 2000  |  | $           | 5.125 |     |  | $ | 3.875 | 
|March 31, 2001     |  | $           | 4.875 |     |  | $ | 4.250 | 
|June 30, 2001      |  | $           | 5.300 |     |  | $ | 4.000 | 
|September 30, 2001 |  | $           | 5.550 |     |  | $ | 5.000 | 
|December 31, 2001  |  | $           | 5.000 |     |  | $ | 3.750 | 

There are currently no Luxembourg foreign
exchange control restrictions on the payment of dividends on the
common shares or on the conduct of Cronos operations. In
addition, there are no limitations on holding or voting
applicable to foreign holders of common shares, imposed by law,
by the Companys Articles of Incorporation or otherwise,
other than those restrictions which apply equally to Luxembourg
holders of common shares. No dividend declarations have been
made by the Company since its initial public offering in
December 1995.

Under the terms of certain loan agreements, the
Company is restricted from declaring or making dividend payments
unless it achieves specified financial criteria.

The following summary of the material Luxembourg
tax consequences is not a comprehensive description of all of
the tax considerations that are applicable to the holders of
common shares, and does not deal with the tax consequences
applicable to all categories of holders, some of which may be
subject to special rules.

Under present Luxembourg law, as long as the
Company maintains its status as a holding company, no income
tax, withholding tax (including with respect to dividends),
capital gains tax or estate inheritance tax is payable in
Luxembourg by shareholders in respect of the common shares,
except for shareholders domiciled, resident (or, in certain
circumstances, formerly resident) or having a permanent
establishment in Luxembourg. The reciprocal tax treaty between
the United States and Luxembourg limiting the rate of any
withholding tax is therefore inapplicable.

12



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##### Table of Contents






Item 6  Selected Financial
Data

The following table sets forth consolidated
financial information for the Group as of and for the periods
noted. The balance sheet and statements of operations data have
been derived from the Consolidated Financial Statements of the
Company. The table should be read in conjunction with
Item 7  Managements Discussion and
Analysis of Financial Condition and Results of Operations
and the 2001 Consolidated Financial Statements and related notes
thereto included elsewhere in this Annual Report.

|                                                              |                                                     |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |       | 
|------------------------------------------------------------- | --------------------------------------------------- | ------------------------------------- | ------- | ----- |  | ---- | ------- | ----- |  | ---- | ------- | ----- |  | - | ------- | ----- |  | - | ------- | ----- | 
|                                                              |                                                     |                                      
|                                                              |                                                     | Year Ended December 31,              
|                                                              |                                                     |                                      
|                                                              |                                                     | 2001                                  |         | 2000  |  | 1999 |         | 1998  |  | 1997
|                                                              |                                                     |                                       |         |       |  |      |         |       |  |     
|                                                              |                                                     |                                      
|                                                              |                                                     | (in thousands, except per share data)
|Statements of Operations
	Data:                               |                                                     |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Gross lease revenue                                           |                                                     | $                                     | 120,345 |       |  | $    | 137,605 |       |  | $    | 132,140 |       |  | $ | 157,546 |       |  | $ | 160,848 |      
|Equipment trading revenue                                     |                                                     |                                       | 5,279   |       |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |      
|Commissions, fees and other operating income                  |                                                     |                                       | 5,449   |       |  |      | 5,026   |       |  |      | 5,949   |       |  |   | 4,955   |       |  |   | 5,545   |      
|Interest income                                               |                                                     |                                       | 282     |       |  |      | 877     |       |  |      | 1,011   |       |  |   | 1,154   |       |  |   | 861     |      
|Gain on sale of investment                                    |                                                     |                                       | 301     |       |  |      | 3,631   |       |  |      | 1,278   |       |  |   |        |       |  |   | 321     |      
|                                                              |                                                     |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Total revenues                                                |                                                     |                                       | 131,656 |       |  |      | 147,139 |       |  |      | 140,378 |       |  |   | 163,655 |       |  |   | 167,575 |      
|                                                              |                                                     |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Direct operating expenses                                     |                                                     |                                       | 30,857  |       |  |      | 26,626  |       |  |      | 31,179  |       |  |   | 35,318  |       |  |   | 34,217  |      
|Payments to managed container owners                          |                                                     |                                       | 56,965  |       |  |      | 71,659  |       |  |      | 63,943  |       |  |   | 75,527  |       |  |   | 73,945  |      
|Equipment trading expenses                                    |                                                     |                                       | 4,942   |       |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |      
|Depreciation and amortization                                 |                                                     |                                       | 15,791  |       |  |      | 16,055  |       |  |      | 16,200  |       |  |   | 18,714  |       |  |   | 19,033  |      
|Selling, general and administrative expenses                  |                                                     |                                       | 14,099  |       |  |      | 17,580  |       |  |      | 16,569  |       |  |   | 21,164  |       |  |   | 22,683  |      
|Financing and recomposition expenses(1)                       |                                                     |                                       |        |       |  |      |        |       |  |      |        |       |  |   | 5,375   |       |  |   | 7,384   |      
|Interest expense                                              |                                                     |                                       | 7,754   |       |  |      | 9,367   |       |  |      | 10,809  |       |  |   | 15,718  |       |  |   | 17,758  |      
|Income from recovery of related party loans(2)                |                                                     |                                       | (6,000  | )     |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |      
|Provision against amounts receivable from related
	parties(3) |                                                     |                                       |        |       |  |      |        |       |  |      |        |       |  |   |        |       |  |   | 3,909   |      
|Reversal of unrealized holding gain on
	securities(4)         |                                                     |                                       |        |       |  |      |        |       |  |      |        |       |  |   | 1,929   |       |  |   |        |      
|Impairment losses(5)                                          |                                                     |                                       | 4,000   |       |  |      |        |       |  |      |        |       |  |   | 6,500   |       |  |   | 11,668  |      
|                                                              |                                                     |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Total expenses                                                |                                                     |                                       | 128,408 |       |  |      | 141,287 |       |  |      | 138,700 |       |  |   | 180,245 |       |  |   | 190,597 |      
|                                                              |                                                     |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Income (loss) before income
	taxes                            |                                                     |                                       | 3,248   |       |  |      | 5,852   |       |  |      | 1,678   |       |  |   | (16,590 | )     |  |   | (23,022 | )    
|Income taxes (benefit)                                        |                                                     |                                       | 78      |       |  |      | 636     |       |  |      | (236    | )     |  |   | 306     |       |  |   |        |      
|                                                              |                                                     |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Net income (loss) available for common
	shares                |                                                     | $                                     | 3,170   |       |  | $    | 5,216   |       |  | $    | 1,914   |       |  | $ | (16,896 | )     |  | $ | (23,022 | )    
|                                                              |                                                     |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Basic net income (loss) per share                             |                                                     | $                                     | 0.40    |       |  | $    | 0.57    |       |  | $    | 0.21    |       |  |   | (1.91   | )     |  | $ | (2.60   | )    
|                                                              |                                                     |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Diluted net income (loss) per share                           |                                                     | $                                     | 0.39    |       |  | $    | 0.57    |       |  | $    | 0.21    |       |  |   | (1.91   | )     |  | $ | (2.60   | )    
|                                                              |                                                     |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Shares used in:                                               |                                                     |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|                                                              |  basic net income (loss) per
	share calculations   |                                       |         | 8,001 |  |      |         | 9,158 |  |      |         | 8,983 |  |   |         | 8,858 |  |   |         | 8,858 | 
|                                                              |  diluted net income (loss) per
	share calculations |                                       |         | 8,052 |  |      |         | 9,214 |  |      |         | 8,998 |  |   |         | 8,858 |  |   |         | 8,858 | 
|Balance Sheet Data (at end of
	period):                       |                                                     |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Cash and cash equivalents                                     |                                                     | $                                     | 4,914   |       |  | $    | 6,601   |       |  | $    | 8,701   |       |  | $ | 9,281   |       |  | $ | 14,455  |      
|Total assets                                                  |                                                     |                                       | 225,819 |       |  |      | 230,893 |       |  |      | 231,867 |       |  |   | 279,979 |       |  |   | 327,145 |      
|Long-term debt and capital lease obligations                  |                                                     |                                       | 95,101  |       |  |      | 81,228  |       |  |      | 93,401  |       |  |   | 61,195  |       |  |   | 88,682  |      
|Total debt and capital lease obligations                      |                                                     |                                       | 107,920 |       |  |      | 99,379  |       |  |      | 109,978 |       |  |   | 148,466 |       |  |   | 171,399 |      
|Shareholders equity                                          |                                                     |                                       | 61,479  |       |  |      | 64,753  |       |  |      | 60,370  |       |  |   | 56,087  |       |  |   | 73,713  |      



|    |                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In 1998 and 1997, the Group incurred costs in
	connection with certain financing and other transactions, the
	restructuring of the Board of Directors, senior management and
	other employee positions and a contingent liability. Costs
	incurred and accrued were charged to the statements of
	operations when the Group determined that no future benefit
	would be derived from such costs.
|   
|(2) | Income from recovery of related party loans
	represented the partial recovery during 2001 of interest and
	principal under two promissory notes between the Group and a
	former chairman.                                                                                                                                                                                                       
|   
|(3) | At December 31, 1997, the Group provided
	$3.9 million against loans to a former chairman due to
	concern over their collectability and the Groups ability
	to exercise the pledge over shares put up as collateral for the
	loans.                                                                                                                                                            
|   
|(4) | At December 31, 1998, in response to claims
	made against certain escrow funds holding Transamerica shares
	pending final determination of post-closing reports and
	adjustments, the Group provided $1.9 million against the
	unrealized holding gain of $1.7 million recognized in 1996,
	together with a $0.2 million charge related to a reduction
	in the number of shares held.           
|   
|(5) | During 2001, 1998 and 1997, the Group recorded
	accounting charges relating to the impairment of certain
	long-lived assets as required by the SFAS No. 121.                                                                                                                                                                                                                                    

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

The following discussion of the Groups
financial condition and results of operations should be read in
conjunction with the 2001 Consolidated Financial Statements and
the notes thereto and the other financial and statistical
information appearing elsewhere in this annual report. The 2001
Consolidated Financial Statements have been prepared in
accordance with accounting principles generally accepted in the
United States of America (US GAAP).

General

The segment information presented in Note 2 to
the Groups 2001 Consolidated Financial Statements relates
to the portions of the Groups fleet owned by the Group
itself, Owned Containers, or by the Groups managed
container programs (Managed Container Owners), which
are comprised of US Limited Partnerships and Other Managed
Container Owners. Owned Containers includes containers held for
resale. The Group bears the risk of ownership with respect to
containers in the Owned Containers segment, but not with respect
to the majority of containers in the Managed Container Owners
segment, although the Group bears the risk that the management
agreements could be terminated, resulting in the removal of the
corresponding managed containers from the fleet. At
December 31, 2001, approximately 29%, 45% and 26% of the
Groups fleet (by original equipment cost) was owned by US
Limited Partnerships, Other Managed Container Owners and Owned
Containers, respectively.

All containers, whether owned or managed, are
operated as part of a single fleet. The Group has discretion
over which ocean carriers, container manufacturers and suppliers
of goods and services it deals with. Since the Groups
management agreements with the Managed Container Owners meet the
definition of leases in SFAS No. 13, they are accounted for
in the Groups financial statements as leases under which
the container owners are lessors and the Group is lessee. In
2001, 81% of payments to Managed Container Owners represented
agreements which generally provided that the amounts payable to
container owners were based upon the rentals to ocean carriers
after deducting direct operating expenses and a management fee.
The remaining 19% of payments to Managed Container Owners
represented agreements under which there were fixed payment
terms. Minimum lease payments on the agreements, which have
fixed payment terms are presented in Note 11 to the Groups
2001 Consolidated Financial Statements.

Gross lease revenueis generated by leasing to ocean
carriers, marine containers that are owned either by Managed
Container Owners or by the Group itself and represents revenue
from operating leases, excluding billings in advance. These
amounts are billed on a monthly basis. Amounts due under master
leases are calculated by the Group at the end of each month and
billed approximately 6 to 8 days thereafter. Amounts due
under term leases are set forth in the respective lease
agreements and are generally billed and payable on a monthly
basis. Changes in gross lease revenue depend primarily upon
fleet size, utilization rates and per diem rates.

Equipment trading revenuerepresents revenue earned from the
sale of equipment to third-parties. Equipment trading expenses
comprise the cost of the equipment sold.

In equipment trading transactions, the Group
enters into an agreement in which it undertakes to supply
equipment to a third-party. Simultaneously, Cronos enters into a
separate agreement with a container manufacturer for the
acquisition of the equipment. The Group acts as principal in
such transactions and accordingly the revenue and expenses are
reported gross. This equipment does not enter the Cronos fleet
of managed containers.

Commissions, fees and other operating incomeincludes acquisition fees relating to
the Groups managed container programs, income from direct
financing leases (containers leased under lease-purchase
arrangements), fees earned in connection with equipment
consultancy and design services, license fee income earned in
connection with the patented CPCs (see Fleet Profile
above), fees from the disposal of used containers, and
miscellaneous other fees and income. This item is affected by
the size of new managed programs, the purchase price of
containers acquired for new managed programs, the level of
consultancy and design work undertaken, the quantity of CPCs
manufactured and sold, the number and value of direct financing
leases and income from disposals of used containers. The
quantity of CPCs acquired is in turn affected by the
availability of financing to the third-party purchasers.
Although acquisition fees are generally received in cash at the

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inception of a managed container program and are
non-refundable, they are amortized in the statement of
operations on a straight-line basis over the period of the
managed container agreement to which they relate.


Direct operating expensesare direct costs associated with
leasing both owned and managed containers. These expenses may be
categorized as activity-related, inventory-related, and legal
and other expenses. Activity-related expenses include agents
costs and depot costs such as repairs, maintenance and handling.
Inventory-related expenses 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 other
expenses include legal costs, insurance and provisions for
doubtful accounts.

Payments to managed container ownersreflect the amounts due to Managed
Container Owners, computed in accordance with the terms of the
individual agreements.

Selling, general and administrative expensesinclude all employee and office costs,
professional fees and computer systems costs.

Operating profit or loss,for reported segments, includes items
directly attributable to specific containers in each of the
Groups operating segments. It also includes items not
directly attributable to any specific container. Such indirect
items are allocated across operating segments. Items directly
attributable to operating segments include gross lease revenue,
direct operating expenses, equipment trading revenue and
expenses, payments to managed container owners, commissions,
fees and other operating income, container interest expense,
container depreciation expense and certain impairment charges.
Indirect items allocated across segments include selling,
general and administrative expenses and non-container interest
and depreciation expense.

Critical
Accounting Policies

Amounts receivable from Other Managed
Container Owner.In 1998, 1997 and
1996, the Group sold containers to a third-party container owner
for a total of $49.7 million. The total consideration for
the container sales comprised cash, management fees receivable
on revenues earned by the containers, non-interest bearing loan
notes and an option to acquire 75% of the container owning
company in August 2006 for one US dollar. The loan
notes, which are subordinate to other loan notes due to
third-parties, fall due for repayment after the other loan notes
have been repaid from funds generated from the containers, which
are managed by the Group.

The four elements of the transactions were
essential and integral parts of the consideration. Collectively,
they gave the Group the right to receive management fees and
certain proceeds on the disposal of the containers.

Management periodically discounts the projected
future net cash flows to be generated by the containers based on
historic and projected trends for per diem revenues,
utilization, container disposal proceeds and funding costs over
the expected remaining life of the containers. The discounted
value of the future cash flows is used to support the combined
carrying value of the loan note and management fees receivable
from the third-party container owner.

The Group reviewed the carrying value of the
receivables from the third-party container owner in the second
quarter of 2001. Due to the global economic downturn, management
revised the projections for per diem revenues and utilization
downwards. Based on the revised projected trends, the Group
considered that the carrying value of the loan notes due from
the third-party container owner exceeded the discounted value of
the future cash flows by $2 million. Accordingly, an impairment
charge of $2 million was recorded.

Under current projections, gross lease revenue is
forecast to increase by 2003 to approximately the same level as
reported in 2000 and 1999, respectively, and remain at this
level until the fleet size decreases due to container disposals.
Projected gross lease revenue is based on current per diem rates
and on forecast improvements in utilization for the dry
container fleet. The underlying leasing and disposal assumptions
are consistent with 10 year historical information
including available information for comparable US Limited
Partnerships and other managed programs. The maximum estimated
remaining life for the containers is 10 years.

15



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##### Table of Contents



Although the projected trends are based on
historical and current available information, they require
subjective management judgement for projections relating to
utilization rates, per diem rates, the disposal age of the
containers, equipment residual values, cash collections and
interest rates.

Container equipment  depreciable
lives.Refrigerated container
equipment is depreciated over a useful life of 12 years to
a residual value of 15%. Dry cargo and other container equipment
is depreciated over a useful life of 15 years to a residual
value of 10%. Management re-evaluates the period of amortization
and residual values to determine whether subsequent events and
circumstances warrant revised estimates of useful lives and
residual values.

Container equipment  valuation.The Group reviews container equipment
when changes in circumstances require consideration as to
whether the carrying value of the equipment has become impaired,
pursuant to guidance established in SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of. Management considers
assets to be impaired if the carrying value of the asset exceeds
the future projected cash flows from related operations
(undiscounted and without interest charges). When impairment is
deemed to exist, the assets are written down to fair value or
projected discounted cash flows from related operations. The
Group periodically evaluates future cash flows and potential
impairment of its fleet by container type rather than for each
individual container. Therefore, future losses could result for
individual container dispositions due to various factors
including age, condition, suitability for continued leasing, as
well as geographic location of the containers where disposed.

Results of
Operations

The demand for dry cargo containers has been
adversely affected by the slowdown in the global economy
resulting in an excess supply of containers in many locations.
Transpacific trade, a large proportion of which consists of
technology-related goods, has been adversely affected by the
slowdown of the US economy, while the contraction in the
Japanese economy contributed to lower levels of intra-Asian
trade. For the first time in many years, the GDP growth rates of
the United States, Europe, and Japan decelerated simultaneously,
contributing to lower utilization rates and higher container
inventories throughout the world.

The following chart summarizes the combined
utilization of the Cronos fleet (based on approximate original
equipment cost):

|                                    |  |      |    |      |  |      |    |   |  |  |    |  
|----------------------------------- |  | ---- | -- | ---- |  | ---- | -- | - |  |  | -- | -
|                                    |  | 2001 |    | 2000 |  | 1999
|                                    |  |      |    |      |  |     
|Utilization at December 31          |  |      | 73 | %    |  |      | 75 | % |  |  | 80 | %
|Average utilization during the year |  |      | 72 | %    |  |      | 79 | % |  |  | 76 | %

Recent corporate failures and defaults within the
credit markets, as well as an increasingly cautious business
climate since September 11, 2001, have contributed to lower
levels of capital available for new container purchases.
Accordingly, a more conservative credit market should result in
a reduction of funding for new container production and, in the
short-term, contribute to improving the level of off-hire
container inventories for both leasing companies and shipping
lines. In response to the foregoing, the Group continues to
implement a number of marketing initiatives which are designed
to target identified leasing opportunities and enhance inventory
management of the container fleet.

Although a slowdown in new container production
should have positive short- and long-term effects for the
container leasing industry, a reduction in new containers will
not significantly reduce off-hire container inventories without
an improvement in the worlds economies. During the fourth
quarter of 2001, prices for new containers reached historic
lows, creating further downward pressures on future per diem
rates and container residual values. Since December 2000, the
combined per diem rate for the Cronos fleet of containers
declined by approximately 14%.

The effect of the slowdown in global economic
conditions on the container leasing industrys customers,
the shipping lines, coupled with their acquisition of new,
larger container ships, appears to have created a condition of
excess shipping capacity. This may ultimately result in some
shipping lines experiencing financial difficulty, insolvency, or
consolidation and ultimately influence the demand for leased
containers. The Group will continue to monitor outstanding
receivables, collections, and credit exposure to various
existing and new customers.

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During 2001, Cronos prioritized its new
production towards specialized containers, the majority of which
were placed under term and direct financing leases. To this end,
Cronos added $28.9 million of specialized containers to the
fleet, including $22 million of refrigerated containers.
This strategy has enabled Cronos to offset in part the decline
in the operating performance of its master lease dry container
fleet.

Cronos uses debt and capital leases to finance
the acquisition of container equipment and investments in direct
financing leases. The primary facilities include quarterly
financial covenants relating to minimum tangible net worth,
maximum level of total liabilities to tangible net worth,
maximum level of debt and capital lease obligations to tangible
net worth, interest expense coverage and debt service coverage.
In 2001, the Group was in compliance with these covenants.
Future compliance with the covenants will depend on the ability
of the Group to report a minimum level of income before income
taxes for each quarter (equal to 10% of interest expense for
that quarter), and to generate sufficient cash from operations
and other activities to maintain the current portion of
borrowings within financial covenant limits. The breach of a
covenant constitutes an event of default.

The Group operates a diversified fleet of
containers, including refrigerated containers, tanks, CPCs and
rolltrailers. Specialized containers account for over 50% of the
Cronos owned fleet (based on original equipment cost). Due to
their specialized nature, demand for certain of these containers
is less likely to be affected by global economic downturns.

Cronos reported net income of $3.2 million
for the year ended December 31, 2001, $5.2 million for
the year ended December 31, 2000, and $1.9 million for
the year ended December 31, 1999. The following chart
represents certain key performance measurements, expressed as a
percentage of total revenues:

|                                             |  |                         |    |      |  |      |    |  |  |  |    | 
|-------------------------------------------- |  | ----------------------- | -- | ---- |  | ---- | -- |  |  |  | -- | 
|                                             |  |                        
|                                             |  | Year Ended December 31,
|                                             |  |                        
|                                             |  | 2001                    |    | 2000 |  | 1999
|                                             |  |                         |    |      |  |     
|                                             |  | %                       |    | %    |  | %   
|Gross lease revenue                          |  |                         | 91 |      |  |      | 94 |  |  |  | 94 | 
|Payments to container owners                 |  |                         | 43 |      |  |      | 49 |  |  |  | 46 | 
|Direct operating expenses                    |  |                         | 23 |      |  |      | 18 |  |  |  | 22 | 
|Selling, general and administrative expenses |  |                         | 11 |      |  |      | 12 |  |  |  | 12 | 
|Depreciation and amortization                |  |                         | 12 |      |  |      | 11 |  |  |  | 12 | 
|Interest expense                             |  |                         | 6  |      |  |      | 6  |  |  |  | 8  | 

Year Ended
December 31, 2001 Compared to Year Ended December 31,
2000

Gross lease revenueof $120.3 million for the year
ended December 31, 2001, was $17.3 million, or 12.5%,
lower than for the year ended December 31, 2000. Gross
lease revenue for dry cargo containers decreased by
$14.9 million due to the combined effect of lower
utilization and per diem rates together with equipment
disposals. Revenue for refrigerated containers was
$2.5 million lower than in 2000 due to the combined effect
of lower utilization and per diem rates, product obsolescence
and equipment disposals. This downward trend was reversed to
some extent by the addition of approximately $20 million of
new term lease equipment to the fleet during the year. Revenue
for tank containers declined by $0.6 million due primarily
to a reduction in per diem rates. Gross lease revenue for dry
freight specials was $0.7 million higher than in the prior
year.

Equipment trading revenueof $5.3 million in 2001,
represented transactions undertaken in which the Group used its
relationships with equipment manufacturers to assist
third-parties to design and acquire their own equipment and
organize delivery to designated locations. After deducting
equipment trading expenses of $4.9 million for the year,
the Group earned $0.3 million from this activity in 2001.

Commissions, fees and other operating incomeof $5.4 million in 2001 was
$0.4 million, or 8.4%, higher than in 2000. Increases of
$0.3 million earned in connection with equipment design
services, $0.3 million in license fee income earned in
connection with the purchase of the patented CPCs and
$0.2 million in direct financing lease income were partly
offset by a $0.1 million reduction in acquisition fees.
During 2000, a gain of $0.3 million was recorded on the
sale of a building.

Investment gainsof
$0.3 million for the year ended December 31, 2001
represented the sale of shares that had been held in escrow as
security for a 1994 tax indemnification agreement. This
agreement expired on December 31, 2000, and the shares were
released during the first quarter of 2001. The gain of
$3.6 million for the year ended December 31, 2000,
represented profit realized pursuant to the receipt of shares
from two

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escrow accounts that had been held pending
post-closing reports and adjustments related to the Agreement
and Plan of Merger between Transamerica Corporation and Trans
Ocean Limited in 1996.


Interest incomewas
$0.3 million in 2001, compared to $0.9 million in
2000. Interest income earned in 2000 included $0.2 million
of income earned on cash on deposit in investment related escrow
accounts, and interest income earned on other cash deposits. In
2001, a general decline in interest rates and lower cash
balances have reduced the amount of interest income earned.

Direct operating expenseswere $30.9 million in 2001, an
increase of $4.2 million, or 15.9%, compared to 2000. An
increase of $4.7 million in inventory-related costs,
reflecting a larger off-hire fleet, together with an increase in
activity-related costs of $0.7 million, was partly offset
by a total reduction of $1.2 million in legal costs and in
provisions for doubtful accounts.

Payments to managed container ownerswere $57 million for the year
ended December 31, 2001, a decrease of $14.7 million,
or 20.5%, when compared to the prior year. This is a result of a
decline in net lease revenue due to the current global economic
environment for those agreements where the amounts payable to
container owners were based upon the rentals to ocean carriers
after deducting direct operating expenses and a management fee.
Payments to US Limited Partnerships were $7.7 million
lower than the prior year. Payments to Other Managed Container
Owners were $37.9 million in 2001, a decrease of
$7 million, or 15.6%, from 2000.

Depreciation and amortizationdecreased by $0.3 million, to
$15.8 million during 2001. A $0.3 million increase in
container depreciation due to the addition of new equipment
during 2001 was more than offset by a $0.4 million
reduction in depreciation for non-container assets and a
reduction in goodwill amortization expense of $0.2 million.

Selling, general and administrative expenseswere $14.1 million in 2001, a
decline of $3.5 million, or 19.8%, when compared to 2000.
This was primarily due to reductions of $1.7 million in
non-operating legal and related expenses, $1.1 million in
manpower costs, $0.3 million in professional services costs
and $0.2 million in each of occupancy and information
technology. Non-operating legal and related expenses were
$0.5 million in 2001. In 2000, manpower costs included a
total of $0.9 million for bonus and termination costs.
There were minimal expenses for these items in 2001.

Interest expenseof
$7.8 million in 2001, was $1.6 million, or 17.2%,
lower than in 2000. This decrease was primarily due to the
effect of lower interest rates. Interest expense during 2001
included a $0.1 million non-recurring charge incurred in
connection with the refinancing of certain loan facilities.
Interest expense for 2000 included interest on a loan facility
relating to a building, which was sold in June of that year.

Income Taxes.In
2001, The Group recorded a charge for income taxes of
$0.1 million, representing 2% of income before income
taxes. During the year the Group recorded income from the
recovery of related party loans of $6 million and a gain on
sale of investment of $0.3 million in jurisdictions where
such income is not subject to income taxes. In addition, the
Group utilized taxation losses that were carried forward from
prior years to reduce 2001 taxable income.

Income from recovery of related party loansfor the year ended December 31,
2001, represented the partial recovery of interest and principal
receivable under two promissory notes between the Group and a
former chairman and chief executive officer of the Group. The
Group had previously made a provision against some of the
amounts owed under the promissory notes in December 1997.
In May 2001, Cronos was awarded 1.8 million
outstanding common shares in the Company that were beneficially
owned by the former chairman and chief executive officer in
partial consideration for amounts owed under the promissory
notes. These shares have been recorded as common shares in
treasury. The valuation of $6 million was based on the
estimated fair value of the shares received.

Impairment chargesof $4 million for the year ended
December 31, 2001, were recorded against certain
refrigerated containers and against loan notes receivable from a
third-party container owner.

In the second quarter of 2001, the Group
undertook a review of its refrigerated container equipment and
identified a number of issues that have had an impact on the
carrying value of certain equipment, which use the
R12 refrigerant gas. As a result of the review, management
concluded that inventories of R12 equipment would be
targeted for immediate sale and that 531 containers with a
carrying value of $2.4 million exceeded fair value.
Additionally, a review was conducted of 776 containers with
a carrying value of $3.7 million that

18



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##### Table of Contents



were on lease at June 30, 2001. It was
concluded that the carrying value of these assets exceeded the
future cash flows expected to result from the use of the assets
and their eventual disposition. As a result of these reviews, an
impairment charge of $2 million was recorded.


The Group also reviewed the carrying value of
loan notes receivable from a third-party container owner in the
second quarter of 2001. The carrying value of the loan notes are
measured in terms of the discounted value of projected future
net cash flows to be generated based on historical and projected
trends on per diem revenues, utilization, container disposal
proceeds and funding costs over the expected useful life of the
containers. Due to the global economic downturn, management
revised the projections for per diem revenues and utilization
downwards. Based on the revised projected trends, the Group
considered that the carrying value of the loan notes due from
the third-party container owner exceeded the discounted value of
the future cash flows by $2 million. Accordingly, an
impairment of $2 million was recorded (see discussion of
Critical Accounting Policy herein).

Operating profit,(see Note 2 to the 2001 Consolidated Financial Statements),
for 2001 has declined for the three segments when compared to
the prior year. This is primarily due to the combined effect of
the lower utilization and per diem rates experienced during the
year.

Operating profit for the US Limited Partnerships
segment was $1.9 million for 2001, a decrease of
$0.8 million, or 28.7% when compared with 2000. A smaller
fleet size in 2001 reflected the disposal of containers during
the year and the sale of containers to the Other Managed
Container Owner segment at the end of 2000. In addition, lower
utilization and per diem rates meant that gross lease revenue
attributable to the US Limited Partnerships decreased from
$43.3 million in 2000 to $33.7 million in 2001. This
was partly offset by a $7.7 million reduction in payments
to container owners and a $1.1 million reduction in
indirect allocations.

The Other Managed Container Owner segment
generated an operating loss of $1.9 million in 2001
compared to an operating profit of $1.8 million in 2000.
Operating profit before allocations of indirect items decreased
from $7.4 million in 2000 to $3 million in 2001.
Indirect allocations of $4.9 million in 2001 were
$0.7 million lower than in 2000 due mainly to a reduction
in allocated selling, general and administration expenses of
$0.8 million.

Owned Containers generated an operating loss of
$0.2 million in 2001, a decrease of $2.6 million when
compared to the operating profit of $2.4 million in 2000. A
$2.7 million reduction in operating profit before indirect
items was due to $4 million of impairment losses together
with a $0.8 million decrease in net lease revenue and
$0.3 million increase in container depreciation partly
offset by increased commissions, fees and other operating income
of $0.8 million, equipment trading transactions of
$0.3 million and lower interest expense of
$1.3 million.



| |                                                                       
| | ----------------------------------------------------------------------
| | Year Ended December 31, 2000 Compared to
	Year Ended December 31, 1999

Approximately 57% of new container investment (by
original equipment cost) in 2000 was financed within the Managed
Container Owners segments, compared to 91% in 1999. The
remaining 43% in 2000 and 9% in 1999 was financed within the
Owned Container segment by operating cash flow and new debt. Dry
cargo containers accounted for 88% of the new container
investment in 2000, with rolltrailers and CPCs accounting for
the majority of the balance.

Gross lease revenueincreased by approximately
$5.5 million, or 4.1%, to $137.6 million in 2000. The
increase was due to a larger fleet size and improved
utilization, partly offset by lower per diem rates.

Commissions, fees and other operating incomeof $5 million were
$0.9 million, or 15.5%, lower than in 1999. A
$0.6 million increase in license fee income earned in
connection with the patented CPCs and a $0.3 million net
gain on the disposal of a property were more than offset by
reductions of $0.8 million in product design and
procurement fees, $0.4 million in acquisition fees,
$0.4 million in direct finance lease income and
$0.2 million in other fee income.

Investment gainsof
$3.6 million represented a gain of $3.2 million
realized pursuant to the settlement and sale of shares in two
escrow accounts that had been held pending final determination
of post-closing reports and adjustments relating to the merger
of Transamerica and Trans Ocean Limited in 1996, and an
additional gain of $0.4 million realized on the settlement
of an additional escrow account.

19



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##### Table of Contents



Direct operating expenseswere $26.6 million in 2000, a
decrease of $4.6 million, or 14.6%, compared to 1999. A
reduction of $3 million in inventory-related costs,
reflecting a larger on-hire fleet, together with lower
activity-related costs of $1.8 million, more than offset a
$0.2 million increase in legal and other expenses.

Payments to managed container ownersincreased to $71.7 million in
2000, an increase of $7.7 million, or 12.1%, over the prior
year. Payments to Other Managed Container Owners were
$45 million in 2000, an increase of $5.3 million, or
13.4%, over 1999 due to a $7.3 million increase in net
lease revenue for this segment. The combined effects of an
increase in fleet size, due to the addition of new container
programs, together with the increase in the number of on-hire
containers, was partly offset by lower per diem rates. Payments
to US Limited Partnerships increased by $2.4 million to
$26.7 million, an increase of 9.9% over the prior year.

Depreciation and amortizationdecreased by $0.1 million, or
0.9%, to $16.1 million during 2000 due to container sales
from the Owned Containers segment to the Other Managed Container
Owners segment during 1999. This was partly offset by additions
to fixed assets during 2000.

Selling, general and administrativeexpenses increased to
$17.6 million in 2000, from $16.6 million in 1999, an
increase of $1 million, or 6.1%. Reductions of
$0.6 million and $0.4 million, respectively, in
manpower and information technology costs were more than offset
by an increase of $1.4 million in non-operating legal and
professional expenses together with a total increase of
$0.6 million in legal fees, audit costs and other overhead
expenses.

Interest expenseof
$9.4 million in 2000, was $1.4 million, or 13.3%,
lower than in 1999. This decrease was primarily due to a lower
debt balance in 2000. During 2000, in addition to scheduled debt
repayments, the Group utilized proceeds from the sale of a
building, proceeds from the sale of investments, and the release
of cash deposits to prepay $11.8 million of debt.

Operating profit,(see Note 2 to the 2001 Consolidated Financial Statements), from
US Limited Partnerships increased by approximately
$0.4 million, or 15%, from $2.3 million in 1999 to
$2.7 million in 2000 as lower indirect allocations of
selling, general and administrative expenses, as well as
interest expense and depreciation expense, more than offset a
reduction in operating profit before indirect items. The
reduction in operating profit before indirect items reflected a
smaller fleet size and lower per diem rates, only partly offset
by higher average utilization during 2000 and lower direct
operating expenses.

The Other Managed Container Owners segment
generated an operating profit of $1.8 million in 2000
compared to $0.2 million in 1999. Operating profit before
allocations of indirect items increased to $7.4 million in
2000 from $5.9 million in 1999 as the effect of a larger
fleet size and higher average utilization more than offset the
reduction in per diem rates. Indirect allocations of
$5.6 million in 2000 were $0.1 million lower than in
1999.

Owned Containers generated an operating profit of
$2.4 million in 2000, an increase of $1.5 million over
1999. Operating profit before indirect items increased by
$1.2 million due to increased net lease revenue and lower
interest expense, which were partly offset by increased
depreciation. Net lease revenue increased as a result of
additions to the owned fleet and the improvement in average
utilization during the year. The $0.3 million reduction in
indirect allocations was primarily due to reduced allocations of
selling, general and administrative expenses.

Liquidity and Capital Resources

The funding sources available to the Group and
its consolidated subsidiaries include operating cash flow and
borrowings.

The Groups operating cash flow is derived
from lease revenues generated by the Groups container
fleet and fee revenues from its managed container programs and
other parties. Operating cash flow is utilized to meet costs
relating to day-to-day fleet support, payments to Managed
Container Owners, selling, general and administrative expenses,
interest expense, servicing the current portion of long-term
borrowings and financing a portion of certain debt funded
equipment acquisitions.

Operating cash flow is largely dependent upon the
timely collections of lease revenues from shipping lines. Based
on loss experience for the last nine years, bad debts have
approximated 1% of lease revenues. The Group monitors the aging
of lease receivables, collections and the credit status of
existing and potential

20



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##### Table of Contents



customers. In the current economic climate there
is a risk that some shipping lines may experience financial
difficulty. Any resultant material increase in the level of bad
debts could potentially impair the ability of the Group to meet
its operating commitments.


At December 31, 2001, the Group had
$122.7 million of available container borrowing facilities
under which $107.9 million was outstanding. In addition,
the Group had $1.6 million of credit facilities under which
there were no amounts outstanding. The credit facilities are
available, if required, for operating cash flow purposes.



| |                                                                           
| | --------------------------------------------------------------------------
| | Cash Flow Statements for the years ended
	December 31, 2001, 2000 and 1999

Cash from Operating
Activities.Net cash provided by
operating activities during 2001, 2000 and 1999 was
$19.1 million, $17.8 million and $15 million,
respectively. The net cash generated in 2001 reflected earnings
from operations, as well as cash generated from the sale of new
container equipment purchased for resale to a new managed
container owner program. This sale generated $8 million in
proceeds of which $6.8 million was used to pay container
manufacturers. The net cash generated in 2000 reflected earnings
from operations and an $8.7 million increase in amounts due
to container manufacturers. This was partly offset by a
$9.3 million increase in new container equipment for resale
and a $1.6 million increase in the net amounts due from
lessees. The cash generated in 1999 represented cash provided by
operations together with a $6.5 million reduction in the
net amounts due from lessees and the release of
$4.9 million of deposits from escrow accounts of which
$2.7 million was utilized to make payments to third-party
container owners.

Cash from Investing
Activities.The Group uses cash from
investing activities to acquire containers for its owned fleet,
to purchase other assets related to the operation of its
world-wide office network and on occasion to acquire
subsidiaries and other investments. Net cash used in investing
activities was $24 million in 2001, reflecting the
acquisition of $22.4 million of container and other
equipment and the investment of $6.5 million in direct
financing leases. Net cash provided by investing activities
during 2001 comprised proceeds generated from the sale of
container equipment of $4.4 million and proceeds from the
sale of investments of $0.5 million. Net cash provided by
investing activities for 2000 and 1999 was $10.7 million
and $18.9 million respectively. During 2000, the Group
generated $10.9 million in proceeds from the sale of a
building and container equipment, and received $1.2 million
of funds that had been held in an escrow account. During 1999,
$21.7 million was generated by sales of container equipment
and direct finance lease equipment, primarily to third-party
container owners.

Cash from Financing
Activities.The Group uses cash from
financing activities to fund capital acquisition requirements
and short-term purchasing requirements of new containers held
for resale. Net cash provided by financing activities was
$3.2 million for 2001. In July 2001, the Group entered into
a $60 million revolving credit facility, under which Cronos
refinanced $37.6 million of existing debt. The Group has
borrowed an additional $24.5 million to finance new
container production. In addition to the refinancing of existing
debt, the Group repaid $22.3 million of debt and capital
lease obligations during 2001. Net cash used in financing
activities for 2000 and 1999 was $30.7 million and
$34.5 million, respectively. During 2000, in addition to
scheduled debt repayments, the Group utilized proceeds from the
sale of a building, proceeds from the sale of shares, and the
release of cash deposits to prepay $11.8 million of debt.
In 1999, the Group utilized the proceeds of a $50 million
loan to refinance $47.8 million of indebtedness. In
addition, debt and capital lease obligations in 1999 included
$20.6 million of repayments in connection with transactions
involving container equipment sales.

Capital
Resources



| |                                      
| | -------------------------------------
| | Capital Expenditures and
	Commitments

The Group purchases new containers for its own
account and for resale to its Managed Container Owners and other
parties. At December 31, 2001, the Group owed container
manufacturers $12.9 million for equipment, of which
$10.2 million was scheduled to be funded in the first half
of 2002 utilizing available container funding facilities. For
the $2.7 million of remaining equipment, the Group had
entered into agreements with third-parties for the sale of the
equipment. The container manufacturer was scheduled to be paid
once the Group was in receipt of the sales proceeds from the
third-party.

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In addition, the Group had outstanding orders to
purchase container equipment at December 31, 2001 of
$1.5 million. These orders relate to containers to be
financed by the Group using available container funding
facilities.

Capital expenditures for containers in 2001, 2000
and 1999 were $22.3 million, $2.1 million and
$2.7 million, respectively. Other capital expenditures in
2001, 2000 and 1999 were $0.1 million, $0.1 million,
and $0.2 million, respectively.

On July 19, 2001, the Group entered into a
$60 million revolving credit facility with Fortis Bank
(Nederland) N.V. This facility is for a term of three years with
an interest rate of libor plus 2.25%, payable monthly in
arrears. The first draw down under the facility was utilized to
refinance existing loan facilities and to fund new container
additions.

During 1996 the Group entered into agreements
(the Agreements) to acquire the patent rights
relating to the CPC, the Slimwall CPC and the intellectual
property of Cargo Unit Containers Limited from a third-party
(the Seller). Under the terms of the intellectual
property agreement (the Agreement), it was agreed
that royalties received by the Group as defined in the Agreement
would be shared equally between the Group and the Seller. In
April 2000, the Group entered into another agreement with the
Seller which provided that, in consideration for the sum of
$1 million, the Group would fully discharge any liabilities
for accrued royalties, acquire full right, title and interest
that the Seller may have had to receive royalties in the future
and acquire all residual rights as the Seller had or may have
had under the Agreements. In accordance with the agreed-upon
installment payment plan, the Group paid $1 million to the
Seller during 2000, thus fulfilling its obligations under the
agreement.

New Accounting Pronouncements

On January 1, 2001 the Group adopted SFAS
No. 133, Accounting for Derivative Instruments and
Hedging Activities. The adoption of SFAS 133 did not have
a significant impact on the financial position, results of
operations, or cash flows of the Group.

In June 2001, the Financial Accounting Standards
Board issued SFAS No. 141, Business
Combinations and SFAS No. 142, Goodwill and
Other Intangible Assets. SFAS No. 141 requires that
all business combinations initiated after September 30,
2001 be accounted for under the purchase method and addresses
the initial recognition and measurement of goodwill and other
intangible assets acquired in a business combination. SFAS
No. 142 addresses the initial recognition and measurement
of intangible assets acquired outside of a business combination
and the accounting for goodwill and other intangible assets
subsequent to their acquisition. SFAS No. 142 provides that
intangible assets with finite useful lives be amortized and that
goodwill and intangible assets with indefinite lives will not be
amortized, but will rather be tested at least annually for
impairment. The Group will adopt SFAS No. 142 for its
fiscal year beginning January 1, 2002. From January 1,
2002, there will be an annual reduction in goodwill amortization
expense of $0.4 million.

In August 2001, the Financial Accounting
Standards Board issued SFAS No. 143, Accounting for Asset
Retirement Obligations, which is effective for all fiscal
years beginning after June 15, 2002. This standard requires
a company to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred, and
a corresponding increase in the carrying value of the related
long-lived asset. In October 2001, the Financial Accounting
Standards Board issued SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, which is
effective for all fiscal years beginning after December 15,
2001. SFAS No. 144 supersedes SFAS No. 121, but
retains its fundamental provisions relating to the recognition
and measurement of the impairment of long-lived assets to be
held and used, and the measurement of long-lived assets to be
disposed of by sale. The Group is currently evaluating the
impact that these standards will have on its financial
statements.

Inflation

Management believes that inflation has not had a
material adverse effect on the Groups results of
operations.

22



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##### Table of Contents






Item 7A  Quantitative and
Qualitative Disclosures about Market Risk

The following table sets forth principal cash
flows and related weighted average interest rates by expected
maturity dates for debt and capital lease obligations at
December 31, 2001:

|                                              |                         |                                                              |   |          |  |      |   |       |  |      |   |       |  |            |   |        |  |  |   |       |  |  |   |       |  |  |   |       | 
|--------------------------------------------- | ----------------------- | ------------------------------------------------------------ | - | -------- |  | ---- | - | ----- |  | ---- | - | ----- |  | ---------- | - | ------ |  |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                              |                         |                                                             
|                                              |                         | Expected Maturity Date of Debt and Capital Lease Obligations
|                                              |                         |                                                             
|                                              |                         |                                                              |   | 2007 and
|                                              |                         | Total                                                        |   | 2002     |  | 2003 |   | 2004  |  | 2005 |   | 2006  |  | thereafter
|                                              |                         |                                                              |   |          |  |      |   |       |  |      |   |       |  |           
|                                              |                         |                                                             
|                                              |                         | (US dollar equivalent, in thousands)                        
|Long-term debt and capital lease obligations: |                         |                                                              |   |          |  |      |   |       |  |      |   |       |  |            |   |        |  |  |   |       |  |  |   |       |  |  |   |      
|                                              | Fixed rate ($US)        |                                                              | $ | 20,583   |  |      | $ | 3,771 |  |      | $ | 4,678 |  |            | $ | 11,621 |  |  | $ | 513   |  |  | $ |      |  |  | $ |      | 
|                                              | Average interest rate % |                                                              |   |         |  |      |   | 8.6   |  |      |   | 8.6   |  |            |   | 8.1    |  |  |   | 8.1   |  |  |   |      |  |  |   |      | 
|                                              | Variable rate ($US)     |                                                              | $ | 87,337   |  |      | $ | 9,048 |  |      | $ | 8,898 |  |            | $ | 54,011 |  |  | $ | 4,241 |  |  |   | 2,419 |  |  | $ | 8,720 | 
|                                              | Average interest rate % |                                                              |   |         |  |      |   | 4.3   |  |      |   | 4.3   |  |            |   | 4.0    |  |  |   | 4.0   |  |  |   | 4.00  |  |  |   | 4.1   | 

Interest rate risk:Outstanding borrowings are subject to
interest rate risk. At December 31, 2001, 81% of total
borrowings had floating interest rates. The Group conducted an
analysis of borrowings with variable interest rates to determine
their sensitivity to interest rate changes. In this analysis,
the same change was applied to the current balance outstanding,
leaving all other factors constant. It was found that if a 10%
increase were applied to market rates, the expected effect would
be to reduce annual cash flows by $0.4 million.

Exchange rate risk:In 2001, over 95% of the Groups
revenues were billed and paid in US dollars. The Group believes
that the proportion of US dollar revenues may decrease in future
years reflecting a more diversified customer base and lease
portfolio. Approximately 78% of costs in 2001 were incurred and
paid in US dollars. Of the remaining costs, approximately 79%
are individually small, unpredictable and were incurred in
various denominations. Thus, such amounts are not suitable for
cost-effective hedging.

As exchange rates are outside of the control of
the Group, there can be no assurance that such fluctuations will
not adversely affect its results of operations and financial
condition. By reference to 2001, it is estimated that for every
10% incremental decline in value of the US dollar against
various foreign currencies, the effect would be to reduce cash
flows by $1.3 million in any given year.

The following table sets forth the commitment
expiration by period where Cronos has provided loan guarantees
and entered into rent support agreements for third-parties. For
a discussion of the Groups commitments and contingencies,
see Note 13, Commitments and Contingencies, to the
Companys Consolidated Financial Statements.

|                        |  |                                           |        |      |  |      |       |      |  |      |       |      |  |   |     |  |  |   |     |  |  |   |     | 
|----------------------- |  | ----------------------------------------- | ------ | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | - | --- |  |  | - | --- |  |  | - | --- | 
|                        |  |                                          
|                        |  | Amount of Commitment Expiration by Period
|                        |  |                                          
|                        |  | Total                                     |        | 2002 |  | 2003 |       | 2004 |  | 2005 |       | 2006
|                        |  |                                           |        |      |  |      |       |      |  |      |       |     
|                        |  |                                          
|                        |  | (US dollar equivalent, in thousands)     
|Loan guarantees         |  | $                                         | 12,968 |      |  | $    | 5,374 |      |  | $    | 5,345 |      |  | $ | 989 |  |  | $ | 841 |  |  | $ | 419 | 
|Rent support agreements |  | $                                         | 6,533  |      |  | $    | 2,102 |      |  | $    | 3,952 |      |  | $ | 380 |  |  | $ | 99  |  |  | $ |    | 




Item 8  Financial
Statements and Supplementary Data

Independent Auditors Report

The financial statements listed in this
Item 8 are set forth herein beginning on page F1:



| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | Consolidated Balance Sheets  At
	December 31, 2001 and 2000                                         
|
| | Consolidated Statements of Income for the Years
	Ended December 31, 2001, 2000 and 1999              
|
| | Consolidated Statements of Shareholders
	Equity for the Years Ended December 31, 2001, 2000 and 1999
|
| | Consolidated Statements of Cash Flows for the
	Years Ended December 31, 2001, 2000 and 1999          

Notes to Consolidated Financial Statements






|         |                                                                                      
|-------- | -------------------------------------------------------------------------------------
|Item 9  | Changes In and Disagreements With
	Accountants on Accounting and Financial Disclosure

None

23



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##### Table of Contents






PART III

The Company hereby incorporates by reference the
information required by Part III (Items 10, 11, 12, and 13) from
the Companys definitive proxy statement to be filed no
later than 120 days after the end of the Companys
fiscal year covered by this annual report. In the event that the
Company does not file its definitive proxy statement with the
Commission on or before 120 days after the end of the fiscal
year covered by this annual report, then the Company shall
provide the information required by Part III in an amendment to
this annual report, filed not later than the end of the 120-day
period.

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##### Table of Contents






PART IV




Item 14  Exhibits,
Financial Statement Schedules, and Reports on
Form 8-K

(a) (1) Financial Statements



| |                                                                                                      
| | -----------------------------------------------------------------------------------------------------
| | Independent Auditors Report                                                                         
|
| | Consolidated Balance Sheets  At
	December 31, 2001 and 2000                                         
|
| | Consolidated Statements of Income for the Years
	Ended December 31, 2001, 2000 and 1999              
|
| | Consolidated Statements of Shareholders
	Equity for the Years Ended December 31, 2001, 2000 and 1999
|
| | Consolidated Statements of Cash Flows for the
	Years Ended December 31, 2001, 2000 and 1999          
|
| | Notes to Consolidated Financial Statements                                                           

(a) (2) Financial Statement Schedules



| |                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | All schedules for which provision is made in the
	applicable regulations of the Commission are not required under
	the related instructions or are inapplicable, and therefore have
	been omitted.

(a) (3) Exhibits



| |                                                                                                                                                                                                                                                             
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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
|       |      |                    
|       | 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)).                                                                                                                                                                
|       |      |                     |  | 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 |                     |  | Agreement for the Sale and Purchase of Orchard
	Lea, Berkshire, England (incorporated by reference to
	Exhibit 10.2 to the Companys Quarterly Report on
	Form 10-Q for the quarter ended June 30, 2000).                                                                                                                                                
|       | 10.2 |                     |  | Guarantee, dated as of July 19, 2001, by and
	between the Group and Fortis Bank N.V, as agent 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).                                                                                                    
|       | 10.3 |                     |  | Loan Agreement, dated as of July 19, 2001,
	by and between Cronos Finance (Bermuda) Limited as issuer, and
	Fortis Bank (Nederland) N.V. 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).
|       | 10.4 |                     |  | Amendment No. 1 to the Amended and Restated Loan
	Agreement dated as of August 6, 2001, by and between Cronos
	Finance (Bermuda) Limited and Fortis Bank (Nederland) N.V.                                                                                                                                                                                
|       | 10.5 |                     |  | Amendment No. 2 to the Amended and Restated Loan
	Agreement dated as of November 20, 2001, by and between
	Cronos Finance (Bermuda) Limited and Fortis Bank (Nederland) N.V.                                                                                                                                                                             
|       | 10.6 |                     |  | Collateral Agreement dated as of
	November 16, 2001, by and between Cronos Equipment
	(Bermuda) Limited, Cronos Finance (Bermuda) Limited and Fortis
	Bank (Nederland) N.V.                                                                                                                                                                              
|       | 10.7 |                     |  | Grant of Security Interest (Patents) dated as of
	November 19, 2001, by between Cronos Equipment (Bermuda)
	Limited, Cronos Finance (Bermuda) Limited and Fortis Bank
	(Nederland) N.V.                                                                                                                                                                  

25



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##### Table of Contents



|                                              |       |                     |  |                                                                                                                                                                                                                                                                                                    
|--------------------------------------------- | ----- | ------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number                                        |       | Exhibit Description
|                                              |       |                    
|Executive Compensation Plans and Arrangements
|                                             
|                                              | 10.8  |                     |  | 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)                                                      
|                                              | 10.9  |                     |  | 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).                                                                                                                                                  
|                                              | 10.10 |                     |  | Employment Agreement by and between Cronos
	Containers Inc. and John 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).                                   
|                                              | 10.11 |                     |  | Amendment, dated December 1, 2000, to the
	Employment Agreement between Cronos Containers Inc. and John Foy
	dated April 1, 1999, as amended December 1, 1999
	(incorporated by reference to Exhibit 10.33 to the
	Companys Annual Report on Form 10-K for the period
	ended December 31, 2000).  
|                                              | 10.12 |                     |  | Employment Agreement by and between Cronos
	Containers Ltd. and John Kirby dated April 1, 1999, as
	amended on January 20, 2000 (incorporated by reference to
	Exhibit 10.26 to the Companys Annual Report on
	Form 10-K for the period ended December 31, 1999).                                 
|                                              | 10.13 |                     |  | Amendment, dated December 1, 2001, to the
	Employment Agreement between Cronos Containers Ltd. and John
	Kirby dated April 1, 1999, as amended January 20, 2000
	(incorporated by reference to Exhibit 10.34 to the
	Companys Annual Report on Form 10-K for the period
	ended December 31, 2000).
|                                              | 10.14 |                     |  | Employment Agreement by and between Cronos
	Containers S.r.l. and Nico Sciacovelli dated April 7, 2000
	(incorporated by reference to Exhibit 10.1 to the
	Companys Quarterly Report on Form 10-Q for the period
	ended March 31, 2000).                                                          
|                                              | 10.15 |                     |  | Amendment, dated December 1, 2000, to the
	Employment Agreement between Cronos Containers S.r.l. and Nico
	Sciacovelli dated April 7, 2000 (incorporated by reference
	to Exhibit 10.35 to the Companys Annual Report on
	Form 10-K for the period ended December 31, 2000).                      
|                                              | 10.16 |                     |  | Amendment to the 1999 Stock Option Plan dated
	June 1, 2001                                                                                                                                                                                                                                        
|                                              | 10.17 |                     |  | Amended and Restated Employment Agreement between
	Cronos and Dennis J Tietz dated November 8, 2001.                                                                                                                                                                                               
|                                              | 10.18 |                     |  | Amended and Restated Employment Agreement between
	Cronos and Peter J Younger dated December 1, 2001                                                                                                                                                                                               
|                                              | 10.19 |                     |  | Amendment, dated December 1, 2001, to the
	Employment Agreement between Cronos Containers Inc. and John
	Foy, dated April 1, 1999, as amended on December 1,
	1999 and December 1, 2000.                                                                                                           
|                                              | 10.20 |                     |  | Variation, dated December 17, 2001, to the
	Employment Agreement between Cronos Containers Ltd. and
	John Kirby dated April 1, 1999, as amended on
	January 20, 2000, and December 1, 2001.                                                                                                        
|                                              | 10.21 |                     |  | Variation, dated December 18, 2001, to the
	Employment Agreement between Cronos Containers Srl. and
	Nico Sciacovelli dated April 7, 2000, as amended
	December 1, 2001.                                                                                                                           
|Other Exhibits                               
|                                             
|                                              | 21.1  |                     |  | List of principal wholly-owned subsidiaries at
	December 31, 2001.                                                                                                                                                                                                                                 
|                                              | 23.1  |                     |  | Consent of Independent Auditors dated
	March 18, 2002.                                                                                                                                                                                                                                             

(b) Reports on Form 8K



| |                                                                                                                                                                                               
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On January 31, 2001, a Current report on
	Form 8K was filed by the Company announcing the results of
	shareholder voting on matters submitted to the shareholders at
	the annual meeting.     
|
| | On May 11, 2001, a Current Report on
	Form 8-K was filed by the Company announcing that
	Massachusetts Superior Court had entered a judgement cancelling
	1,793,798 outstanding common shares.

26



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SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

Date:
March 14, 2002

| |                          
| | -------------------------
| | THE CRONOS GROUP         
|
| | By: /s/ DENNIS J TIETZ   
| |                          
| | Dennis J Tietz           
| | Chairman of the Board and
| | Chief Executive Officer  

Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant and in the
capacities and on the dates indicated.

|                                                      |  |                                                                                                                                          |  |               
|----------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|Signature                                             |  | Title                                                                                                                                    |  | Date          
|                                                      |  |                                                                                                                                          |  |               
|By /s/ DENNIS J TIETZDennis J Tietz                   |  | Chairman of the Board and
	Chief Executive Officer
	(Principal Executive Officer)                                                        |  | March 14, 2002
|By /s/ PETER J YOUNGERPeter J Younger                 |  | Director, Chief Operating Officer,
	Chief Financial Officer, and
	Chief Accounting Officer
	(Principal Financial and Accounting Officer) |  | March 14, 2002
|                                                     
|By /s/ MAURICE TAYLORMaurice Taylor                   |  | Director                                                                                                                                 |  | March 14, 2002
|By /s/ CHARLES THARPCharles Tharp                     |  | Director                                                                                                                                 |  | March 14, 2002
|By /s/ STEPHEN NICHOLAS WALKERStephen Nicholas Walker |  | Director                                                                                                                                 |  | March 14, 2002
|By /s/ ROBERT M MELZERRobert M Melzer                 |  | Director                                                                                                                                 |  | March 14, 2002

27



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##### Table of Contents



THE CRONOS GROUP

Consolidated financial statements as of
December 31, 2001 and 2000

and for the years ended December 31,
2001, 2000 and 1999


and Independent Auditors
Report


F-1



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##### Table of Contents



INDEPENDENT AUDITORS REPORT

To the Shareholders and Board of Directors of The
Cronos Group:

We have audited the accompanying consolidated
balance sheets of The Cronos Group and its subsidiaries
(collectively the Group) as of December 31,
2001, and 2000, and the related consolidated statements of
income, cash flows and shareholders equity for each of the
three years in the period ended December 31, 2001. These
financial statements are the responsibility of the Groups
management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial
statements present fairly, in all material respects, the
financial position of The Cronos Group and its subsidiaries as
of December 31, 2001 and 2000 and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2001, in conformity with
accounting principles generally accepted in the United States of
America.

/s/ Deloitte & Touche LLP

San Francisco, CA


February 15, 2002


F-2



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##### Table of Contents



THE CRONOS GROUP

CONSOLIDATED STATEMENTS OF INCOME

For the years ended December 31, 2001,
2000 and 1999


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


|                                              |                                                                                          |      |         |        |   |      |         |        |   |   |         |        | 
|--------------------------------------------- | ---------------------------------------------------------------------------------------- | ---- | ------- | ------ | - | ---- | ------- | ------ | - | - | ------- | ------ | 
|                                              |                                                                                          | 2001 |         | 2000   |   | 1999
|                                              |                                                                                          |      |         |        |   |     
|Gross lease revenue                           |                                                                                          | $    | 120,345 |        |   | $    | 137,605 |        |   | $ | 132,140 |       
|Equipment trading revenue                     |                                                                                          |      | 5,279   |        |   |      |        |        |   |   |        |       
|Commissions, fees and other operating income: |                                                                                          |      |         |        |   |      |         |        |   |   |         |       
|                                              | US Limited Partnerships                                                                  |      |         | 1,334  |   |      |         | 1,318  |   |   |         | 1,356  | 
|                                              | unrelated parties                                                                        |      |         | 4,115  |   |      |         | 3,708  |   |   |         | 4,593  | 
|Interest income                               |                                                                                          |      | 282     |        |   |      | 877     |        |   |   | 1,011   |       
|Gain on sale of investment:                   |                                                                                          |      |         |        |   |      |         |        |   |   |         |       
|                                              | gain on conversion of investment                                                         |      |         |       |   |      |         | 1,502  |   |   |         | 613    | 
|                                              | realized holding gain                                                                    |      |         | 301    |   |      |         | 2,129  |   |   |         | 665    | 
|                                              |                                                                                          |      |         |        |   |      |         |        |   |   |         |       
|Total revenues                                |                                                                                          |      | 131,656 |        |   |      | 147,139 |        |   |   | 140,378 |       
|                                              |                                                                                          |      |         |        |   |      |         |        |   |   |         |       
|Direct operating expenses                     |                                                                                          |      | 30,857  |        |   |      | 26,626  |        |   |   | 31,179  |       
|Payments to managed container owners:         |                                                                                          |      |         |        |   |      |         |        |   |   |         |       
|                                              | US Limited Partnerships                                                                  |      |         | 19,033 |   |      |         | 26,696 |   |   |         | 24,288 | 
|                                              | Other managed container owners                                                           |      |         | 37,932 |   |      |         | 44,963 |   |   |         | 39,655 | 
|Equipment trading expenses                    |                                                                                          |      | 4,942   |        |   |      |        |        |   |   |        |       
|Amortization of intangible assets             |                                                                                          |      | 560     |        |   |      | 710     |        |   |   | 683     |       
|Depreciation                                  |                                                                                          |      | 15,231  |        |   |      | 15,345  |        |   |   | 15,517  |       
|Selling, general and administrative expenses  |                                                                                          |      | 14,099  |        |   |      | 17,580  |        |   |   | 16,569  |       
|Interest expense                              |                                                                                          |      | 7,754   |        |   |      | 9,367   |        |   |   | 10,809  |       
|Income from recovery of related party loans   |                                                                                          |      | (6,000  | )      |   |      |        |        |   |   |        |       
|Impairment losses                             |                                                                                          |      | 4,000   |        |   |      |        |        |   |   |        |       
|                                              |                                                                                          |      |         |        |   |      |         |        |   |   |         |       
|Total expenses                                |                                                                                          |      | 128,408 |        |   |      | 141,287 |        |   |   | 138,700 |       
|                                              |                                                                                          |      |         |        |   |      |         |        |   |   |         |       
|Income before income taxes                    |                                                                                          |      | 3,248   |        |   |      | 5,852   |        |   |   | 1,678   |       
|Income taxes (benefit)                        |                                                                                          |      | 78      |        |   |      | 636     |        |   |   | (236    | )     
|                                              |                                                                                          |      |         |        |   |      |         |        |   |   |         |       
|Net income                                    |                                                                                          |      | 3,170   |        |   |      | 5,216   |        |   |   | 1,914   |       
|Other comprehensive income (loss):            |                                                                                          |      |         |        |   |      |         |        |   |   |         |       
|                                              | unrealized holding gain (loss) arising
	during the year on available for sale securities |      |         | (150   | ) |      |         | (300   | ) |   |         | 848    | 
|                                              | reclassification adjustment                                                              |      |         | (294   | ) |      |         | (533   | ) |   |         |       | 
|                                              |                                                                                          |      |         |        |   |      |         |        |   |   |         |       
|Comprehensive income                          |                                                                                          | $    | 2,726   |        |   | $    | 4,383   |        |   | $ | 2,762   |       
|                                              |                                                                                          |      |         |        |   |      |         |        |   |   |         |       
|Basic net income per common share             |                                                                                          | $    | 0.40    |        |   | $    | 0.57    |        |   | $ | 0.21    |       
|                                              |                                                                                          |      |         |        |   |      |         |        |   |   |         |       
|Diluted net income per common share           |                                                                                          | $    | 0.39    |        |   | $    | 0.57    |        |   | $ | 0.21    |       
|                                              |                                                                                          |      |         |        |   |      |         |        |   |   |         |       

The accompanying notes are an integral part of
these consolidated financial statements.

F-3



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##### Table of Contents



THE CRONOS GROUP

CONSOLIDATED BALANCE SHEETS

December 31, 2001 and 2000


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


|                                                                                                                                                        |  |      |         |      |  |   |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                                                                                                                                                        |  | 2001 |         | 2000
|                                                                                                                                                        |  |      |         |     
|Assets                                                                                                                                                  |  |      |         |      |  |   |         | 
|Cash and cash equivalents                                                                                                                               |  | $    | 4,914   |      |  | $ | 6,601   | 
|Amounts due from lessees (net)                                                                                                                          |  |      | 22,825  |      |  |   | 28,334  | 
|Amounts receivable from container owners,
	including amounts due from related parties of $4,333 and $5,865
	at December 31, 2001 and 2000, respectively |  |      | 8,675   |      |  |   | 9,851   | 
|New container equipment for resale                                                                                                                      |  |      | 1,463   |      |  |   | 11,790  | 
|Net investment in direct financing leases,
	including amounts due within twelve months of $1,268 and $99 at
	December 31, 2001 and 2000, respectively   |  |      | 7,306   |      |  |   | 99      | 
|Investments, including investments in related
	parties of $nil and $1 at December 31, 2001 and 2000,
	respectively                                      |  |      |        |      |  |   | 628     | 
|Container equipment, net of accumulated
	depreciation of $81,162 and $78,774 at December 31, 2001
	and 2000, respectively                               |  |      | 150,440 |      |  |   | 140,751 | 
|Other equipment, net of accumulated depreciation
	of $11,986 and $11,195 at December 31, 2001 and 2000,
	respectively                                   |  |      | 375     |      |  |   | 846     | 
|Restricted cash                                                                                                                                         |  |      | 452     |      |  |   | 1,418   | 
|Intangible assets                                                                                                                                       |  |      | 12,135  |      |  |   | 12,695  | 
|Other assets                                                                                                                                            |  |      | 17,234  |      |  |   | 17,880  | 
|                                                                                                                                                        |  |      |         |      |  |   |         | 
|Total assets                                                                                                                                            |  | $    | 225,819 |      |  | $ | 230,893 | 
|                                                                                                                                                        |  |      |         |      |  |   |         | 

The accompanying notes are an integral part of
these consolidated financial statements.

F-4



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##### Table of Contents



THE CRONOS GROUP

CONSOLIDATED BALANCE SHEETS

December 31, 2001 and 2000


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


|                                                                                                                                                      |  |      |         |      |  |   |         |  
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                                                                                                                                      |  | 2001 |         | 2000
|                                                                                                                                                      |  |      |         |     
|Liabilities and shareholders
	equity                                                                                                                 |  |      |         |      |  |   |         |  
|Amounts payable to container owners, including
	amounts payable to related parties of $7,966 and $10,504 at
	December 31, 2001 and 2000, respectively |  | $    | 16,889  |      |  | $ | 23,254  |  
|Amounts payable to container manufacturers                                                                                                            |  |      | 12,888  |      |  |   | 12,314  |  
|Other amounts payable and accrued expenses                                                                                                            |  |      | 13,020  |      |  |   | 15,684  |  
|Debt and capital lease obligations, including
	amounts due within twelve months of $12,819 and $18,151 at
	December 31, 2001 and 2000, respectively   |  |      | 107,920 |      |  |   | 99,379  |  
|Income taxes                                                                                                                                          |  |      | 2,555   |      |  |   | 3,154   |  
|Deferred income taxes                                                                                                                                 |  |      | 4,357   |      |  |   | 3,963   |  
|Deferred income and deferred acquisition fees                                                                                                         |  |      | 6,711   |      |  |   | 8,392   |  
|                                                                                                                                                      |  |      |         |      |  |   |         |  
|Total liabilities                                                                                                                                     |  |      | 164,340 |      |  |   | 166,140 |  
|                                                                                                                                                      |  |      |         |      |  |   |         |  
|Commitments and contingencies                                                                                                                         |  |      |         |      |  |   |         |  
|Shareholders equity                                                                                                                                  |  |      |         |      |  |   |         |  
|Common shares, par value $2 per share (25,000,000
	shares authorized; shares issued and outstanding, 9,158,378)                                       |  |      | 18,317  |      |  |   | 18,317  |  
|Additional paid-in capital                                                                                                                            |  |      | 49,846  |      |  |   | 49,925  |  
|Share subscriptions receivable                                                                                                                        |  |      |        |      |  |   | (79     | )
|Accumulated other comprehensive income                                                                                                                |  |      |        |      |  |   | 444     |  
|Common shares held in treasury (1,793,798 shares)                                                                                                     |  |      | (6,000  | )    |  |   |        |  
|Restricted retained earnings                                                                                                                          |  |      | 1,832   |      |  |   | 1,832   |  
|Accumulated deficit                                                                                                                                   |  |      | (2,516  | )    |  |   | (5,686  | )
|                                                                                                                                                      |  |      |         |      |  |   |         |  
|Total shareholders equity                                                                                                                            |  |      | 61,479  |      |  |   | 64,753  |  
|                                                                                                                                                      |  |      |         |      |  |   |         |  
|Total liabilities and shareholders
	equity                                                                                                           |  | $    | 225,819 |      |  | $ | 230,893 |  
|                                                                                                                                                      |  |      |         |      |  |   |         |  

The accompanying notes are an integral part of
these consolidated financial statements.

F-5



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##### Table of Contents



THE CRONOS GROUP

CONSOLIDATED STATEMENTS OF CASH
FLOWS

For the years ended December 31, 2001,
2000 and 1999


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


|                                                                                   |                                                               |                         |         |        |        |      |        |        |        |   |        |        |         |  
|---------------------------------------------------------------------------------- | ------------------------------------------------------------- | ----------------------- | ------- | ------ | ------ | ---- | ------ | ------ | ------ | - | ------ | ------ | ------- | -
|                                                                                   |                                                               | 2001                    |         | 2000   |        | 1999
|                                                                                   |                                                               |                         |         |        |        |     
|Cash flows from operating activities                                               |                                                               |                         |         |        |        |      |        |        |        |   |        |       
|Net income                                                                         |                                                               | $                       | 3,170   |        |        | $    | 5,216  |        |        | $ | 1,914  |       
|Adjustments to reconcile net income to net cash
	provided by operating activities: |                                                               |                         |         |        |        |      |        |        |        |   |        |       
|                                                                                   | impairment losses                                             |                         |         | 4,000  |        |      |        |       |        |   |        |       |        
|                                                                                   | depreciation and amortization                                 |                         |         | 15,791 |        |      |        | 16,055 |        |   |        | 16,200 |        
|                                                                                   | income from recovery of related party loans                   |                         |         | (6,000 | )      |      |        |       |        |   |        |       |        
|                                                                                   | decrease in unamortized acquisition fees                      |                         |         | (1,647 | )      |      |        | (1,664 | )      |   |        | (1,607 | )      
|                                                                                   | provision for losses on accounts receivable                   |                         |         | 630    |        |      |        | 1,326  |        |   |        | 1,331  |        
|                                                                                   | gain on disposal of fixed assets                              |                         |         | (94    | )      |      |        | (103   | )      |   |        | (79    | )      
|                                                                                   | gain on sale of investment securities                         |                         |         | (301   | )      |      |        | (550   | )      |   |        |       |        
|                                                                                   | (decrease) increase in current and deferred
	income taxes     |                         |         | (205   | )      |      |        | 59     |        |   |        | (1,027 | )      
|                                                                                   | decrease (increase) in new container
	equipment for resale    |                         |         | 6,282  |        |      |        | (9,255 | )      |   |        | (2,220 | )      
|                                                                                   | decrease (increase) in amounts receivable:                    |                         |         |        |        |      |        |        |        |   |        |        |        
|                                                                                   |                                                               | US Limited Partnerships |         |        | 1,532  |      |        |        | (8     | ) |        |        | 1,881   |  
|                                                                                   |                                                               | unrelated parties       |         |        | 4,447  |      |        |        | (1,285 | ) |        |        | 9,636   |  
|                                                                                   | (decrease) increase in amounts payable and
	accrued expenses: |                         |         |        |        |      |        |        |        |   |        |        |        
|                                                                                   |                                                               | US Limited Partnerships |         |        | (2,538 | )    |        |        | (1,787 | ) |        |        | (996    | )
|                                                                                   |                                                               | unrelated parties       |         |        | (5,952 | )    |        |        | 9,807  |   |        |        | (10,045 | )
|                                                                                   |                                                               |                         |         |        |        |      |        |        |        |   |        |       
|Net cash provided by operating
	activities                                         |                                                               |                         | 19,115  |        |        |      | 17,811 |        |        |   | 14,988 |       
|                                                                                   |                                                               |                         |         |        |        |      |        |        |        |   |        |       
|Cash flows from investing activities                                               |                                                               |                         |         |        |        |      |        |        |        |   |        |       
|Purchase of container equipment                                                    |                                                               |                         | (22,324 | )      |        |      | (2,111 | )      |        |   | (2,650 | )     
|Purchase of other equipment                                                        |                                                               |                         | (43     | )      |        |      | (65    | )      |        |   | (176   | )     
|Investment in direct financing leases                                              |                                                               |                         | (6,526  | )      |        |      |       |        |        |   |       |       
|Proceeds from sales of container equipment                                         |                                                               |                         | 4,379   |        |        |      | 2,165  |        |        |   | 20,724 |       
|Proceeds from sales of property and other
	equipment                               |                                                               |                         |        |        |        |      | 8,747  |        |        |   |       |       
|Proceeds from sale of investment securities                                        |                                                               |                         | 484     |        |        |      | 764    |        |        |   |       |       
|Proceeds from release of escrow                                                    |                                                               |                         |        |        |        |      | 1,245  |        |        |   |       |       
|Proceeds from sale of investment in direct
	financing lease equipment              |                                                               |                         |        |        |        |      |       |        |        |   | 1,000  |       
|                                                                                   |                                                               |                         |         |        |        |      |        |        |        |   |        |       
|Net cash (used in) provided by investing
	activities                               |                                                               |                         | (24,030 | )      |        |      | 10,745 |        |        |   | 18,898 |       
|                                                                                   |                                                               |                         |         |        |        |      |        |        |        |   |        |       

The accompanying notes are an integral part of
these consolidated financial statements.

F-6



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##### Table of Contents



THE CRONOS GROUP

CONSOLIDATED STATEMENTS OF CASH
FLOWS

For the years ended December 31, 2001,
2000 and 1999


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


|                                                       |                                                                  |      |         |       |  |      |         |        |  |   |         |        | 
|------------------------------------------------------ | ---------------------------------------------------------------- | ---- | ------- | ----- |  | ---- | ------- | ------ |  | - | ------- | ------ | 
|                                                       |                                                                  | 2001 |         | 2000  |  | 1999
|                                                       |                                                                  |      |         |       |  |     
|Cash flows from financing activities                   |                                                                  |      |         |       |  |      |         |        |  |   |         |       
|Proceeds from issuance of term debt                    |                                                                  |      | 62,114  |       |  |      |        |        |  |   | 51,116  |       
|Repayments of term debt and capital lease
	obligations |                                                                  |      | (59,852 | )     |  |      | (29,238 | )      |  |   | (85,582 | )     
|Cash deposits (restricted)                             |                                                                  |      | 966     |       |  |      | (1,418  | )      |  |   |        |       
|                                                       |                                                                  |      |         |       |  |      |         |        |  |   |         |       
|Net cash provided by (used in) financing
	activities   |                                                                  |      | 3,228   |       |  |      | (30,656 | )      |  |   | (34,466 | )     
|                                                       |                                                                  |      |         |       |  |      |         |        |  |   |         |       
|Net decrease in cash and cash
	equivalents             |                                                                  |      | (1,687  | )     |  |      | (2,100  | )      |  |   | (580    | )     
|Cash and cash equivalents at beginning of
	year        |                                                                  |      | 6,601   |       |  |      | 8,701   |        |  |   | 9,281   |       
|                                                       |                                                                  |      |         |       |  |      |         |        |  |   |         |       
|Cash and cash equivalents at end of
	year              |                                                                  | $    | 4,914   |       |  | $    | 6,601   |        |  | $ | 8,701   |       
|                                                       |                                                                  |      |         |       |  |      |         |        |  |   |         |       
|Supplementary disclosure of cash flow information:     |                                                                  |      |         |       |  |      |         |        |  |   |         |       
|Cash paid during the year for:                         |                                                                  |      |         |       |  |      |         |        |  |   |         |       
|                                                       | interest                                                         |      | $       | 8,178 |  |      | $       | 8,407  |  |   | $       | 11,328 | 
|                                                       | income taxes                                                     |      |         | 339   |  |      |         | 1,029  |  |   |         | 820    | 
|Cash received during the year for:                     |                                                                  |      |         |       |  |      |         |        |  |   |         |       
|                                                       | interest                                                         |      |         | 409   |  |      |         | 657    |  |   |         | 494    | 
|                                                       | income taxes                                                     |      |         | 58    |  |      |         | 30     |  |   |         | 29     | 
|Non-cash activities:                                   |                                                                  |      |         |       |  |      |         |        |  |   |         |       
|                                                       | container equipment acquired under capital lease                 |      |         | 4,985 |  |      |         | 17,476 |  |   |         | 1,257  | 
|                                                       | direct finance lease equipment acquired under
	capital lease     |      |         | 1,018 |  |      |         |       |  |   |         |       | 
|                                                       | other fixed assets acquired under capital lease                  |      |         | 276   |  |      |         |       |  |   |         |       | 
|                                                       | transfer to long-term ownership of container
	equipment          |      |         | 4,045 |  |      |         |       |  |   |         |       | 
|                                                       | reduction of debt/other amounts receivable from
	related parties |      |         |      |  |      |         |       |  |   |         | 5,279  | 
|                                                       | capital lease/amounts payable to container
	manufacturers        |      |         |      |  |      |         | 1,163  |  |   |         |       | 

The accompanying notes are an integral part of
these consolidated financial statements.

F-7



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##### Table of Contents



THE CRONOS GROUP

CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY

For the years ended December 31, 2001,
2000 and 1999


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


|                                                                    |  |        |        |            |  |               |        |               |  |             |      |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   |         |   |  |   |        |  
|------------------------------------------------------------------- |  | ------ | ------ | ---------- |  | ------------- | ------ | ------------- |  | ----------- | ---- | ---------- |  | ------------ | ----- | ------------- |  | - | ------ | - |  | - | ----- |  |  | - | ------- | - |  | - | ------ | -
|                                                                    |  |        |        |            |  |               |        | Accumulated   |  |             |      |            |  | Unrestricted |       |              
|                                                                    |  |        |        | Additional |  | Share         |        | other         |  | Common      |      | Restricted |  | retained     |       | Total        
|                                                                    |  | Common |        | paid-in    |  | subscriptions |        | comprehensive |  | shares held |      | retained   |  | earnings     |       | shareholders
|                                                                    |  | shares |        | capital    |  | receivable    |        | income        |  | in treasury |      | earnings   |  | (deficit)    |       | equity       
|                                                                    |  |        |        |            |  |               |        |               |  |             |      |            |  |              |       |              
|Balance, December 31, 1998                                          |  | $      | 17,717 |            |  | $             | 49,108 |               |  | $           | (123 | )          |  | $            | 429   |               |  | $ |       |   |  | $ | 1,772 |  |  | $ | (12,816 | ) |  | $ | 56,087 |  
|Net income                                                          |  |        |        |            |  |               |        |               |  |             |      |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   | 1,914   |   |  |   | 1,914  |  
|MEIP forfeits                                                       |  |        |        |            |  |               | (41    | )             |  |             | 41   |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   |         |   |  |   |       |  
|Stock grant                                                         |  |        | 600    |            |  |               | 615    |               |  |             |      |            |  |              |       |               |  |   |        |   |  |   | 60    |  |  |   |         |   |  |   | 1,275  |  
|Issue of stock warrants                                             |  |        |        |            |  |               | 246    |               |  |             |      |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   |         |   |  |   | 246    |  
|Change in unrealized holding gain on available
	for sale securities |  |        |        |            |  |               |        |               |  |             |      |            |  |              | 848   |               |  |   |        |   |  |   |       |  |  |   |         |   |  |   | 848    |  
|                                                                    |  |        |        |            |  |               |        |               |  |             |      |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   |         |   |  |   |        |  
|Balance, December 31, 1999                                          |  |        | 18,317 |            |  |               | 49,928 |               |  |             | (82  | )          |  |              | 1,277 |               |  |   |       |   |  |   | 1,832 |  |  |   | (10,902 | ) |  |   | 60,370 |  
|Net income                                                          |  |        |        |            |  |               |        |               |  |             |      |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   | 5,216   |   |  |   | 5,216  |  
|MEIP forfeits                                                       |  |        |        |            |  |               | (3     | )             |  |             | 3    |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   |         |   |  |   |       |  
|Change in unrealized holding gain on available
	for sale securities |  |        |        |            |  |               |        |               |  |             |      |            |  |              | (833  | )             |  |   |        |   |  |   |       |  |  |   |         |   |  |   | (833   | )
|                                                                    |  |        |        |            |  |               |        |               |  |             |      |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   |         |   |  |   |        |  
|Balance, December 31, 2000                                          |  |        | 18,317 |            |  |               | 49,925 |               |  |             | (79  | )          |  |              | 444   |               |  |   |       |   |  |   | 1,832 |  |  |   | (5,686  | ) |  |   | 64,753 |  
|Net income                                                          |  |        |        |            |  |               |        |               |  |             |      |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   | 3,170   |   |  |   | 3,170  |  
|MEIP expirations                                                    |  |        |        |            |  |               | (79    | )             |  |             | 79   |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   |         |   |  |   |       |  
|Receipt of shares in settlement of related party
	loans             |  |        |        |            |  |               |        |               |  |             |      |            |  |              |       |               |  |   | (6,000 | ) |  |   |       |  |  |   |         |   |  |   | (6,000 | )
|Change in unrealized holding gain on available
	for sale securities |  |        |        |            |  |               |        |               |  |             |      |            |  |              | (444  | )             |  |   |        |   |  |   |       |  |  |   |         |   |  |   | (444   | )
|                                                                    |  |        |        |            |  |               |        |               |  |             |      |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   |         |   |  |   |        |  
|Balance, December 31, 2001                                          |  | $      | 18,317 |            |  | $             | 49,846 |               |  | $           |     |            |  | $            |      |               |  | $ | (6,000 | ) |  | $ | 1,832 |  |  | $ | (2,516  | ) |  | $ | 61,479 |  
|                                                                    |  |        |        |            |  |               |        |               |  |             |      |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   |         |   |  |   |        |  

The accompanying notes are an integral part of
these consolidated financial statements.

F-8



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##### Table of Contents



THE CRONOS GROUP

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS

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


1   Summary of significant
accounting policies

a)Nature of
operations

The principal activity of The Cronos Group (the
Company) and its subsidiaries (together, the
Group or Cronos) is the leasing to ocean
carriers of marine containers that are owned by the Group or
managed by the Group on behalf of other parties.

The Company is incorporated in Luxembourg. The
common shares of the Company are publicly traded on the NASDAQ
National Market System under the symbol CRNS.

The consolidated financial statements include the
accounts of the Company and its subsidiaries, all of which are
wholly owned. All significant intercompany accounts and
transactions have been eliminated in consolidation.

The Group provides a world-wide service and,
accordingly, has significant foreign operations and assets in
key shipping locations, particularly in the United States,
Europe and Asia.

The Group enters into agreements (the
Agreements) with container owners to manage the
leasing of their containers to ocean carriers. These Agreements
have taken two principal forms. Under the first form, a
subsidiary of the Company, as General Partner, has organized
public limited partnerships in the United States (the US
Limited Partnerships) and purchases and manages containers
on behalf of the US Limited Partnerships. The US Limited
Partnerships are a related party of the Group (see Note 7).
Under the second form, the Group enters into Agreements with
other managed container owners (Other Manager Container
Owners) that provide for the Group to purchase and manage
containers for such container owners. Although the provisions of
the Agreements vary, they all permit the Group to use the
containers together with containers owned by the Group as part
of a single fleet, which the Group endeavours to operate without
regard to ownership. The Group has discretion over which ocean
carriers, container manufacturers and suppliers of goods and
services it may deal with. Since the Agreements meet the
definition of leases in Statement of Financial Accounting
Standards (SFAS) No. 13, they are accounted for
as leases under which the container owners are lessors and the
Group is lessee.

The terms of the Agreements vary from 1 to
15 years. Containers generally have an expected useful
economic life of 12 to 15 years. The Agreements generally
contain provisions which permit earlier termination under
certain conditions upon 60  90 days
notice. For the US Limited Partnerships, a majority of the
limited partners in a partnership can remove the general
partner, thereby terminating the Agreement with the Group. Under
the Agreements with Other Managed Container Owners, certain
container owners can terminate the Agreement if stipulated
performance thresholds are not achieved by the Group (see
Note 13). The Group believes that early termination is
unlikely in normal circumstances.

The Agreements generally provide that the Group
will make payments to the container owners based upon the
rentals collected from ocean carriers after deducting direct
operating expenses and the Groups management fee. In 2001,
81% of payments to container owners were contingent upon the
leasing of the containers by the Group to ocean carriers and the
collection of lease rentals. Details of the minimum lease
payments on those Agreements with fixed payment terms are
presented in Note 11(c).

The Group also leases containers from lessors
under capital lease agreements.

The Group leases containers to ocean carriers
under master leases, term leases and direct financing leases.
Master leases do not specify the exact number of containers to
be leased or the term that each container will remain on-hire
but allow the ocean carrier to pick-up and drop-off containers
at various locations specified in the lease agreement. Lease
rentals, which are generally based upon the number of containers
used by the ocean carrier and the applicable per diem rate, are
therefore all contingent rentals.

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)


Term leases provide the ocean carriers with
specified container equipment for a specified term. The rentals
are based upon the number of containers leased, the applicable
per diem rate and the length of the lease, irrespective of the
number of days during which the ocean carrier actually uses the
containers.

Direct financing leases are usually long-term in
nature and require relatively low levels of customer service.
They ordinarily require fixed payments over a defined period and
provide customers with an option to purchase the subject
containers at the end of the lease term. Per diem rates
typically include an element of repayment of capital and
therefore are higher than rates charged under either term or
master leases.

b)Basis of
accounting

The Groups accounting records are
maintained in United States dollars and the consolidated
financial statements are prepared in accordance with accounting
principles generally accepted in the United States of America
(US GAAP).

The preparation of financial statements in
conformity with US GAAP requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
amounts of revenues and expenses during the reporting period.
The most significant estimates relate to the carrying value of
equipment and include the depreciable lives, residual values and
asset impairments. Actual results could differ from those
estimates.

c)Gross lease
revenue

Gross lease revenue represents amounts invoiced
to customers for leasing marine containers under master and term
leases excluding advance billings which are recorded as deferred
revenue.

d)Equipment
trading revenue and expenses

Equipment trading revenue represents revenue
earned from the sale of equipment to third-parties. Equipment
trading expenses comprise the cost of the equipment sold.

In such transactions, the Group enters into an
agreement in which it undertakes to supply equipment to a
third-party buyer. Simultaneously, the Group enters into a
separate agreement with a container manufacturer for the
acquisition of the equipment. The Group acts as principal in
such transactions and accordingly the revenue and expenses are
reported gross. This equipment does not enter the Cronos fleet
of managed containers unless the third-party buyer defaults on
their agreement.

e)Commissions,
fees and other operating income

This comprises acquisition fees, income on direct
financing leases, license fees earned in connection with the
patented Cellular Palletwide Container (CPC), fees
earned on the disposal of managed containers, gains and losses
resulting from the disposal of fixed assets, income from the
Groups limited partner interests in US Limited
Partnerships and other income.

Acquisition fees represent amounts paid by
container owners when the Group enters into an Agreement and
begins to manage new container equipment on their behalf. Such
fees are generally non-refundable and are deferred and
recognized as income on a straight-line basis over the term of
the Agreements.

f)Income
taxes

Income taxes are accounted for using SFAS
No. 109 (SFAS 109), Accounting for
Income Taxes. This statement requires that deferred income
taxes be recognized for the tax consequences of temporary

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)


differences by applying the statutory tax
rate to the difference between the financial statement carrying
amounts and the tax basis of existing assets and liabilities.
The effect on deferred income taxes of a change in tax rates is
recognized in income in the period of enactment. A valuation
allowance is established to reduce the carrying amounts of
deferred tax assets unless it is more likely than not that such
assets will be realized.

g)     Net income
per common share

Net income per share data have been calculated in
accordance with SFAS No. 128 (SFAS 128),
Earnings per Share.

Basic net income per share is based on the
weighted effect of all common shares issued and outstanding and
is calculated by dividing net income available to common
shareholders by the weighted average number of shares
outstanding during the period. Diluted net income per share is
calculated by dividing net income available to common
shareholders by the weighted average number of common shares
used in the basic net income per common share calculation plus
the number of common shares that would be issued assuming
conversion of all potentially dilutive common shares outstanding.

The components of basic and diluted net income
per share were as follows:

|                                             |                                        |      |           |        |  |      |           |        |  |   |           |       | 
|-------------------------------------------- | -------------------------------------- | ---- | --------- | ------ |  | ---- | --------- | ------ |  | - | --------- | ----- | 
|                                             |                                        | 2001 |           | 2000   |  | 1999
|                                             |                                        |      |           |        |  |     
|Net income available for common shareholders |                                        | $    | 3,170     |        |  | $    | 5,216     |        |  | $ | 1,914     |      
|                                             |                                        |      |           |        |  |      |           |        |  |   |           |      
|Average outstanding shares of common shares  |                                        |      | 8,001,089 |        |  |      | 9,158,378 |        |  |   | 8,983,378 |      
|Dilutive effect of:                          |                                        |      |           |        |  |      |           |        |  |   |           |      
|                                             | Executive officer common share options |      |           | 21,451 |  |      |           | 31,358 |  |   |           | 9,197 | 
|                                             | Warrants                               |      |           | 12,929 |  |      |           | 19,473 |  |   |           | 5,780 | 
|                                             | 1999 stock option plan                 |      |           | 2,510  |  |      |           | 5,153  |  |   |           |      | 
|                                             | Non employee directors equity plan    |      |           | 14,056 |  |      |           |       |  |   |           |      | 
|                                             |                                        |      |           |        |  |      |           |        |  |   |           |      
|Common shares and common share equivalents   |                                        |      | 8,052,035 |        |  |      | 9,214,362 |        |  |   | 8,998,355 |      
|                                             |                                        |      |           |        |  |      |           |        |  |   |           |      
|Basic net income per share                   |                                        | $    | 0.40      |        |  | $    | 0.57      |        |  | $ | 0.21      |      
|                                             |                                        |      |           |        |  |      |           |        |  |   |           |      
|Diluted net income per share                 |                                        | $    | 0.39      |        |  | $    | 0.57      |        |  | $ | 0.21      |      
|                                             |                                        |      |           |        |  |      |           |        |  |   |           |      

h)     Cash
equivalents

Cash equivalents are highly liquid debt
instruments purchased with original maturities of three months
or less. The carrying value approximates fair value. Cash and
cash equivalents are maintained in accounts which, at times, may
exceed federally insured limits. No losses have been experienced
in such accounts and management believes it is not exposed to
any significant credit risk. The Group places its cash
equivalents in investment grade, short-term debt instruments and
limits the amount of credit exposure to any one commercial
issuer.

i)     Allowance
for doubtful accounts

Amounts due from lessees represent gross lease
revenue due from customers, less an allowance for doubtful
accounts. The allowance for doubtful accounts comprises specific
amounts provided against known probable losses plus an
additional amount based on loss experience.

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)


j)     New
container equipment for resale

New container equipment for resale represents new
containers purchased by the Group with an intent to resell to
container owners and is stated at the lower of original unit
cost or net realizable value. Such sales are usually made at
original cost and accordingly no gain or loss arises.

Containers not sold to container owners within
six months from date of purchase are transferred to the
Groups container equipment. Depreciation is then
calculated from the original date of acquisition. The amount of
depreciation which would have been provided on container
equipment for resale, had it been transferred to long-term
ownership at the balance sheet date is not material to the
Companys operations.

Rental income earned on container equipment for
resale is included within gross lease revenue.

k)     Leases

i.    Group as
lessor

Operating leases with customers.The Group enters into leases with
customers, principally as lessor in operating leases. Operating
lease rentals are recognized as gross lease revenue on a
straight line basis in accordance with US GAAP.

Direct financing leases with customers.The Group has entered into direct
financing leases as lessor for container equipment owned by the
Group. The net investment in direct financing leases represents
the receivables due from lessees net of unearned income.
Unearned income is amortized to give a constant return on
capital over the lease term.

ii.   Group as lessee

Capital leases.Assets held under capital leases are
initially reported at the fair value of the asset categorized
within container equipment, with an equivalent liability
reported as capital lease obligations. The asset is depreciated
over its expected useful life. Finance charges are reported over
the lease term in accordance with the interest method.

Operating leases.Payments by the Group to container
owners are charged to the statement of operations in each period
based upon the amounts paid and payable under the Agreements
with container owners. The majority of payments are contingent
upon the lease rentals to ocean carriers and reduced by direct
operating expenses and management fees due to the Group.

Other operating lease rentals are expensed on a
straight-line basis over the lease term.

l)     Investments,
including investments in related parties

i.    Investment
securities

Investment securities are classified as either
available for sale or trading securities. Available for sale
securities are reported at fair market value with unrealized
gains and losses included in shareholders equity as
accumulated other comprehensive income.

ii.   Investment in US Limited
Partnerships

Investment in US Limited Partnerships represents
the Groups general and limited partner interests in
partnerships in which a subsidiary company, Cronos Capital
Corp., acts as a general partner. These are accounted for using
the equity method.

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)


m)     Container
equipment

Container equipment is carried at cost, adjusted
for impairment, if appropriate, less accumulated depreciation.
Containers, both owned by the Group and acquired under capital
leases are depreciated on a straight-line basis as follows:

Refrigerated container equipment is depreciated
over a useful life of 12 years to a residual value of 15%.
Dry cargo and other container equipment is depreciated over a
useful life of 15 years to a residual value of 10%.

n)     Other
equipment

Other equipment is carried at cost less
accumulated depreciation. Depreciation is recorded on a
straight-line basis as follows:



| |                                                             
| | ------------------------------------------------------------
| | Leasehold improvements  lower of
	useful life or lease term
| | Other equipment 
	3  7 years                              

o)     Restricted
cash

Under the terms of a loan facility, the Group is
required to hold on deposit in a restricted cash account, a
minimum balance equivalent to two months of interest due under
the facility. The restricted cash account would be utilized in
the event that adequate funds were not available to meet the
scheduled debt service payments.

p)     Intangible
assets

Intangible assets consist of goodwill and
patents. Until December 31, 2001, goodwill has been
amortized over a period of 40 years and patents have been
amortized on a straight-line basis over their estimated useful
lives, to a residual of zero. On January 1, 2002, the Group
will adopt SFAS No. 142, Goodwill and Other
Intangible Assets, which provides that intangible assets
with finite useful lives be amortized over that life and that
goodwill and intangible assets with indefinite lives will not be
amortized, but will rather be tested at least annually for
impairment. From January 1, 2002, there will be an annual
reduction in goodwill amortization expense of $373.

q)     Translation
of foreign currencies

The majority of the Groups revenue is
denominated in US dollars as are a significant proportion of
total costs, including container purchases. Accordingly, the
functional currency of the Group is the US dollar, the currency
in which the financial statements are prepared.

Transactions denominated in other currencies are
translated into US dollars and recorded at the rate of exchange
at the date of the transaction. Balances denominated in other
currencies are translated into US dollars at the rate of
exchange on the balance sheet date. Exchange differences arising
are charged or credited to the statement of income.

r)     Stock based
compensation

The Group has adopted disclosure requirements
under SFAS No. 123 Accounting for Stock-Based
Compensation, but continues to account for stock based
compensation under Accounting Practices Board Opinion
(APB) No. 25, Accounting for Stock Issued
to Employees under which no compensation expense has been
recognized.

F-13



---



##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

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


The Management Equity Investment Plan (the
MEIP) expired in November 2001. Prior to this,
amounts received and receivable for the purchase of options
under the contractual arrangements of the MEIP were included
within additional paid-in capital when the commitment was made
by the key employee. Amounts receivable for the purchase of
options were included in share subscriptions receivable within
shareholders equity.

s)     Asset
impairment

Certain long-lived assets of the Group are
reviewed when changes in circumstances require consideration as
to whether their carrying value has become impaired, pursuant to
guidance established in SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of. Management considers assets to be impaired
if the carrying value of the asset exceeds the future projected
cash flows from related operations (undiscounted and without
interest charges). When impairment is deemed to exist, the
assets are written down to fair value or projected discounted
cash flows from related operations. The Group periodically
evaluates future cash flows and potential impairment of its
fleet by container type rather than for each individual
container. Therefore, future losses could result for individual
container dispositions due to various factors including age,
condition, suitability for continued leasing, as well as
geographic location of the containers where disposed. Management
also re-evaluates the period of amortization to determine
whether subsequent events and circumstances warrant revised
estimates of useful lives.

t)     New
pronouncements

On January 1, 2001 the Group adopted SFAS
No. 133, Accounting for Derivative Instruments and
Hedging Activities. The adoption of SFAS No. 133 did
not have a significant impact on the financial position, results
of operations, or cash flows of the Group.

In June 2001, the Financial Accounting Standards
Board issued SFAS No. 141, Business
Combinations and SFAS No. 142. SFAS No. 141
requires that all business combinations initiated after
September 30, 2001 be accounted for under the purchase
method and addresses the initial recognition and measurement of
goodwill and other intangible assets acquired in a business
combination. SFAS No. 142 addresses the initial recognition
and measurement of intangible assets acquired outside of a
business combination and the accounting for goodwill and other
intangible assets subsequent to their acquisition. SFAS
No. 142 provides that intangible assets with finite useful
lives be amortized and that goodwill and intangible assets with
indefinite lives will not be amortized, but will rather be
tested at least annually for impairment. The Group will adopt
SFAS No. 142 for its fiscal year beginning January 1,
2002, and has concluded that the adoption of SFAS No. 142
will not have a significant impact on its financial position or
results of operations. From January 1, 2002, there will be
an annual reduction in goodwill amortization expense of $373.

In August 2001, the Financial Accounting
Standards Board issued SFAS No. 143, Accounting for
Asset Retirement Obligations, which is effective for all
fiscal years beginning after June 15, 2002. This standard
requires a company to record the fair value of a liability for
an asset retirement obligation in the period in which it is
incurred, and a corresponding increase in the carrying value of
the related long-lived asset.

In October 2001, the Financial Accounting
Standards Board issued SFAS No. 144, Accounting for
the Impairment or Disposal of Long-Lived Assets, which is
effective for all fiscal years beginning after December 15,
2001. SFAS No. 144 supersedes SFAS No. 121, but
retains its fundamental provisions relating to the recognition
and measurement of the impairment of long-lived assets to be
held and used, and the measurement of long lived assets to be
disposed of by sale. The Company believes that the adoption of
SFAS No. 141, SFAS No. 143 and SFAS No. 144 will
have little or no effect on its financial statements.

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)


2     Operating
segment data

Segment information is provided in the tables
below:

|                                                                                  |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |         |  
|--------------------------------------------------------------------------------- | -------------------------------------------- | ------------ | ------ | --------- | - | ---------- | ------ | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                  |                                              |              |        | Other     |   |            |        |        
|                                                                                  |                                              |              |        | Managed   |   |            |        |        
|                                                                                  |                                              | US Limited   |        | Container |   | Owned      |        |        
|                                                                                  |                                              | Partnerships |        | Owners    |   | Containers |        | Total  
|                                                                                  |                                              |              |        |           |   |            |        |        
|Year ended December 31, 2001                                                      |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Items directly attributable to operating segments:                                |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|                                                                                  | gross lease revenue                          |              | $      | 33,744    |   |            | $      | 54,715  |   |   | $       | 31,886  |   |   | $       | 120,345 |  
|                                                                                  | direct operating expenses                    |              |        | (9,631    | ) |            |        | (15,129 | ) |   |         | (6,097  | ) |   |         | (30,857 | )
|                                                                                  |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|                                                                                  | net lease revenue                            |              |        | 24,113    |   |            |        | 39,586  |   |   |         | 25,789  |   |   |         | 89,488  |  
|                                                                                  | equipment trading revenue                    |              |        |          |   |            |        |        |   |   |         | 5,279   |   |   |         | 5,279   |  
|                                                                                  | payments to managed container owners         |              |        | (19,033   | ) |            |        | (37,932 | ) |   |         |        |   |   |         | (56,965 | )
|                                                                                  | commissions, fees and other operating income |              |        | 1,334     |   |            |        | 1,333   |   |   |         | 2,782   |   |   |         | 5,449   |  
|                                                                                  | equipment trading expenses                   |              |        |          |   |            |        |        |   |   |         | (4,942  | ) |   |         | (4,942  | )
|                                                                                  | container depreciation                       |              |        |          |   |            |        |        |   |   |         | (14,459 | ) |   |         | (14,459 | )
|                                                                                  | container interest expense                   |              |        |          |   |            |        |        |   |   |         | (7,712  | ) |   |         | (7,712  | )
|                                                                                  | impairment losses                            |              |        |          |   |            |        |        |   |   |         | (4,000  | ) |   |         | (4,000  | )
|                                                                                  |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Operating profit before indirect items                                            |                                              |              | 6,414  |           |   |            | 2,987  |         |   |   | 2,737   |         |   |   | 12,138  |        
|Indirect allocations:                                                             |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|                                                                                  | interest income                              |              |        |          |   |            |        | 182     |   |   |         | 100     |   |   |         | 282     |  
|                                                                                  | depreciation                                 |              |        | (218      | ) |            |        | (351    | ) |   |         | (203    | ) |   |         | (772    | )
|                                                                                  | interest expense                             |              |        | (12       | ) |            |        | (19     | ) |   |         | (11     | ) |   |         | (42     | )
|                                                                                  | selling, general and administrative expenses |              |        | (4,271    | ) |            |        | (4,736  | ) |   |         | (2,773  | ) |   |         | (11,780 | )
|                                                                                  |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Operating profit (loss)                                                           |                                              | $            | 1,913  |           |   | $          | (1,937 | )       |   | $ | (150    | )       |   | $ | (174    | )      
|                                                                                  |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Segment assets                                                                    |                                              | $            | 10,589 |           |   | $          | 14,892 |         |   | $ | 165,603 |         |   | $ | 191,084 |        
|                                                                                  |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Expenditure for segment assets                                                    |                                              | $            | 89     |           |   | $          | 145    |         |   | $ | 31,439  |         |   | $ | 31,673  |        
|                                                                                  |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Reconciliation of operating loss for reportable
	segments to income before taxes:
|Operating loss                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   | $ | (174    | )      
|Gain on sale of investment                                                        |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   | 301     |        
|Unallocated selling, general and administrative
	expenses                         |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   | (2,319  | )      
|Income from recovery of related party loans                                       |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   | 6,000   |        
|Amortization of intangibles                                                       |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   | (560    | )      
|                                                                                  |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Income before taxes                                                               |                                              |              |        |           |   |            |        |         |   |   |         |         |   | $ | 3,248   |        
|                                                                                  |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Reconciliation of assets for reportable segments
	to total assets:               
|Total assets for reportable segments                                              |                                              |              |        |           |   |            |        |         |   |   |         |         |   | $ | 191,084 |        
|General corporate assets                                                          |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   | 34,735  |        
|                                                                                  |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Total assets                                                                      |                                              |              |        |           |   |            |        |         |   |   |         |         |   | $ | 225,819 |        
|                                                                                  |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        

F-15



---



##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

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


|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |         |  
|----------------------------------------------------------------------------------- | -------------------------------------------- | ------------ | ------ | --------- | - | ---------- | ------ | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                    |                                              |              |        | Other     |   |            |        |        
|                                                                                    |                                              |              |        | Managed   |   |            |        |        
|                                                                                    |                                              | US Limited   |        | Container |   | Owned      |        |        
|                                                                                    |                                              | Partnerships |        | Owners    |   | Containers |        | Total  
|                                                                                    |                                              |              |        |           |   |            |        |        
|Year ended December 31, 2000                                                        |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Items directly attributable to operating segments:                                  |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|                                                                                    | gross lease revenue                          |              | $      | 43,288    |   |            | $      | 61,787  |   |   | $       | 32,530  |   |   | $       | 137,605 |  
|                                                                                    | direct operating expenses                    |              |        | (9,639    | ) |            |        | (11,091 | ) |   |         | (5,896  | ) |   |         | (26,626 | )
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|                                                                                    | net lease revenue                            |              |        | 33,649    |   |            |        | 50,696  |   |   |         | 26,634  |   |   |         | 110,979 |  
|                                                                                    | payments to managed container owners         |              |        | (26,696   | ) |            |        | (44,963 | ) |   |         |        |   |   |         | (71,659 | )
|                                                                                    | commissions, fees and other operating income |              |        | 1,317     |   |            |        | 1,702   |   |   |         | 2,007   |   |   |         | 5,026   |  
|                                                                                    | container depreciation                       |              |        |          |   |            |        |        |   |   |         | (14,122 | ) |   |         | (14,122 | )
|                                                                                    | container interest expense                   |              |        |          |   |            |        |        |   |   |         | (9,070  | ) |   |         | (9,070  | )
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Operating profit before indirect items                                              |                                              |              | 8,270  |           |   |            | 7,435  |         |   |   | 5,449   |         |   |   | 21,154  |        
|Indirect allocations:                                                               |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|                                                                                    | interest income                              |              |        |          |   |            |        | 575     |   |   |         | 302     |   |   |         | 877     |  
|                                                                                    | depreciation                                 |              |        | (385      | ) |            |        | (549    | ) |   |         | (289    | ) |   |         | (1,223  | )
|                                                                                    | interest expense                             |              |        | (96       | ) |            |        | (133    | ) |   |         | (68     | ) |   |         | (297    | )
|                                                                                    | selling, general and administrative expenses |              |        | (5,107    | ) |            |        | (5,513  | ) |   |         | (2,963  | ) |   |         | (13,583 | )
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Operating profit                                                                    |                                              | $            | 2,682  |           |   | $          | 1,815  |         |   | $ | 2,431   |         |   | $ | 6,928   |        
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Segment assets                                                                      |                                              | $            | 14,793 |           |   | $          | 17,112 |         |   | $ | 159,766 |         |   | $ | 191,671 |        
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Expenditure for segment assets                                                      |                                              | $            | 20     |           |   | $          | 29     |         |   | $ | 19,603  |         |   | $ | 19,652  |        
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Reconciliation of operating profit for reportable
	segments to income before taxes:
|Operating profit                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   | $ | 6,928   |        
|Gain on sale of investment                                                          |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   | 3,631   |        
|Unallocated selling, general and administrative
	expenses                           |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   | (3,997  | )      
|Amortization of intangibles                                                         |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   | (710    | )      
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Income before taxes                                                                 |                                              |              |        |           |   |            |        |         |   |   |         |         |   | $ | 5,852   |        
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Reconciliation of assets for reportable segments
	to total assets:                 
|Total assets for reportable segments                                                |                                              |              |        |           |   |            |        |         |   |   |         |         |   | $ | 191,671 |        
|General corporate assets                                                            |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   | 39,222  |        
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Total assets                                                                        |                                              |              |        |           |   |            |        |         |   |   |         |         |   | $ | 230,893 |        
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        

F-16



---



##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

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


|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |         |  
|----------------------------------------------------------------------------------- | -------------------------------------------- | ------------ | ------ | --------- | - | ---------- | ------ | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                                                    |                                              |              |        | Other     |   |            |        |        
|                                                                                    |                                              |              |        | Managed   |   |            |        |        
|                                                                                    |                                              | US Limited   |        | Container |   | Owned      |        |        
|                                                                                    |                                              | Partnerships |        | Owners    |   | Containers |        | Total  
|                                                                                    |                                              |              |        |           |   |            |        |        
|Year ended December 31, 1999                                                        |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Items directly attributable to operating segments:                                  |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|                                                                                    | gross lease revenue                          |              | $      | 43,912    |   |            | $      | 56,533  |   |   | $       | 31,695  |   |   | $       | 132,140 |  
|                                                                                    | direct operating expenses                    |              |        | (12,386   | ) |            |        | (13,123 | ) |   |         | (5,670  | ) |   |         | (31,179 | )
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|                                                                                    | net lease revenue                            |              |        | 31,526    |   |            |        | 43,410  |   |   |         | 26,025  |   |   |         | 100,961 |  
|                                                                                    | payments to managed container owners         |              |        | (24,288   | ) |            |        | (39,655 | ) |   |         |        |   |   |         | (63,943 | )
|                                                                                    | commissions, fees and other operating income |              |        | 1,356     |   |            |        | 2,170   |   |   |         | 2,423   |   |   |         | 5,949   |  
|                                                                                    | container depreciation                       |              |        |          |   |            |        |        |   |   |         | (13,958 | ) |   |         | (13,958 | )
|                                                                                    | container interest expense                   |              |        |          |   |            |        |        |   |   |         | (10,267 | ) |   |         | (10,267 | )
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Operating profit before indirect items                                              |                                              |              | 8,594  |           |   |            | 5,925  |         |   |   | 4,223   |         |   |   | 18,742  |        
|Indirect allocations:                                                               |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|                                                                                    | interest income                              |              |        |          |   |            |        | 638     |   |   |         | 373     |   |   |         | 1,011   |  
|                                                                                    | depreciation                                 |              |        | (519      | ) |            |        | (667    | ) |   |         | (373    | ) |   |         | (1,559  | )
|                                                                                    | interest expense                             |              |        | (179      | ) |            |        | (234    | ) |   |         | (129    | ) |   |         | (542    | )
|                                                                                    | selling, general and administrative expenses |              |        | (5,564    | ) |            |        | (5,496  | ) |   |         | (3,153  | ) |   |         | (14,213 | )
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Operating profit                                                                    |                                              | $            | 2,332  |           |   | $          | 166    |         |   | $ | 941     |         |   | $ | 3,439   |        
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Segment assets                                                                      |                                              | $            | 18,496 |           |   | $          | 19,726 |         |   | $ | 150,643 |         |   | $ | 188,865 |        
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Expenditure for segment assets                                                      |                                              | $            | 58     |           |   | $          | 75     |         |   | $ | 3,950   |         |   | $ | 4,083   |        
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Reconciliation of operating profit for reportable
	segments to income before taxes:
|Operating profit                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   | $ | 3,439   |        
|Gain on sale of investment                                                          |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   | 1,278   |        
|Unallocated selling, general and administrative
	expenses                           |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   | (2,356  | )      
|Amortization of intangibles                                                         |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   | (683    | )      
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Income before taxes                                                                 |                                              |              |        |           |   |            |        |         |   |   |         |         |   | $ | 1,678   |        
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Reconciliation of assets for reportable segments
	to total assets:                 
|Total assets for reportable segments                                                |                                              |              |        |           |   |            |        |         |   |   |         |         |   | $ | 188,865 |        
|General corporate assets                                                            |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   | 43,002  |        
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Total assets                                                                        |                                              |              |        |           |   |            |        |         |   |   |         |         |   | $ | 231,867 |        
|                                                                                    |                                              |              |        |           |   |            |        |         |   |   |         |         |   |   |         |        

The segments shown above depict the different
forms of Agreements entered into by the Group with container
owners and represent different levels of profitability and risk
to the Group. Although there are a number of different forms of
Agreements, they fall into two principal categories 
those with US Limited Partnerships and those with Other
Managed Container Owners. Owned containers are those which are
financed by the Groups own capital resources, debt
facilities and capital leases, and include new container
equipment for resale.

All revenues and expenses that are specifically
identifiable to the containers within each segment are allocated
to that segment. The Group manages a number of different
container products, revenue details on which are given below.
Individual product revenues have been aggregated within the
operating segments reported. A significant portion of the
selling, general and administrative expenses relating to the
operation of

F-17



---



##### Table of Contents



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)

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


the entire container fleet is not identified to
segments. Since the Group operates the container fleet as a
homogenous unit, these expenses have been allocated on the basis
of the gross lease revenue in each segment.

Gross lease revenue from external customers by
product comprised:

|                        |  |      |         |      |  |      |         |  |  |   |         | 
|----------------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                        |  | 2001 |         | 2000 |  | 1999
|                        |  |      |         |      |  |     
|Dry cargo containers    |  | $    | 84,921  |      |  | $    | 99,853  |  |  | $ | 93,813  | 
|Refrigerated containers |  |      | 22,422  |      |  |      | 24,899  |  |  |   | 26,413  | 
|Tanks                   |  |      | 5,908   |      |  |      | 6,481   |  |  |   | 7,050   | 
|Dry freight specials    |  |      | 7,094   |      |  |      | 6,372   |  |  |   | 4,864   | 
|                        |  |      |         |      |  |      |         |  |  |   |         | 
|Total                   |  | $    | 120,345 |      |  | $    | 137,605 |  |  | $ | 132,140 | 
|                        |  |      |         |      |  |      |         |  |  |   |         | 

No single customer accounted for 10% or more of
total revenues in the years ended December 31, 2001, 2000
and 1999, respectively.

Almost all of the Groups lease revenue is
earned on containers used by its customers in global trade
routes. Accordingly, the Group believes that it does not possess
discernible geographic reporting segments as defined in SFAS
No. 131 (SFAS 131), Disclosures
about Segments of an Enterprise and Related Information.

3   Income taxes

The provision (benefit) for income taxes
comprises:

|                                           |             |      |      |       |   |      |     |      |   |   |      |        |  
|------------------------------------------ | ----------- | ---- | ---- | ----- | - | ---- | --- | ---- | - | - | ---- | ------ | -
|                                           |             | 2001 |      | 2000  |   | 1999
|                                           |             |      |      |       |   |     
|Current taxes:                             |             |      |      |       |   |      |     |      |   |   |      |       
|                                           | Federal     |      | $    |      |   |      | $   | (17  | ) |   | $    | 75     |  
|                                           | Foreign     |      |      | (316  | ) |      |     | 717  |   |   |      | 637    |  
|                                           |             |      |      |       |   |      |     |      |   |   |      |       
|                                           |             |      | (316 | )     |   |      | 700 |      |   |   | 712  |       
|                                           |             |      |      |       |   |      |     |      |   |   |      |       
|Deferred taxes:                            |             |      |      |       |   |      |     |      |   |   |      |       
|                                           | Federal     |      |      | (843  | ) |      |     | (729 | ) |   |      | (1,219 | )
|                                           | State       |      |      | (234  | ) |      |     | (135 | ) |   |      | (247   | )
|                                           | Withholding |      |      | 145   |   |      |     | 11   |   |   |      |       |  
|                                           | Foreign     |      |      | 1,326 |   |      |     | 789  |   |   |      | 518    |  
|                                           |             |      |      |       |   |      |     |      |   |   |      |       
|                                           |             |      | 394  |       |   |      | (64 | )    |   |   | (948 | )     
|                                           |             |      |      |       |   |      |     |      |   |   |      |       
|Total provision (benefit) for income taxes |             | $    | 78   |       |   | $    | 636 |      |   | $ | (236 | )     
|                                           |             |      |      |       |   |      |     |      |   |   |      |       

Differences between the provision
(benefit) for taxes that would be computed at the US
statutory rate and the actual tax provision (benefit) were:

|                                                     |  |      |        |      |  |      |        |   |  |   |        |  
|---------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                     |  | 2001 |        | 2000 |  | 1999
|                                                     |  |      |        |      |  |     
|Expected US Federal provision                        |  | $    | 1,104  |      |  | $    | 1,989  |   |  | $ | 579    |  
|Foreign income not subject to US corporate taxes     |  |      | (2,429 | )    |  |      | (2,568 | ) |  |   | (1,154 | )
|State taxes (net of federal tax benefit)             |  |      | (234   | )    |  |      | (102   | ) |  |   | (158   | )
|Foreign corporate taxes                              |  |      | 1,010  |      |  |      | 1,507  |   |  |   | 1,155  |  
|Tax on unremitted retained earnings of
	subsidiaries |  |      | 145    |      |  |      | 11     |   |  |   |       |  
|Valuation allowance                                  |  |      | 371    |      |  |      | (112   | ) |  |   | (345   | )
|Other                                                |  |      | 111    |      |  |      | (89    | ) |  |   | (313   | )
|                                                     |  |      |        |      |  |      |        |   |  |   |        |  
|Actual tax provision (benefit)                       |  | $    | 78     |      |  | $    | 636    |   |  | $ | (236   | )
|                                                     |  |      |        |      |  |      |        |   |  |   |        |  

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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)


Income before income taxes comprises:

|              |  |      |        |      |  |      |        |   |  |   |        |  
|------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|              |  | 2001 |        | 2000 |  | 1999
|              |  |      |        |      |  |     
|United States |  | $    | (3,897 | )    |  | $    | (1,702 | ) |  | $ | (2,753 | )
|Foreign       |  |      | 7,145  |      |  |      | 7,554  |   |  |   | 4,431  |  
|              |  |      |        |      |  |      |        |   |  |   |        |  
|              |  | $    | 3,248  |      |  | $    | 5,852  |   |  | $ | 1,678  |  
|              |  |      |        |      |  |      |        |   |  |   |        |  

Temporary differences giving rise to the net
deferred income tax liability as of the balance sheet date were:

|                                                                           |  |      |       |      |  |   |       | 
|-------------------------------------------------------------------------- |  | ---- | ----- | ---- |  | - | ----- | 
|                                                                           |  | 2001 |       | 2000
|                                                                           |  |      |       |     
|Assets                                                                     |  |      |       |      |  |   |       | 
|Acquisition fees                                                           |  | $    | 1,506 |      |  | $ | 2,017 | 
|Losses carried forward                                                     |  |      | 1,452 |      |  |   | 1,092 | 
|Disallowed interest expense carried forward                                |  |      | 1,491 |      |  |   | 1,491 | 
|Alternative minimum tax credit                                             |  |      | 57    |      |  |   | 57    | 
|Other                                                                      |  |      | 283   |      |  |   | 85    | 
|                                                                           |  |      |       |      |  |   |       | 
|Total deferred income tax assets                                           |  |      | 4,789 |      |  |   | 4,742 | 
|                                                                           |  |      |       |      |  |   |       | 
|Liabilities                                                                |  |      |       |      |  |   |       | 
|Depreciation                                                               |  |      | 6,465 |      |  |   | 6,102 | 
|Partnership income taxable in different periods
	for book and tax purposes |  |      | 1,116 |      |  |   | 1,554 | 
|Unremitted retained earnings of subsidiaries                               |  |      | 422   |      |  |   | 277   | 
|Valuation allowance                                                        |  |      | 1,143 |      |  |   | 772   | 
|                                                                           |  |      |       |      |  |   |       | 
|Total deferred income tax liabilities                                      |  |      | 9,146 |      |  |   | 8,705 | 
|                                                                           |  |      |       |      |  |   |       | 
|Net deferred income tax liabilities                                        |  | $    | 4,357 |      |  | $ | 3,963 | 
|                                                                           |  |      |       |      |  |   |       | 

Tax losses have arisen in certain US entities. As
of December 31, 2001 the deferred tax asset associated with
these losses carried forward will expire as follows:

|                    |  |   |       | 
|------------------- |  | - | ----- | 
|2002                |  | $ | 89    | 
|2003                |  |   | 93    | 
|2004                |  |   | 74    | 
|2005                |  |   | 46    | 
|2006                |  |   | 27    | 
|2007 and thereafter |  |   | 815   | 
|                    |  |   |       | 
|Total               |  | $ | 1,144 | 
|                    |  |   |       | 

At December 31, 2001, the Group had net
operating loss carryforwards available of approximately $2,193,
$4,452 and $773 for federal, state and foreign income taxes,
respectively, to offset future income tax liabilities. The
expected tax effect of these losses is reflected as a deferred
tax asset. A valuation allowance has been established in the US
subsidiaries since the realization of tax benefits of net
operating loss carryforwards is not assured. The amount of the
valuation allowance is reviewed on a quarterly basis.

The Group has a potential deferred income tax
liability on unremitted retained earnings of certain
subsidiaries. Upon remittance of such earnings to the parent
company, tax may be withheld by certain jurisdictions in which
the Group operates. Management has considered the Groups
remittance intentions in arriving at the related provision for
deferred income taxes. The total potential amount of such
deferred income taxes not provided at December 31, 2001 was
nil as a result of certain subsidiaries carrying a retained
deficit.

F-19



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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   Amounts due from
lessees

a)     Lease
rentals

As of December 31, 2001 the minimum lease
rentals receivable in future years under term operating leases
were:

|                    |  |   |         | 
|------------------- |  | - | ------- | 
|2002                |  | $ | 35,860  | 
|2003                |  |   | 30,954  | 
|2004                |  |   | 22,942  | 
|2005                |  |   | 16,046  | 
|2006                |  |   | 8,312   | 
|2007 and thereafter |  |   | 3,203   | 
|                    |  |   |         | 
|Total               |  | $ | 117,317 | 
|                    |  |   |         | 

Contingent rentals approximated $82,000,
$103,000, and $92,000 of gross lease revenue, respectively, in
the years ended December 31, 2001, 2000 and 1999,
respectively.

b)     Allowance
for doubtful accounts

The activity in the allowance for doubtful
accounts was:

|                                |  |      |       |      |  |   |        |  
|------------------------------- |  | ---- | ----- | ---- |  | - | ------ | -
|                                |  | 2001 |       | 2000
|                                |  |      |       |     
|Beginning of year               |  | $    | 2,765 |      |  | $ | 3,569  |  
|Provision for doubtful accounts |  |      | 630   |      |  |   | 1,326  |  
|Write-offs, net of recoveries   |  |      | (794  | )    |  |   | (2,130 | )
|                                |  |      |       |      |  |   |        |  
|End of year                     |  | $    | 2,601 |      |  | $ | 2,765  |  
|                                |  |      |       |      |  |   |        |  

5   New container equipment for
resale

Activity during the year in new container
equipment for resale was:

|                                                           |                                                                     |      |        |        |   |   |        |         |  
|---------------------------------------------------------- | ------------------------------------------------------------------- | ---- | ------ | ------ | - | - | ------ | ------- | -
|                                                           |                                                                     | 2001 |        | 2000  
|                                                           |                                                                     |      |        |       
|Beginning of year                                          |                                                                     | $    | 11,790 |        |   | $ | 2,535  |        
|Container purchases                                        |                                                                     |      | 8,947  |        |   |   | 45,592 |        
|Container disposals:                                       |                                                                     |      |        |        |   |   |        |        
|                                                           | sold to US Limited Partnerships and Other Managed
	Container Owners |      |        | (7,469 | ) |   |        | (33,258 | )
|                                                           | sold to other parties                                               |      |        | (4,942 | ) |   |        |        |  
|Transferred to net investment in direct financing
	leases  |                                                                     |      | (932   | )      |   |   |       |        
|Transferred to long-term ownership of container
	equipment |                                                                     |      | (5,931 | )      |   |   | (3,079 | )      
|                                                           |                                                                     |      |        |        |   |   |        |        
|End of year                                                |                                                                     | $    | 1,463  |        |   | $ | 11,790 |        
|                                                           |                                                                     |      |        |        |   |   |        |        

As part of organizing the US public limited
partnerships the Group purchases containers for resale to these
partnerships. For the years ended December 31, 2001 and
2000, containers purchased and resold to these partnerships
amount to $18 and $6,425, respectively. These transactions were
entered into on normal commercial terms.

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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)


6     Net investment
in direct financing leases

The Group, as lessor, has entered into various
leases of equipment that qualify as direct financing leases. The
minimum future lease rentals under these direct financing
leases, net of unearned income, are due as follows:

|                   |                     |             |    |              |       |                |   |       |       |   |     |       |        | 
|------------------ | ------------------- | ----------- | -- | ------------ | ----- | -------------- | - | ----- | ----- | - | --- | ----- | ------ | 
|                   |                     | Net lease   |    | Unearned     |       | Minimum future
|                   |                     | receivables |    | lease income |       | lease rentals 
|                   |                     |             |    |              |       |               
|December 31, 2000  |                     | $           | 99 |              |       | $              | 3 |       |       | $ | 102 |      
|                   |                     |             |    |              |       |                |   |       |       |   |     |      
|December 31, 2001: |                     |             |    |              |       |                |   |       |       |   |     |      
|                   | 2002                |             |    | 1,268        |       |                |   | 1,045 |       |   |     | 2,313 |       
|                   | 2003                |             |    | 1,442        |       |                |   | 809   |       |   |     | 2,251 |       
|                   | 2004                |             |    | 1,554        |       |                |   | 500   |       |   |     | 2,054 |       
|                   | 2005                |             |    | 1,033        |       |                |   | 331   |       |   |     | 1,364 |       
|                   | 2006                |             |    | 1,040        |       |                |   | 191   |       |   |     | 1,231 |       
|                   | 2007 and thereafter |             |    | 969          |       |                |   | 133   |       |   |     | 1,102 |       
|                   |                     |             |    |              |       |                |   |       |       |   |     |      
|                   |                     | Total       |    | $            | 7,306 |                |   | $     | 3,009 |   |     | $     | 10,315 | 
|                   |                     |             |    |              |       |                |   |       |       |   |     |      

7     Investments,
including investments in related parties

Investments comprise:

|                                          |                         |      |   |      |  |   |     |     | 
|----------------------------------------- | ----------------------- | ---- | - | ---- |  | - | --- | --- | 
|                                          |                         | 2001 |   | 2000
|                                          |                         |      |   |     
|Investment in US Limited Partnerships     |                         | $    |  |      |  | $ | 1   |    
|Investment securities available for sale: |                         |      |   |      |  |   |     |    
|                                          | cost                    |      |   |     |  |   |     | 183 | 
|                                          | unrealized holding gain |      |   |     |  |   |     | 444 | 
|                                          |                         |      |   |      |  |   |     |    
|                                          |                         | $    |  |      |  | $ | 628 |    
|                                          |                         |      |   |      |  |   |     |    

i. Investment in US Limited
Partnerships

The Group has general partnership investments and
limited partnership investments in eight sponsored funds. These
general and limited partner investments are accounted for using
the equity method. At December 31, 2001, distributions
exceeded the sum of the investments in the partnerships and the
profit recognized under the equity method for the eight
partnerships by a total of $853. At December 31, 2000,
distributions for several of the limited partnerships exceeded
the sum of the investment in the partnership and the profit
recognized under the equity method by a total of $493. For these
partnerships, the net balance is included in amounts payable to
container owners.

ii. Investment securities

At December 31, 1998, the Group had an
interest in 56,580 shares of Transamerica Corporation
(Transamerica). Of these shares, a total 44,254 were
held in three escrows pending final determination of
post-closing reports and adjustments. A further 11,336 shares
were held in escrow by Transamerica as security for a tax
indemnification agreement. In July 1999, Aegon N.V.
(Aegon) acquired Transamerica. Under the terms of
the takeover agreement, the Group was entitled to receive a cash
payment of $23.40 together with 0.71813 Aegon shares for each
Transamerica share held.

In September 1999, the Group was notified that
one of the three escrows had been settled and received a cash
payment of $278 together with 15,524 shares in Aegon which were
sold for a consideration of $1,000. The

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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)


Group recognized a $1,278 gain, which is reported
on the statement of operations as a gain on conversion of
investment and a realized holding gain.

The gain on conversion is computed as the excess
number of shares released from escrow over the number of shares
previously recognized multiplied by the approximate share value
on the merger date. The realized holding gain is computed as the
total number of shares released from escrow multiplied by the
share appreciation between the merger date and the date of sale.

During 2000, the Group recorded a gain of $3,170
resulting from the settlement and sale of shares in the two
escrow accounts held pending final determination of post-closing
reports and adjustments. In addition, the Group recorded a gain
of $461 in connection with an interim settlement of the escrow
subject to the terms of the tax indemnification agreement.

During 2001, the Group recorded a gain of $301 on
the final settlement of the escrow subject to the terms of the
tax indemnification agreement.

8     Container
equipment

The activity in container equipment for the years
ended December 31, 2001 and 2000 was:

|                           |  |   |         |  
|-------------------------- |  | - | ------- | -
|Cost                       |  |   |         |  
|Balance, December 31, 1999 |  | $ | 205,120 |  
|Additions                  |  |   | 19,587  |  
|Disposals                  |  |   | (5,182  | )
|                           |  |   |         |  
|Balance, December 31, 2000 |  |   | 219,525 |  
|Additions                  |  |   | 31,354  |  
|Disposals                  |  |   | (17,277 | )
|Impairment loss            |  |   | (2,000  | )
|                           |  |   |         |  
|Balance, December 31, 2001 |  | $ | 231,602 |  
|                           |  |   |         |  
|Accumulated depreciation   |  |   |         |  
|Balance, December 31, 1999 |  | $ | 67,573  |  
|Depreciation expense       |  |   | 14,122  |  
|Disposals                  |  |   | (2,921  | )
|                           |  |   |         |  
|Balance, December 31, 2000 |  |   | 78,774  |  
|Depreciation expense       |  |   | 14,459  |  
|Disposals                  |  |   | (12,071 | )
|                           |  |   |         |  
|Balance, December 31, 2001 |  | $ | 81,162  |  
|                           |  |   |         |  
|Book value                 |  |   |         |  
|December 31, 2001          |  | $ | 150,440 |  
|                           |  |   |         |  
|December 31, 2000          |  | $ | 140,751 |  
|                           |  |   |         |  

Depreciation expense in 1999 was $13,958.



| |                
| | ---------------
| | Impairment loss

In the second quarter of 2001, the Group reviewed
its refrigerated container equipment to consider recent changes
in the marketplace and economic environment and to identify the
consequences, if any, from an accounting perspective. Management
identified a number of issues that had an impact on the carrying
value of certain equipment at June 30, 2001.

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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)


In 1992, the Montreal Protocol outlawed the
production of the R12 refrigerant gas by developed countries.
Since that date, shipping lines and leasing companies continued
to operate fleets including equipment with the R12 refrigerant
gas. However, the environmental impact of refrigerant gases has
become increasingly prominent. On January 1, 2001, it
became illegal for R12 to be handled, other than for disposal,
in almost all countries that are members of the European Union.

Several of the major shipping lines that lease
from Cronos and other leasing companies have committed to
eliminating containers with the R12 refrigerant gas from their
fleets in 2001. Inventories of this equipment will continue to
increase as shipping lines redeliver leased equipment.

During 2000, Cronos entered into a number of term
leases for R12 equipment. However, over the course of 2001, the
factors outlined above together with the deteriorating economic
environment resulted in a very slow leasing market for R12
equipment. In addition, it is probable that residual prices for
R12 containers will decrease as equipment is returned.

Cronos management considered the impact of these
factors in June 2001 and decided to change the current marketing
strategy for R12 equipment. Management concluded effective
July 1, 2001, that inventories of R12 equipment would be
targeted for immediate sale. Management also conducted a review
of R12 equipment that was on lease at June 30, 2001.

R12 Assets to be disposed of:In June 2001 management committed to a
plan to dispose of 531 containers with a carrying value of
$2,400. It was concluded that the carrying value of the assets
exceeded fair value and accordingly an impairment charge of
$1,400 was recorded to operations under impairment losses. Fair
value was determined by discounting expected cash flows. The
assets are reported as part of the owned container business
segment. It is expected that the assets will be disposed of by
June 30, 2002. At December 31, 2001, the Group had
disposed of 235 assets at an additional loss of $50.

R12 Assets to be held and used:Management conducted a review of 776
containers with a carrying value of $3,700 that were on lease at
June 30, 2001. It was concluded that the carrying value of
these assets exceeded the future cash flows expected to result
from the rental of the assets and their eventual disposition,
and therefore was not recoverable. Accordingly a charge of $600
was recorded to operations under impairment losses. Fair value
was determined by discounting expected cash flows. The assets
are reported as part of the owned container business segment.

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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)


9     Intangible
assets

The activity in the intangible assets was:

|                           |  |          |        |         |  |       |       |  |  |   |        | 
|-------------------------- |  | -------- | ------ | ------- |  | ----- | ----- |  |  | - | ------ | 
|                           |  | Goodwill |        | Patents |  | Total
|                           |  |          |        |         |  |      
|Cost                       |  |          |        |         |  |       |       |  |  |   |        | 
|Balance, December 31, 1999 |  | $        | 16,231 |         |  | $     | 2,096 |  |  | $ | 18,327 | 
|Additions                  |  |          |       |         |  |       |      |  |  |   |       | 
|                           |  |          |        |         |  |       |       |  |  |   |        | 
|Balance, December 31, 2000 |  |          | 16,231 |         |  |       | 2,096 |  |  |   | 18,327 | 
|Additions                  |  |          |       |         |  |       |      |  |  |   |       | 
|                           |  |          |        |         |  |       |       |  |  |   |        | 
|Balance, December 31, 2001 |  | $        | 16,231 |         |  | $     | 2,096 |  |  | $ | 18,327 | 
|                           |  |          |        |         |  |       |       |  |  |   |        | 
|Accumulated amortization   |  |          |        |         |  |       |       |  |  |   |        | 
|Balance, December 31, 1999 |  | $        | 4,296  |         |  | $     | 626   |  |  | $ | 4,922  | 
|Amortization expense       |  |          | 524    |         |  |       | 186   |  |  |   | 710    | 
|                           |  |          |        |         |  |       |       |  |  |   |        | 
|Balance, December 31, 2000 |  |          | 4,820  |         |  |       | 812   |  |  |   | 5,632  | 
|Amortization expense       |  |          | 373    |         |  |       | 187   |  |  |   | 560    | 
|                           |  |          |        |         |  |       |       |  |  |   |        | 
|Balance, December 31, 2001 |  | $        | 5,193  |         |  | $     | 999   |  |  | $ | 6,192  | 
|                           |  |          |        |         |  |       |       |  |  |   |        | 
|Book value                 |  |          |        |         |  |       |       |  |  |   |        | 
|December 31, 2001          |  | $        | 11,038 |         |  | $     | 1,097 |  |  | $ | 12,135 | 
|                           |  |          |        |         |  |       |       |  |  |   |        | 
|December 31, 2000          |  | $        | 11,411 |         |  | $     | 1,284 |  |  | $ | 12,695 | 
|                           |  |          |        |         |  |       |       |  |  |   |        | 

The amortization expense in 1999 was $683.

i.   Goodwill

Goodwill arose on the acquisition in 1990 of
Intermodal Equipment Associates and the acquisition in 1996 of
Intermodal Management AB.

ii.  CPC & Slimwall CPC
patents

The Group entered into agreements to acquire the
patent rights relating to the CPC, the Slimwall CPC and the
intellectual property of Cargo Unit Containers Limited
(CUC) in August 1996 for a total consideration of
$2,096 from a third-party (the Seller). In April
2000, the Group entered into another agreement with the Seller
which provided that, in consideration for the sum of $1,000, the
Group would fully discharge any liabilities for accrued
royalties, acquire full right, title and interest that the
Seller may have had to receive royalties in the future and
acquire all residual rights as the Seller had or may have had
under the Agreements.

Until December 31, 2001, patents were
amortized on a straight line basis over a period of 4 to
40 years. With the adoption of SFAS No. 142 on January
2002, patents will be amortized on a straight-line basis to a
nil residual value through 2006.

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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)


10     Other
assets

Other assets includes the following items:

|                                                                           |  |      |        |      |  |   |        | 
|-------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                                                                           |  | 2001 |        | 2000
|                                                                           |  |      |        |     
|Residual interests in leased containers
	(non-interest bearing loan notes) |  | $    | 5,305  |      |  | $ | 7,305  | 
|Retention deposits                                                         |  |      | 4,004  |      |  |   | 4,054  | 
|Unamortized loan origination fees                                          |  |      | 2,370  |      |  |   | 2,477  | 
|Deposits held in escrow for third-party container
	owner                   |  |      | 1,175  |      |  |   | 919    | 
|Other deposits held in escrow                                              |  |      |       |      |  |   | 255    | 
|Prepaid expenses                                                           |  |      | 923    |      |  |   | 1,145  | 
|Other                                                                      |  |      | 3,457  |      |  |   | 1,725  | 
|                                                                           |  |      |        |      |  |   |        | 
|                                                                           |  | $    | 17,234 |      |  | $ | 17,880 | 
|                                                                           |  |      |        |      |  |   |        | 

i.In
1998, 1997 and 1996, the Group sold containers to a third-party
container owner for a total of $49,700. The total consideration
for the container sales comprised cash, management fees
receivable on revenues earned by the containers, non-interest
bearing loan notes and an option to acquire 75% of the container
owning company in August 2006 for one US dollar. The loan notes,
which are subordinate to other loan notes due to third-parties,
fall due for repayment after the other loan notes have been
repaid from funds generated from the containers, which are
managed by the Group.

The four elements of the transactions were
essential and integral parts of the consideration. Collectively,
they gave the Group the right to receive management fees and
certain proceeds on the disposal of the containers.

To value the loan notes, management periodically
discounts the future projected net cash flows to be generated by
the containers based on historic and projected trends for per
diem revenues, utilization, container disposal proceeds and
funding costs over the expected remaining life of the containers.

In the second quarter of 2001, the Group revised
the projections for per diem revenues and utilization downwards,
due to the global economic downturn. Based on the revised
projected trends, the carrying value of the loan notes due from
the third-party container owner exceeded the discounted value of
the future cash flows by $2,000. Accordingly, a $2,000
impairment charge was recorded and is reported as part of the
owned container business segment.

ii.At
December 31, 2001 and 2000, amounts of $4,004 and $4,054,
respectively, were held as retention deposits by financial
institutions in connection with long-term funding transactions.
At December 31, 2001, the remaining release dates for these
amounts ranged from between 2002 and 2005 in accordance with the
terms of the funding transactions (see Note 11).

iii.At
December 31, 2001 and 2000, deposits of $1,175 and $919,
respectively, were held in escrow accounts relating to amounts
due to a third-party container owner (see Note 13).

iv.At
December 31, 2000 an amount of $255 was held as a
restricted cash deposit in an escrow account under the terms of
a tax indemnification agreement (see Note 7).

11     Debt and lease
obligations

As of December 31, 2001, the Group had
$122,748 of term facilities (including capital lease financing)
under which $107,920 was outstanding and $1,645 of credit
facilities under which $0 was outstanding. Interest rates under
these facilities ranged from 3.5% to 8.6%. The terms of these
facilities extend to various dates through 2011.

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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)


Debt and capital lease obligations are comprised
of:

|                                                   |                              |      |         |        |  |          |        |        |  |  |           |           | 
|-------------------------------------------------- | ---------------------------- | ---- | ------- | ------ |  | -------- | ------ | ------ |  |  | --------- | --------- | 
|                                                   |                              |      |         |        |  | Interest
|                                                   |                              | 2001 |         | 2000   |  | Rates % 
|                                                   |                              |      |         |        |  |         
|Debt:                                              |                              |      |         |        |  |          |        |        |  |  |           |          
|                                                   | Floating rate debt, due 2004 |      | $       | 50,172 |  |          | $      | 34,055 |  |  |           | 4.5  8.3 | 
|                                                   | Fixed rate debt, due 2004    |      |         | 16,588 |  |          |        | 19,099 |  |  |           | 8.6  8.7 | 
|                                                   | Floating rate debt, due 2004 |      |         | 9,714  |  |          |        | 12,286 |  |  |           | 4.1  8.0 | 
|                                                   | Other loans, due 2002  2004 |      |         | 80     |  |          |        | 4,871  |  |  |           | 6.2  9.6 | 
|                                                   |                              |      |         |        |  |          |        |        |  |  |           |          
|Total debt                                         |                              |      | 76,554  |        |  |          | 70,311 |        |  |  |           |          
|Obligations under capital leases, due
	2001  2011 |                              |      | 31,366  |        |  |          | 29,068 |        |  |  | 3.5  8.6 |          
|                                                   |                              |      |         |        |  |          |        |        |  |  |           |          
|Total                                              |                              | $    | 107,920 |        |  | $        | 99,379 |        |  |  |           |          
|                                                   |                              |      |         |        |  |          |        |        |  |  |           |          

a)     Debt

Debt is comprised of:

|                                           |               |      |        |        |  |   |        |        | 
|------------------------------------------ | ------------- | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                           |               | 2001 |        | 2000  
|                                           |               |      |        |       
|Long-term debt:                            |               |      |        |        |  |   |        |       
|Bank term loans                            |               |      |        |        |  |   |        |       
|                                           | fixed rate    |      | $      | 16,588 |  |   | $      | 20,571 | 
|                                           | variable rate |      |        | 59,966 |  |   |        | 49,740 | 
|                                           |               |      |        |        |  |   |        |       
|                                           |               |      | 76,554 |        |  |   | 70,311 |       
|Less: current maturities of long-term debt |               |      | 8,094  |        |  |   | 14,445 |       
|                                           |               |      |        |        |  |   |        |       
|                                           |               | $    | 68,460 |        |  | $ | 55,866 |       
|                                           |               |      |        |        |  |   |        |       

Bank loans are secured by the Groups
container equipment with installments payable through 2004 and
with interest rates fixed or floating dependent upon the
facilities. The weighted average interest rates for the years
ended December 31, 2001, 2000 and 1999 were 6.7%, 8.4%, and
8.4%, respectively.

As of December 31, 2001, the estimated fair
value of fixed rate long-term debt was $17,501 (2000 
$20,394) for which the carrying value was $16,588
(2000  $20,571). The fair value of fixed rate
long-term debt has been calculated using the market rates
prevailing at December 31, 2001 and 2000.

On July 19, 2001, the Group entered into a
$60,000 revolving credit facility. This facility is for a term
of three years with an interest rate of libor plus 2.25%,
payable monthly in arrears. The first draw down under the
facility was utilized to refinance $37,600 of previous loan
facilities.

The primary facilities include quarterly
financial covenants relating to minimum tangible net worth,
maximum level of total liabilities to tangible net worth,
maximum level of debt and capital lease obligations to tangible
net worth, interest expense coverage and debt service coverage.
At December 31, 2001, the Group was in compliance with
these covenants. Future compliance with the covenants will
depend on the ability of the Group to report a minimum level of
income before income taxes for each quarter (equal to 10% of
interest expense for that quarter), and to generate sufficient
cash from operations and other activities to maintain the
current portion of borrowings within financial covenant limits.
The breach of a covenant constitutes an event of default.

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)


As of December 31, 2001, the annual
maturities of debt were:

|      |  |   |        | 
|----- |  | - | ------ | 
|2002  |  | $ | 8,094  | 
|2003  |  |   | 8,260  | 
|2004  |  |   | 60,200 | 
|      |  |   |        | 
|Total |  | $ | 76,554 | 
|      |  |   |        | 

b)     Capital
lease obligations

The cost and net book value of assets acquired
through capital leases was $40,222 and $31,897, respectively, at
December 31, 2001, ($36,437 and $29,248, respectively, at
December 31, 2000). Amortization in respect of these leases
is included in depreciation expense. The aggregate capital lease
obligations are secured by container equipment.

As of December 31, 2001, the minimum lease
payments under capital leases representing interest and
principal were:

|                    |  |           |        |          |  |       |       |  |  |   |        | 
|------------------- |  | --------- | ------ | -------- |  | ----- | ----- |  |  | - | ------ | 
|                    |  | Principal |        | Interest |  | Total
|                    |  |           |        |          |  |      
|2002                |  | $         | 4,725  |          |  | $     | 2,128 |  |  | $ | 6,853  | 
|2003                |  |           | 5,316  |          |  |       | 1,808 |  |  |   | 7,124  | 
|2004                |  |           | 5,432  |          |  |       | 1,382 |  |  |   | 6,814  | 
|2005                |  |           | 4,754  |          |  |       | 963   |  |  |   | 5,717  | 
|2006                |  |           | 2,419  |          |  |       | 745   |  |  |   | 3,164  | 
|2007 and thereafter |  |           | 8,720  |          |  |       | 1,101 |  |  |   | 9,821  | 
|                    |  |           |        |          |  |       |       |  |  |   |        | 
|Total               |  | $         | 31,366 |          |  | $     | 8,127 |  |  | $ | 39,493 | 
|                    |  |           |        |          |  |       |       |  |  |   |        | 

At December 31, 2000 the current maturities
under capital leases were $3,706.

c)     Operating
leases

i.   Group as lessee

The total fixed operating lease rental expense
for container equipment, computer equipment and office space was
$11,926, $10,291 and $10,339 for the years ended
December 31, 2001, 2000 and 1999, respectively. Of this,
the fixed operating lease rental expense for container equipment
was $10,379, $8,675, and $8,783 for the years ended
December 31, 2001, 2000 and 1999, respectively. Rental
expense for containers, the majority of which is contingent as
described in Note 1, is shown in the Statements of Income
as payments to container owners.

As of December 31, 2001 future minimum lease
payments under these non-cancellable operating leases were:

|                    |  |   |        | 
|------------------- |  | - | ------ | 
|2002                |  | $ | 10,063 | 
|2003                |  |   | 9,666  | 
|2004                |  |   | 9,037  | 
|2005                |  |   | 7,724  | 
|2006                |  |   | 5,078  | 
|2007 and thereafter |  |   | 14,985 | 
|                    |  |   |        | 
|Total               |  | $ | 56,553 | 
|                    |  |   |        | 

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)


ii.     Group as
lessor

The Group sub-leases containers to ocean carriers
under operating leases, as described in Note 1. The Group
also sub-leases office space and earned revenue of $380, $315
and $250 for the years ended December 31, 2001, 2000 and
1999, respectively.

Rental income from sub-leasing containers owned
by managed container owners to ocean carriers was $88,459,
$105,075 and $100,445 for the years ended December 31,
2001, 2000 and 1999, respectively (see Note 2). These
amounts are included in gross lease revenue in the Statements of
Income.

Future sub-lease rentals for containers leased
under operating leases to ocean carriers under non-cancellable
term leases are included in the amounts shown in Note 4.

12     Deferred
income and deferred acquisition fees

Deferred income and deferred acquisition fees
comprise:

|                          |  |      |       |      |  |   |       | 
|------------------------- |  | ---- | ----- | ---- |  | - | ----- | 
|                          |  | 2001 |       | 2000
|                          |  |      |       |     
|Advance billings          |  | $    | 1,543 |      |  | $ | 1,577 | 
|Deferred acquisition fees |  |      | 5,168 |      |  |   | 6,815 | 
|                          |  |      |       |      |  |   |       | 
|                          |  | $    | 6,711 |      |  | $ | 8,392 | 
|                          |  |      |       |      |  |   |       | 

The recognition of deferred acquisition fees is
not contingent upon the performance or continuation of any of
the Agreements to which they relate. On the termination of an
Agreement, any deferred fees are recognized immediately. As of
December 31, 2001, deferred acquisition fees are scheduled
to be recognized as follows:

|                    |  |   |       | 
|------------------- |  | - | ----- | 
|2002                |  | $ | 1,323 | 
|2003                |  |   | 1,158 | 
|2004                |  |   | 891   | 
|2005                |  |   | 666   | 
|2006                |  |   | 484   | 
|2007 and thereafter |  |   | 646   | 
|                    |  |   |       | 
|Total               |  | $ | 5,168 | 
|                    |  |   |       | 

13     Commitments
and contingencies

i.     Commitments

At December 31, 2001, the Group had
outstanding orders to purchase container equipment of $1,490.

ii.     Guarantee
to US Limited Partnership

During 2000, the Group provided a guarantee under
a $5,000 third-party loan note (the Note), with a
2006 maturity date, to a US Limited Partnership. Under the terms
of the guarantee, the Group may be liable for any principal and
interest outstanding under the terms of the Note in the event of
a default by the US Limited Partnership. At
December 31, 2001, the balance outstanding under the Note
was $3,782.

iii.     Guarantee
of third-party loan & rent support agreement

During 1996 and 1997, the Group sold a total of
$26,300 of equipment, which was under a direct financing lease
with a major shipping line, to a third-party. The third-party
financed the acquisition of this equipment with a loan of
$26,300, with a 2004 maturity date, to which the Group provided
a first loss

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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)


guarantee for 20% of the debt. The Group can
collateralise up to 50% of the guarantee with a first security
interest in additional equipment. At December 31, 2001, the
balance outstanding under the loan was $9,186.

In addition, under the terms of a rent support
agreement, the Group is required to deposit an amount equal to
the aggregate of all rental charges scheduled to be paid under
the direct financing lease for the next twelve months or until
the end of the lease, if sooner, upon the occurrence of a
continuing event of default by the shipping line. Annual rental
charges under the lease, with a 2004 scheduled maturity date,
approximate $5,130.

iv.     Guarantee
under a purchase, assignment and agency agreement

During 1996, the Group entered into a term lease
with a lessee in the ordinary course of business. During 1997,
the containers held under the lease were sold, and the lease
assigned, to a financial institution. As part of this contract,
the Group continues to manage the containers held under the term
lease and invoices the lessee and collects monies on behalf of
the financial institution. Rental under the lease is
approximately $482 per annum. of which the Group remits $378 to
the financial institution as rent and $84 to a retention account
held as security by the institution. As compensation for this
service, the Group retains an agency fee of $20 per annum.

Under the terms of the contract with the
financial institution, if the lessee fails to make payments,
other than in the event of being declared bankrupt, the Group
has guaranteed that it will continue to make payments to the
financial institution. The guarantee and agreement with the
financial institution will expire in October 2005.

v.   Agreements with Other
Managed Container Owners  early termination
options

Approximately 47% (based on original equipment
cost) of the Agreements with Other Managed Container Owners
contain early termination options, whereby the container owner
may terminate the agreement if certain performance thresholds
are not achieved. At December 31, 2001, approximately 35%
(based on original equipment cost) of Agreements were eligible
for early termination. Cronos believes that early termination of
these Agreements by the Other Managed Container Owners is
unlikely.

vi.     Agreements
with Other Managed Container Owners  change of
control provisions

Approximately 45% (based on original equipment
cost) of Agreements with Other Managed Container Owners provide
that a change in ownership of the Group, without the prior
consent of the container owner, may constitute an event of
default under the Agreement. In substantially all of these
Agreements, the consent of the container owners may not be
unreasonably withheld. In the event that consent is not
obtained, 34% of Agreements may require the Group to transfer
possession of the equipment to another equipment manager. Such
transfer of possession may result in the Group incurring certain
costs. The remaining 11% of Agreements may require the Group to
purchase the equipment from the container owners pursuant to the
terms of their respective Agreements, generally a stipulated
percentage (determined by age of the equipment) of the original
cost of the equipment.

vii.     Dispute
with Contrin Holding S.A.

Since 1983, the Group has managed containers for
Austrian investment entities sponsored by companies owned or
controlled by Contrin Holding S.A., a Luxembourg holding
company, and for Contrin itself (collectively,
Contrin).

The Group is in litigation with Contrin over
funds that Contrin claims to have remitted to the Group for the
purchase of containers. Contrin claims that in 1994 it
transmitted $2,600 to the Group for the purchase of

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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)


containers. The Group did not receive these funds
and believes that the funds were diverted to an account
controlled by Stefan M. Palatin, a former chairman and chief
executive officer of the Group, and that this was known or
should have been known by Contrin.

In December 1997, the Group recorded an accrual
of $3,400 relating to the alleged transfer of $2,600, the
related interest, plus the estimated settlement costs of this
and other claims by Contrin. On December 31, 2001, the
balance of this accrual was $3,020.

On August 8, 2000, Contrin, through an
affiliate, Contrin Worldwide Container Leasing GmbH
(CWC) filed an action in the Luxembourg District
Court against the Company, seeking recovery of $2,600, together
with interest and costs. On January 10, 2001, the Company
responded to Contrins complaint, requesting that the
District Court dismiss the proceeding for lack of jurisdiction
over the dispute, and denying Contrins claims on the
merits. Since January 10, 2001, each party has supplemented
their pleadings to respond to assertions made by the other
party. The Company anticipates that a final hearing will be held
by the Court during 2002.

To preserve its rights of indemnity in the face
of Contrins claims, the Group, on June 1, 2000, filed
a protective claim against Mr. Palatin and his wife. By its
claim, the Group seeks to establish that the Palatins are liable
to the Group for any liability which the Group may have to
Contrin arising out of the 1994 transfers.

On July 13, 2000, Cronos also filed a
protective claim against Barclays Bank PLC
(Barclays) in the High Court of Justice, London,
England. Barclays was the bank that received the $2,600 from
Contrin. By its claim, the Group seeks a declaration that
Barclays is liable to the Group for $2,600, plus interest and
costs, arising out of Contrins 1994 transfer to an account
with Barclays in the name of Mrs. Palatin. In February 2001
the Group obtained an order from the Court requiring the
production of documents by Barclays. The Group and Barclays have
agreed to a stay of the action while the Group evaluates the
documentation produced by Barclays.

On August 2, 2001, CWC filed a separate
claim against Cronos Containers N.V. (CNV), a
wholly-owned Netherlands Antilles subsidiary of the Company, in
the High Court of Justice, London, England. By its claim,
Contrin asserts that CNV, wrongfully and in violation of the
container management agreement between Contrin and CNV, failed
to distribute to Contrin $500 in distributions for the second
through fourth calendar quarters of 1996. Contrin seeks recovery
of this sum, plus interest.

On December 31, 2001, CNV filed its defense
to CWCs claim, denying CWCs claims and denying that
CNV is liable to CWC in any amount. Concurrently with the filing
of its defense to CWCs claims, CNV filed a separate claim
against the Palatins and Klamath Enterprises, S.A.
(Klamath), seeking recovery of $500 from the
Palatins that CNV alleges was misappropriated from CNV by
Mr. Palatin.

Since September 2001, the Group and Contrin have
engaged in discussions with a view to resolving all disputes
between them. These discussions have yet to achieve any success.
During the course of the discussions, Contrin has asserted, in
addition to its claims advanced in the Luxembourg District Court
and in the High Court of Justice in England, described above, a
claim to $2,570, including interest, as its share of the
proceeds from containers disposed of by CNV under the container
management agreements between Contrin and CNV. CNV has rejected
the claim as a misinterpretation of the container management
agreements.

Contrin has also asserted an interest in the
containers managed by the Group for Transocean Equipment
Manufacturing Limited (TOEMT) and in the
distributions payable with respect to such containers, as
discussed below.

Management considers that prudent provision has
been made in the financial statements for the Contrin matters
noted above. There is a reasonable possibility that a material
change could occur with respect to these

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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)


commitments and contingencies within one year of
the date of these financial statements. In such an event,
management estimates that possible losses could exceed the
amount accrued by $2,700.

viii. TOEMT

TOEMT, which is currently in liquidation in the
United Kingdom, has been separately registered by the same name
in both the United Kingdom and in the Isle of Man. At
December 31, 2001 and 2000, the Group had $1,175 and $919,
respectively, in amounts payable to TOEMT on deposit in a bank
account pending clarification of the proper claimants to the
distributions payable with respect to the containers owned by
TOEMT. The information currently available to the Group is
insufficient to enable it to determine the nature or amount of
the claims, by the respective companies and their creditors to
the distributions available with respect to the TOEMT containers.

As stated above, Contrin, in its discussions with
the Group over a global resolution of all disputes between the
parties, has asserted a right to the distributions being held by
the Group for TOEMT. Contrin has provided the Group with copies
of default judgements Contrin secured in January and June 2001
from the Commercial Court of Vienna, Austria, against TOEMT in
the UK, and TOEMT in the Isle of Man, for $100 and $400
respectively. Until clarification is secured by court
proceedings and/or through agreement with the creditors of
TOEMT, the Group presently intends to continue to set aside the
distributions due and payable by the Group on the containers it
manages for TOEMT.

14     Common
shares

|                               |  |      |            |      |  |      |           |  |  |  |           | 
|------------------------------ |  | ---- | ---------- | ---- |  | ---- | --------- |  |  |  | --------- | 
|                               |  | 2001 |            | 2000 |  | 1999
|                               |  |      |            |      |  |     
|Common shares outstanding:     |  |      |            |      |  |      |           |  |  |  |           | 
|At beginning of year           |  |      | 9,158,378  |      |  |      | 9,158,378 |  |  |  | 8,858,378 | 
|New common shares issued       |  |      |           |      |  |      |          |  |  |  | 300,000   | 
|Common shares held in treasury |  |      | (1,793,798 | )    |  |      |          |  |  |  |          | 
|                               |  |      |            |      |  |      |           |  |  |  |           | 
|At end of year                 |  |      | 7,364,580  |      |  |      | 9,158,378 |  |  |  | 9,158,378 | 
|                               |  |      |            |      |  |      |           |  |  |  |           | 

On December 11, 1998, an option to purchase
300,000 common shares was granted to Mr. Tietz on his
appointment as chief executive officer (see Note 15).

On June 3, 1999, the 1999 Stock Option Plan
(the Plan) was approved by the Board of Directors.
The Plan authorizes the issuance of 500,000 common shares to key
employees (see Note 15).

In August 1999, the Company issued an additional
300,000 common shares and warrants to purchase 200,000 common
shares in connection with the Groups refinancing of
approximately $47,800 of its short term and other indebtedness.
The warrants are exercisable at $4.41 per share and expire on
August 15, 2004, plus ninety days or, if later, the date on
which there has been full repayment of the monies borrowed under
the associated refinancing. Using a Black Scholes model, the
fair value of the warrant was determined to be $246 and such
amount was credited to additional paid-in capital. The
corresponding debt discount has been deferred and is being
amortized over the life of the associated refinancing using the
interest method in accordance with SFAS No. 91.

On October 29, 1999, a Shareholder Rights
Plan (the Rights Plan) was adopted. Under the Rights
Plan, one common share purchase right was distributed as a
dividend on each share of the Companys common shares as of
the close of business on October 25, 1999. The rights will
be attached to and trade with all certificates representing
common shares. The rights expire on October 28, 2009, and
are redeemable by the Company at any time prior to this date.
The rights will only be exercisable on the acquisition by any
person or related group of persons of 20% or more of the
Companys common shares. The rights entitle the holder, with

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)


the exception of the acquiring person or group,
to purchase a specified number of the Companys common
shares for 50% of their market value at that time. The rights
will not be triggered if the Companys Board of Directors
has previously approved such an acquisition.

On January 10, 2001, the Non-Employee
Directors Equity Plan (the Equity Plan) was
approved by the shareholders. The Equity Plan authorizes the
issuance of 275,000 common shares to non-employee directors (see
Note 15).

In May 2001, the Group was awarded 1,793,798
outstanding common shares in the Company that were beneficially
owned by a former chairman and chief executive officer in part
consideration for amounts owed under two promissory notes.
Cancelation of the shares beneficially owned by the former
chairman represents a 19.6% reduction in the number of
outstanding common shares of the Group. Under Luxembourg law,
the canceled shares are to be resold or, if not resold, retired,
unless earlier retired by vote of the shareholders of Cronos.
Cronos presently intends to formally retire the
1,793,798 shares ordered by the Court to be transferred to
Cronos subsidiary. From and after May 2001, the shares are
no longer deemed outstanding common shares of the Company. The
subsidiary of the Company, as the holder of the shares, will not
be entitled to vote at any meeting of the Companys
shareholders or on any matter put to the shareholders for
approval, and will not be entitled to any dividends or other
distributions the Company declares on its outstanding common
shares. Under Luxembourg law, the Company has three years to
resell the shares. If the shares are not resold within this
period of time, then they are automatically canceled. The
Company may also, under Luxembourg law, seek shareholder
approval for the retirement and cancelation of the shares. The
Company does not presently intend to resell the shares but to
cancel and retire them, either by seeking shareholder approval
for a cancelation and retirement of the shares or by allowing
the time within which to resell the shares to lapse.

All 7,364,580 of common shares outstanding rank
equally in respect of shareholder rights.

15     Stock Based
Compensation

Stock based compensation comprises:

a) Management Equity Investment
Plan

In November 1994, the Company introduced the MEIP
for key employees of the Company. A total of 440,000 common
shares were reserved for issuance under the MEIP. The MEIP
expired on November 25, 2001 on which date all unexercised
options expired. The main terms of the plan were as follows:

i.The MEIP
consisted of option units comprising four separate options, each
option granting the right to the employee to acquire an equal
number of common shares at four different exercise prices. The
employee was required to pay an option price to acquire each
option. The option price and exercise price was determined at
the date of grant.

ii.Members of
the MEIP were able to exercise vested options within seven years
of November 25, 1994, the date of grant.

At January 1, 1999, there were 156,600
outstanding options of which 81,000 were exercisable. During the
year ended December 31, 2000, 5,400 shares were
reinstated under the MEIP. During the years ended
December 31, 2001, 2000 and 1999, 102,600, 10,800 and
48,600 options expired, respectively. At December 31, 2000
and 1999, there were 102,600 and 108,000 respective options
outstanding of which 54,000 and 56,700 were exercisable.

For each of the years presented, the weighted
average option price and exercise price were $1.625 and $16.25,
respectively.

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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)


No compensation cost was recognized in the
Statements of Income for each of 2001, 2000 and 1999. The net
income and net income per share of the Group would be unchanged
if the compensation cost for the MEIP had been determined in
accordance with SFAS No. 123.

As of December 31, 2000, outstanding unpaid
options amounted to $79 and were reported as share subscriptions
receivable within shareholders equity.

b) Stock Options

In December 1998, the Company granted
Mr. Tietz, on his appointment as chief executive officer of
the Company, the option to acquire 300,000 common shares in the
Company at an exercise price of $4.375 per share, the closing
price of the common shares on the date of the grant. The term of
the option is ten years, and may be exercised, in whole or in
part, at any time from the date of grant. The fair value of the
option at the date of the grant was $683. In order to determine
fair value, the Company used the Black Scholes model using a
risk-free interest rate of 8%, an expected life of
10 years, an expected volatility of 13.9% and no expected
dividends. Payment for the shares is to be by cash, the
surrender of shares of the Companys common shares already
owned by the employee (valued at their fair market value on the
date of the surrender), or an alternate form of payment as may
be approved by the Companys Compensation Committee (the
Committee). The number and price of shares subject
to the option will be adjusted in the event of any stock split,
declaration of a stock dividend, or like changes in the capital
stock of the Company. The option is not transferable other than
by will or the laws of descent and distribution. No rights as a
shareholder of the Company shall accrue until such time as the
shares are purchased under the option. There were no options
exercised, granted or forfeited during 2001, 2000 or 1999,
respectively. No modifications have been made to the plan since
inception.

c)  Stock Appreciation
Rights

On October 13, 1999, the Board resolved to
grant stock appreciation rights (SARs) to a key
executive of 200,000 share units. A SAR is defined as the
equivalent of one common share of the Company. The grant of the
SARs entitles the grantee to receive cash payments from the
Company as provided for in the SAR agreement. The SARs were
granted at a grant price of $4.375 per SAR. As of the date of
the award the closing price of the Companys common shares
was $4.875 per share. The SARs are exercisable over a period of
three years, with one-third being exercisable on each of the
first three anniversaries of the date of grant.

In addition, on October 13, 1999, the Board
approved the grant of 60,000 SARs to its non-employee directors.
The grant represented 15,000 SARs for each current non-employee
director, with a grant price of $4.094. On October 13,
1999, the closing price of the Companys common shares was
$4.875 per share. The SARs were scheduled to vest over a period
of three years, with one-third vesting each year on the earlier
of the anniversary of the date of grant, or seven days before
the next scheduled annual meeting of shareholders for that year.
In 2001, the current non-employee directors were granted the
option to convert the SARs into directors options
(Directors Options) under the Non-Employee
Directors Equity Plan (the Equity Plan). This
right of conversion was exercised by all non-employee directors.

If a grantee of SARs resigns from the Company or
is terminated (other than for cause) by the Company within
twelve months following a change in control, then
the SARs become fully exercisable, at any time within
90 days after the date of such resignation or termination.
If not exercised, the SARs shall lapse and terminate. The SARs
similarly vest in the event that a grantee is terminated by the
Company without cause, or upon a grantees permanent
disability or death. A change in control is defined
to include the acquisition by any person or related group of
persons of 20% or more of the common shares of the Company. The
SARs are also fully exercisable upon any merger of the Company
with another corporation or the sale of substantially all of the
assets of the Company.

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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)


The SARs may be redeemed only for cash and not
for the Companys common shares. A grantee is entitled to
an award payment at the time of exercise of SARs,
equal to the excess if any, of the fair market value of a share
of common shares on the date of exercise over the grant price,
multiplied by the number of exercised SARs. The number of SARs
is subject to adjustment in the event of any subdivision of the
outstanding common shares of the Company, the declaration of a
dividend payable in common shares of the Company, or like
events. In all events, the SARs may not be exercised beyond
October 12, 2009. The grant of SARs does not entitle the
grantee to any rights as a shareholder of the Company.

In accordance with SFAS No. 123, the
compensation expense incurred in respect of SARs is estimated
using the price of the Companys common shares on the
balance sheet date as a surrogate for the price on the date of
exercise. A liability is created for the estimated compensation
expense and is adjusted up or down at each balance sheet date
for changes in the price of the Companys stock.
Compensation expense of $94, $62 and $13 was recognized for the
years ended December 31, 2001, 2000 and 1999, respectively.

No SARs were redeemed during the years ended
December 31, 2001, 2000 and 1999, respectively. At
December 31, 2001, 133,334 SARs were exercisable.

d)  1999 Stock Option
Plan

The 1999 Stock Option Plan was approved by the
Board of Directors on June 3, 1999, and by the Shareholders
at the 1999 Annual Meeting on January 13, 2000. The Plan is
designed to attract, motivate and retain key employees. The Plan
authorizes the issuance of 500,000 common shares and permits the
Company to award to key employees incentive options and
non-qualified stock options. The number of shares available for
issuance under the Plan may be adjusted in the event of any
subdivision of the outstanding shares of the common shares of
the Company, the declaration of a dividend payable in common
shares of the Company, or like events. The aggregate number of
stock options to be awarded to any eligible employee over the
term of the Plan was initially limited to 80,000 shares. The
Plan terminates on December 31, 2002, after which no awards
will be made. The exercise price of a stock option will be
determined by the Committee, but will not be less than the fair
market value of the Companys common shares at the date of
grant. The exercise price of a stock option may be paid in cash
or previously owned stock or both. The options vest and are
exercisable at the rate of 25% per year on the first four
anniversary dates of the grant. The term of each option is ten
years.

On February 4, 2000, the Committee of the
Board authorized the grant of options for 420,000 shares of
common shares to eight officers of subsidiaries of the Company
at an exercise price of $5.25 per share. The fair value of the
options at the date of the grant was $1,235. In order to
determine fair value, the Company used the Black Scholes model
using a risk-free rate of 8%, an expected life of 10 years,
an expected volatility of 2.94% and no expected dividends.
During 2000, options for 105,000 common shares reverted back to
the Plan when two officers left the Company. At
December 31, 2000, 315,000 options were outstanding with a
remaining contractual life of 9 years, of which none were
exercisable.

In January 2001, the Committee awarded incentive
stock options to 26 officers and employees of the Companys
subsidiaries, covering 185,000 common shares, representing the
balance of the common shares reserved for issuance under the
Plan at an exercise price of $4.875 per share. Included in the
January 2001 grant of options were options covering 45,000
common shares granted to three of the executive officers of
subsidiaries of the Company. The grant of these additional
options were conditional upon approval of an amendment to the
Plan, under which the aggregate number of shares granted to any
one individual was increased from 80,000 to 100,000. The
amendment to the Plan was approved at the annual meeting of
shareholders held on June 1, 2001.

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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)


The fair value of the 185,000 options granted in
2001 was $316. In order to determine fair value, the Company
used the Black Scholes model using a risk-free rate of 5%, an
expected life of 10 years, an expected volatility of 0.3%
and no expected dividends.

At December 31, 2001, 500,000 options were
outstanding, of which 78,750 were exercisable, with a weighted
average remaining contractual life of 8.5 years. The
weighted average exercise price was $5.11.

e)  The Non-Employee
Directors Equity Plan

The Non-Employee Directors Equity Plan was
approved by the shareholders at the 2000 Annual Meeting on
January 10, 2001. The Equity Plan is designed to attract,
motivate and retain non-employee directors of outstanding
ability and to assist the Company in promoting a greater
identity of interest between the Companys non-employee
directors and its shareholders. A non-employee director
will participate in the Equity Plan in two ways: by electing to
receive, in lieu of the cash compensation otherwise payable to
the non-employee Director, an award of Directors
Stock Units, and through the receipt of Directors
Options to acquire common shares of the Company. A
Directors Stock Unit is defined as the equivalent of one
common share of the Company. A total of 275,000 common shares
were made available for issuance under the Equity Plan, both to
supply shares for the settlement of Directors Stock Units
into common shares of the Company and for issuance upon the
exercise of Directors Options. The number of shares
available for issuance under the Equity Plan may be adjusted in
the event of any subdivision of the outstanding common shares of
the Company, the declaration of a dividend payable in common
shares of the Company, or like events. The option may be
exercised within 10 years of the grant date. The Equity
Plan shall expire on the date of the Annual Meeting to be held
in 2003, after which no awards will be made.

During 2001, non-employee directors were awarded
28,932 Directors Stock Units in lieu of compensation. In
addition, non-employee directors accumulated a further 11,082
Directors Stock Units in lieu of compensation that were
awarded on January 1, 2002. Compensation expense of $164
was recognized for the year. Each Directors Stock Unit is
the equivalent of one common share of the Company and shall vest
on the third anniversary of the date of grant. The range of fair
market values used to determine the number of Directors
Stock Units awarded during 2001 was between
$4.45  $5.225 for which the weighted average
value was $4.89. At December 31, 2001 the weighted average
remaining contractual life was 9.25 years.

On January 10, 2001, each non-employee
director was granted options to acquire 15,000 common shares of
the Company. On each anniversary of the first date of grant, the
non-employee directors shall automatically be granted
Directors Options to purchase an additional 15,000 common
shares. The Directors Options shall vest and become
exercisable over three years, with one third exercisable as of
the first anniversary following the date of grant, one third
exercisable on the second anniversary following the date of
grant, and one third exercisable as of the third anniversary
following the date of grant. The exercise price of each
Directors Option will be the average of the fair market
value of the common shares for the twenty trading days
immediately preceding the date of grant of the Directors
Options. The fair value at the date of the grant was $123. In
order to determine fair value, the Company used the Black
Scholes model using a risk-free rate of 5%, an expected life of
10 years, an expected volatility of 0.3%, an exercise price
of $4.35 and no expected dividends. The current non-employee
directors were granted the option to convert the SARs granted on
October 13, 1999 into Directors Options under the
Equity Plan. This right of conversion of 60,000 SARs was
exercised by the non-employee directors within thirty days of
the date that the Equity Plan was approved by the shareholders.
The fair value of the options at the date of grant was $134. In
order to determine fair value, the Company used the Black
Scholes model using a risk-free rate of 5%, an expected life of
10 years, an expected volatility of 0.3%, an exercise price
of $4.094 and no expected dividends. At December 31, 2001,
120,000 options were outstanding, the range of exercise prices
were between $4.094  $4.375. The weighted
average exercise price was $4.23 and the weighted average
remaining contractual life was 9.08 years.

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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)


f)  SFAS No. 123 Pro forma
net income and net income per share

If the Stock Options noted above had been
accounted for under SFAS No. 123, the impact on the
Groups net income and net income per share would have been
as follows:

|                              |             |      |   |       |  |      |   |       |  |  |   |       | 
|----------------------------- | ----------- | ---- | - | ----- |  | ---- | - | ----- |  |  | - | ----- | 
|                              |             | 2001 |   | 2000  |  | 1999
|                              |             |      |   |       |  |     
|Net income:                   |             |      |   |       |  |      |   |       |  |  |   |      
|                              | as reported |      | $ | 3,170 |  |      | $ | 5,216 |  |  | $ | 1,914 | 
|                              | pro forma   |      | $ | 2,909 |  |      | $ | 3,981 |  |  | $ | 1,914 | 
|Basic net income per share:   |             |      |   |       |  |      |   |       |  |  |   |      
|                              | as reported |      | $ | 0.40  |  |      | $ | 0.57  |  |  | $ | 0.21  | 
|                              | pro forma   |      | $ | 0.35  |  |      | $ | 0.43  |  |  | $ | 0.21  | 
|Diluted net income per share: |             |      |   |       |  |      |   |       |  |  |   |      
|                              | as reported |      | $ | 0.39  |  |      | $ | 0.57  |  |  | $ | 0.21  | 
|                              | pro forma   |      | $ | 0.35  |  |      | $ | 0.43  |  |  | $ | 0.21  | 

16  Restricted retained
earnings

On an annual basis, Luxembourg law requires
appropriation of an amount equal to at least 5% of net income to
a legal reserve until such reserve equals 10% of the stated
capital related to the outstanding common and preferred shares.
This reserve is not available for dividends. At
December 31, 2001 and 2000, the legal reserve represented
10% of the stated capital and no appropriation to the reserve
was required.

17  Related party
transactions

The Group had the following transactions with
related parties during the years ended December 31, 2001,
2000 and 1999, respectively:

In October 1999, the Group brought an action
against Mr. Palatin in the Supreme Court of the State of
New York, for payment of the remaining balances due under two
promissory notes, both dated July 14, 1997 (the
Palatin Notes), by and between a subsidiary of the
Company, as payee, and Mr. Palatin, as payor. The original
principal amount of the Palatin Notes was $9,600.
Mr. Palatin made no payments under the Palatin Notes, which
were due on October 31 and December 31, 1997,
respectively. The amounts due under the Palatin Notes were
reduced by $5,279 as a result of the sale, on or about
June 21, 1999, of 1,463,636 common shares of the Company by
certain of the Groups lenders (the indebtedness of the
Group to the lenders was reduced by a like amount). The shares
had been acquired by the banks by pledge from the Group to
secure, in part, indebtedness owed by the Group to the banks. As
a result of the sale of the shares, Mr. Palatin owed the
Group $6,227 in principal and $356 in interest under the Palatin
Notes, at the time the Group filed its complaint in New York
Supreme Court.

Mr. Palatin did not respond to the
Groups lawsuit, and on February 8, 2000, the Supreme
Court of the State of New York entered its default judgement
against Mr. Palatin in the amount of $6,584. Since that
time the Group pursued execution of the judgement against
Mr. Palatins beneficial ownership of the common
shares of the Company. According to filings made with the SEC by
the shareholder of Klamath, Mr. Palatin was the beneficial
owner of the 1,793,798 outstanding common shares of the Company
owned of record by Klamath (the Klamath Shares). The
Group pursued execution of the judgement it obtained against
Mr. Palatin in the Superior Court of the Commonwealth of
Massachusetts, Norfolk County, where its transfer agent is
located, and in Geneva, Switzerland, where the individual the
Group believes is the record owner of the outstanding shares of
Klamath resides.

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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)


On May 8, 2001, in response to a motion the
Group made in the Massachusetts Court, the Court entered its
judgement against Mr. Palatin and Klamath affirming the
default judgement of the New York State Supreme Court in the
amount of $6,584, and ordering the Companys transfer
agent, to cancel the Klamath Shares, to issue a new stock
certificate for 1,793,798 common shares in the name of the
Companys subsidiary, Cronos Equipment (Bermuda) Limited
(CEB), and to transfer the Klamath Shares to CEB on
the books and records of the transfer agent. The transfer agent
promptly canceled the Klamath Shares and issued a new stock
certificate for 1,793,798 common shares of the Company to CEB.
The Court also ordered Mr. Palatin and Klamath to pay
CEBs fees and expenses, including attorneys fees,
incurred in securing the final judgement. The Group reduced the
amount owed by Mr. Palatin to CEB by $6,000 which is a
valuation based on the estimated fair value of the shares
received. Any future amounts received from the settlement will
be recorded as income when received.

F-37