##### 









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, 2002

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, BOÎTE 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 the 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.     o

The aggregate market value of voting stock of the
registrant held by non-affiliates as of March 24, 2003
(Common Shares) was approximately $21,123,430.

The number of Common Shares outstanding as of
March 24, 2003:

|       |  |                             
|------ |  | ----------------------------
|Class  |  | Number of Shares Outstanding
|       |  |                             
|Common |  | 7,360,080                   

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
    2003 |  | Part III                   



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The Cronos Group

TABLE OF CONTENTS

|                                                                                                       |  |      |  | 
|------------------------------------------------------------------------------------------------------ |  | ---- |  | 
|                                                                                                       |  | Page
|                                                                                                       |  |     
|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                                                                                              
|Item 14  Controls and Procedures                                                                      |  |      |  | 
|PART IV                                                                                               
|Item 15  Exhibits, Financial
    Statement Schedules, and Reports on Form 8-K                         |  |      |  | 

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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 dispute with a group of container
    owners over actions taken by prior management; the group of
    container owners has filed lawsuits against Cronos in Luxembourg
    and in the United Kingdom, claiming damages in excess of
    $3 million, before interest and costs.
|
| | The market for the Companys outstanding
    common shares is not liquid. The Companys six largest
    groups of shareholders control approximately 72% of its
    outstanding common shares. For 2002, the average daily trading
    volume in the Companys shares was 1,365.              

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 Stockholder Matters herein.

ii



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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, Boîte
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. The
internet address of the Company is www.cronos.com. Cronos
Containers Limited, the Companys principal container
leasing subsidiary, is a UK corporation located at The Ice
House, Dean Street, Marlow, Buckinghamshire, SL7 3AB, 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 and
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 400 ocean
carriers and transport operators, including all of the 30
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 worldwide standards of container
dimensions and container ship fittings adopted by the
International Standards Organization (ISO) in 1968.
The standard container is either 20 long ×
8 wide × 86 high (one TEU)
or 40 long × 8
wide × 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 88% (in TEU)
of the worldwide container fleet. Refrigerated containers and
tank containers currently constitute approximately 5% (in TEU)
of the worldwide container fleet, with open-tops and other
specialized containers constituting the remaining 7%. 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 2002.

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The container leasing business is cyclical and
depends largely upon the volume of world trade.

Benefits
of Leasing

Leasing companies own approximately 44% 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 customer credit rating, type of lease, length of term,
maintenance provided, type and age of the equipment, equipment
replacement costs 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.

Lease
Profile

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

2



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|                 |              |                                                           |     |              |      |      |     |          |      |  |     |     |      |  |     |     |      | 
|---------------- | ------------ | --------------------------------------------------------- | --- | ------------ | ---- | ---- | --- | -------- | ---- |  | --- | --- | ---- |  | --- | --- | ---- | 
|                 |              |                                                          
|                 |              | Percentage of Fleet by Lease Type as of December 31, 2002
|                 |              |                                                          
|                 |              |                                                           |     | Dry Freight 
|Type of Lease    |              | Dry Cargo                                                 |     | Refrigerated |      | Tank |     | Specials
|                 |              |                                                           |     |              |      |      |     |         
|Master           |              |                                                           | 48% |              |      |      | 30% |          |      |  | 48% |     |      |  | 45% |    
|Term             |              |                                                           |     |              |      |      |     |          |      |  |     |     |      |  |     |    
|                 | - short-term |                                                           |     | 13%          |      |      |     | 18%      |      |  |     | 40% |      |  |     | 9%  |     
|                 | - long-term  |                                                           |     | 34%          |      |      |     | 50%      |      |  |     | 7%  |      |  |     | 35% |     
|Direct Financing |              |                                                           | 5%  |              |      |      | 2%  |          |      |  | 5%  |     |      |  | 11% |    
|                 |              |                                                           |     |              |      |      |     |          |      |  |     |     |      |  |     |    
|                 |              | 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
provides this service 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 44% 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 outer 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.

Cronos tank containers, both owned and
managed, are constructed and maintained in accordance with
strict international codes for the worldwide transport and
storage of bulk liquids on both land and sea. These

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codes include ISO, International Maritime
Organization (IMO) and American Society of
Mechanical Engineers (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 litres to 31,000 litres and are generally
insulated and equipped with a heating system (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 of ships.
Cronos markets this product on a worldwide basis through its
network of offices and agents, and has increased its rolltrailer
fleet to 2,667 TEU at the end of 2002. 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.

During 2002, the size of the Groups total
fleet decreased by 900 TEU, representing new container
production of 20,246 TEU and net of disposals of
21,146 TEU. The total cost of new container production for
the total fleet in 2002 was $32.2 million.

|                      |                            |                                 |       |      |  |      |       |      |  |      |       |     |  |  |       |     |  |  |       |     | 
|--------------------- | -------------------------- | ------------------------------- | ----- | ---- |  | ---- | ----- | ---- |  | ---- | ----- | --- |  |  | ----- | --- |  |  | ----- | --- | 
|                      |                            |                                
|                      |                            | Cronos Fleet (in TEU thousands)
|                      |                            | at December 31,                
|                      |                            |                                
|                      |                            | 2002                            |       | 2001 |  | 2000 |       | 1999 |  | 1998
|                      |                            |                                 |       |      |  |      |       |      |  |     
|Dry Cargo             |                            |                                 | 364.5 |      |  |      | 368.4 |      |  |      | 375.9 |     |  |  | 346.6 |     |  |  | 337.8 |    
|Refrigerated          |                            |                                 | 13.3  |      |  |      | 13.9  |      |  |      | 12.5  |     |  |  | 13.6  |     |  |  | 14.7  |    
|Tank                  |                            |                                 | 2.4   |      |  |      | 2.3   |      |  |      | 2.0   |     |  |  | 2.0   |     |  |  | 2.0   |    
|Dry Freight Specials: |                            |                                 |       |      |  |      |       |      |  |      |       |     |  |  |       |     |  |  |       |    
|                      | CPCs                       |                                 |       | 8.3  |  |      |       | 5.4  |  |      |       | 3.3 |  |  |       | 3.1 |  |  |       | 2.4 | 
|                      | Rolltrailer                |                                 |       | 2.7  |  |      |       | 2.5  |  |      |       | 2.5 |  |  |       | 1.9 |  |  |       | 2.2 | 
|                      | Other Dry Freight Specials |                                 |       | 3.8  |  |      |       | 3.4  |  |      |       | 3.0 |  |  |       | 2.7 |  |  |       | 2.3 | 
|                      |                            |                                 |       |      |  |      |       |      |  |      |       |     |  |  |       |     |  |  |       |    
|Total Fleet           |                            |                                 | 395.0 |      |  |      | 395.9 |      |  |      | 399.2 |     |  |  | 369.9 |     |  |  | 361.4 |    
|                      |                            |                                 |       |      |  |      |       |      |  |      |       |     |  |  |       |     |  |  |       |    

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 worldwide 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, Belgium and China.

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 Description of
Business  Lease Profile. Depots in major port
areas perform repair and maintenance work 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

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container. Cronos is authorized to make this
decision for most of the owners for whom it manages equipment
and makes the decision 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 worldwide
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, Hamburg,
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
approximately 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 global fleet by providing the responsiveness and
flexibility necessary to service the leasing 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
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 cargo containers and not
specialized containers. In addition to dry cargo containers,
refrigerated containers and tanks, Cronos supplies a wide range
dry freight special equipment.

Cronos competes with various container leasing
companies in the markets in which it conducts business. Mergers
and acquisitions have been a feature of the container leasing
industry for over a decade and the leasing market essentially
comprises three distinct groups: the very large (in TEU terms)
companies, GE SeaCo, Textainer Group, Transamerica Leasing,
Triton Container International Ltd. and Interpool Inc., who

5



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between them, with fleets of around
1 million TEU each in mid-2002, control approximately two
thirds of the total leased fleet; a middle tier of companies
possessing fleets in the 200,000 to 500,000 TEU range; and the
smaller, more specialized fleet operators. In recent years,
several major leasing companies, as well as numerous smaller
ones, have been acquired by competitors. Cronos believes that
the 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, worldwide 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, and 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. Container Equity Programs (Container
    Equity Programs),              
|
| | 2. Other Managed Container Owners (Other
    Managed Container Owners), and
|
| | 3. Owned Containers (Owned
    Containers).                                

In September 2002, the Group announced the
establishment of a joint venture container purchase program (the
Joint Venture Program). Prior to the inception of
the Joint Venture Program, the Cronos operating segments were
defined as containers managed on behalf of US Limited
Partnerships, containers managed on behalf of Other Managed
Container Owners, and containers owned by the Group itself. In
accordance with Statement of Financial Accounting Standards
(SFAS) No. 131, Disclosures about
Segments of an Enterprise and Related Information, Cronos
structures operating segments based on the way in which
management organizes the Group for making operating decisions
and assessing performance. The Group views the new Joint Venture
Program as a natural extension to its US Limited
Partnership programs. The Joint Venture Program will target the
same container products and customer base and the operating
decision making and performance assessment processes will be
consistent with those used for the US Limited Partnership
programs. Accordingly, the Group has combined the US Limited
Partnerships and the Joint Venture Program into a revised
operating segment entitled Container Equity Programs.

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.

6



---



##### 



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

|                               |       |      |     |      |  |      |     |      |  |      |     |      |  |  |     |      |  |  |     |      | 
|------------------------------ | ----- | ---- | --- | ---- |  | ---- | --- | ---- |  | ---- | --- | ---- |  |  | --- | ---- |  |  | --- | ---- | 
|                               |       | 2002 |     | 2001 |  | 2000 |     | 1999 |  | 1998
|                               |       |      |     |      |  |      |     |      |  |     
|Container Equity Programs      |       |      | 31% |      |  |      | 29% |      |  |      | 31% |      |  |  | 33% |      |  |  | 34% |     
|Other Managed Container Owners |       |      | 44% |      |  |      | 45% |      |  |      | 45% |      |  |  | 45% |      |  |  | 41% |     
|Owned Containers               |       |      | 25% |      |  |      | 26% |      |  |      | 24% |      |  |  | 22% |      |  |  | 25% |     
|                               |       |      |     |      |  |      |     |      |  |      |     |      |  |  |     |      |  |  |     |     
|                               | Total |      |     | 100% |  |      |     | 100% |  |      |     | 100% |  |  |     | 100% |  |  |     | 100% | 
|                               |       |      |     |      |  |      |     |      |  |      |     |      |  |  |     |      |  |  |     |     

As of December 31, 2002, 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. One customer, Mediterranean Shipping Company S.A.
(MSC), generated 11.5% of gross lease revenue of the
Container Equity Program in the year ended December 31,
2002. MSC is a private company based in Switzerland and is
ranked as the second largest container liner operator in the
world. The Group evaluates the performance of its operating
segments based on operating profit or loss. Lease revenue is
deemed to be earned based on the physical location of the
containers while on lease. Substantially all of the Groups
lease revenue is earned on containers used in global trade
routes. Accordingly, the Group believes that it does not possess
discernible geographic reporting segments as defined in SFAS
No. 131. See Note 2 to the 2002 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.

Container Equity
Programs

Cronos raised capital through investment
syndication activities from 1979 to 1997 by organizing and
sponsoring public limited partnership offerings. Cronos
sponsored sixteen 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 for
    accounting purposes 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 fees, acquisition fees and equity in
Container Equity Programs recorded by the Group, were
$5.1 million, $6.4 million, and $8.3 million,
respectively, for the years ended December 31, 2002, 2001
and 2000, respectively.

7



---



##### 



In September 2002, Cronos established the Joint
Venture Program with a current lender to the Company. The
purpose of the Joint Venture Program is to acquire and lease to
third party lessees marine cargo containers. The Joint Venture
Program will provide compensation to Cronos consisting of the
following fees:



| |   |                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Management fees:equal to 8% of net lease revenue;                                                                                                                          
|
| |  | Acquisition fees:equal to 1.25% of the original cost of
    equipment purchased by the Joint Venture Program, recognized for
    accounting purposes over a 12-year period;
|
| |  | Disposition fees:equal to 5% of the excess of the
    disposal proceeds over the net book value of a container.                                                            



| |                               
| | ------------------------------
| | Other Managed Container Owners

In addition to Container Equity Programs, 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 Container Equity
Programs 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 30% 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 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 2002 Consolidated Financial Statements.

Total fees earned by the Group from Other Managed
Container Owners were $1.2 million, $3 million and
$7.4 million for the years ended December 31, 2002,
2001 and 2000, 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 related 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 Container Equity
Programs 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

8



---



##### 



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 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 additional 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 most of the countries
that are members of the European Union.




| |          
| | ---------
| | Employees

As of December 31, 2002, Cronos had 75
employees worldwide; 40 were located in Europe, 21 in the United
States and 14 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 revenue in certain cases and cost 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 6,300 square
feet of office space near London, England, from where its
container leasing operations are conducted. 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 Managed Container Owner
activities are based. Cronos also conducts its container leasing
operations from offices in New Jersey, Genoa, Gothenburg,
Hamburg, 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  Container Equity Programs, Other
Managed Container Owners and Owned Containers, above. As
of December 31, 2002, Cronos owned 62,321 TEU of dry
cargo containers, 6,951 TEU of refrigerated containers,
8,214 TEU of CPCs, 2,013 TEU of rolltrailers,
493 TEU of tank containers, and 1,226 TEU of other
specialized equipment. As of December 31, 2002, Cronos
managed a total of 302,165 TEU of dry cargo containers,
6,373 TEU of refrigerated containers, 1,911 TEU of
tank containers, 654 TEU of rolltrailers, and
2,639 TEU of other specialized equipment.



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



| |                                
| | -------------------------------
| | Disputes with the Contrin Group

Contrins $2.6 Million
Claim.The Group manages containers
for investment entities sponsored by or affiliated with Contrin
Holding S.A., a Luxembourg holding company
(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

9



---



##### 



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
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, the parties have supplemented their
pleadings and filed documentary evidence with the court to
respond to assertions made and evidence submitted by the other
party. No date has been set for a final hearing on
CWCs claims against the Company.

On September 26, 2002, the Company issued
its intervening summons in the proceeding, naming
Mr. Palatin, his wife, and Klamath Enterprises S.A.
(Klamath) as cross-defendants. By its intervening
summons, the Company claims the right to indemnity from the
Palatins and Klamath for any liability imposed upon the Company
in favor of Contrin on Contrins claims against the
Company. Klamath is a Panamanian company and the record owner of
an estate located in Amersham, England. The Company alleges that
a substantial portion of the $2.6 million transferred by
Contrin for the purchase of containers was diverted by the
Palatins to improve and furnish the Amersham estate, in which
they lived in 1994, and that Mr. Palatin is the beneficial
owner of Klamath. The Company has served the summons on Klamath
and is in the process of serving the summons on the Palatins.
Once served, the cross-defendants will have the opportunity to
file responsive pleadings and evidence. Klamath, through its
Austrian counsel, has indicated that it will challenge the
jurisdiction of the Luxembourg court over it.

In anticipation of the filing of Contrins
claims against the Company in Luxembourg, 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 this 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 UK
claim against the Palatins. By the injunction, the Palatins are
prohibited from selling, charging, or otherwise disposing of
their interest in the Amersham estate. The injunction also
extends to Klamath, the record owner of the estate.

The Palatins and Klamath contested the
jurisdiction of the High Court of Justice over them, or, in the
alternative, requested that the court exercise its discretion
not to exercise jurisdiction over them. In support of their
application, the Palatins filed an affidavit with the court
asserting that the Amersham estate is owned by Pontino S.A., a
Panamanian company, in which they disclaim any interest. The
Group opposed the applications of the Palatins and Klamath. A
hearing was held on the defendants motion for dismissal on
November 27, 2002, and on December 22, 2002, the court
rendered its decision rejecting the defendants motion for
dismissal. A further hearing was held on February 26, 2003,
at which time the court rejected the defendants motion for
leave to appeal the courts decision, and awarded the
Company 90% of its costs in opposing the motions, ordering the
defendants to pay $30,000 on account of these costs. The
defendants have indicated they may petition the court of appeal
for its consent to appeal the courts decision on
jurisdiction.

In light of the Companys issuance of its
intervening summons against the Palatins and Klamath in the
Luxembourg proceeding, described above, the Group sought a stay
of prosecution of the UK proceeding pending the outcome of
the Luxembourg proceeding. The court, by its decision of
December 22, 2002, rejecting the defendants motion to
dismiss, declined to stay prosecution of the UK proceeding
pending the outcome of the Luxembourg proceeding. Accordingly,
depending upon whether the defendants appeal the courts
ruling on jurisdiction, the Group will have to decide whether to
pursue its claim for indemnity against the Palatins and Klamath
in Luxembourg or in the UK.

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 and that stay remains in place.

10



---



##### 



Austrian Conviction of
Mr. Palatin.In July 1998, the
Vienna public prosecutor initiated criminal proceedings against
Mr. Palatin, Axel Friedberg, a director of the Company from
January 1997 through March 1999, and a third defendant, the
managing director of the Austrian companies affiliated with
Contrin. The focus of the indictment was the defendants
conduct in managing, or controlling the management of the
Austrian entities affiliated with Contrin.

One of the counts of the indictment involved
Contrins transfer, in 1994, of $2.6 million,
discussed above. Specifically, the 1998 indictment alleged that
Mr. Palatin instructed the managing director of
Contrins Austrian affiliates to transfer this amount,
intended for the purchase of containers to be managed by the
Group, to the personal account of Mrs. Palatin. The Vienna
public prosecutor alleged that this conduct constituted the
crime of gross fraud under the Austrian criminal code.

The trial of the defendants proceeded
intermittently through October 15, 2002. On that date, the
court, in the form of two judges and two lay jurors, rendered
its judgement, convicting Messrs. Palatin and
Contrins managing director of certain of the counts
brought against them, and acquitting Mr. Friedberg of the counts
brought against him. Mr. Palatin was convicted of gross
fraud with respect to the transfer by Contrin of
$2.6 million in 1994. The public prosecutor withdrew the
count alleging that Contrins managing director colluded in
this transfer. Mr. Palatin was also convicted of three of
the other counts involving his mismanagement of the Austrian
entities affiliated with Contrin, and was sentenced to nine
years in prison.

The defendants have entered appeals of their
convictions. The Group intends to proceed vigorously with the
prosecution of its proceedings against Mr. Palatin, his
wife, and Klamath, notwithstanding Mr. Palatins
conviction in Austria.

Contrins $0.5 Million
Claim.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 the CWC in any amount. The trial of CWCs claim,
initially set for January 27, 2003, has been postponed. The
new trial date has yet to be scheduled.

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. On April 8, 2002, Klamath filed its
application with the court seeking an order declaring that the
court has no jurisdiction over Klamath or, in the alternative,
that it should exercise its discretion not to assert
jurisdiction over the Groups claims against Klamath. The
Palatins filed their application for dismissal with the court on
July 5, 2002, alleging that the court has no jurisdiction
over them. CNV opposed both applications, and both were heard by
the court at the same time as Klamaths and the
Palatins challenge to the jurisdiction of the UK court
over them with respect to the Groups $2.6 million
claim against them, discussed above. The court, by its decision
of December 22, 2002, rejected the defendants
jurisdictional challenge to CNVs claim.

Contrins Disposals
Claim.On September 18, 2002,
three Austrian affiliates of Contrin filed a claim against CNV
in the High Court of Justice, London, England (the
Disposals Claim). The claimants assert that CNV has
breached container management agreements entered into in 1993 by
selling containers without obtaining the consent of the
claimants, in violation of the terms of the container management
agreements. The claimants assert that they are entitled to all
sums received by CNV from the sale of containers wrongfully
disposed of under the container management agreements or,
alternatively, that CNV is liable for damages for wrongfully
depriving the claimants of the use and possession of the
containers sold. Claimants assert damages in excess of
$0.1 million, and request an accounting, interest, and
costs.

CNV filed its defense to the Disposals Claim on
December 13, 2002, denying the substantive allegations of
the claim and that the claimants are entitled to the relief
claimed or to any other relief.



| |                            
| | ---------------------------
| | Collection of Palatin Notes

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

11



---



##### 



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 cancelled 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.


As of May 8, 2001, the amount owed by
Mr. Palatin to CEB under the New York judgement totaled
$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 by $6 million as a result of the cancellation
of the Klamath Shares, leaving a balance due under the judgement
of $1.3 million as of May 8, 2001.

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 Amersham estate discussed above. On
July 5, 2002, Mr. Palatin filed his application with
the court seeking an order declaring that the court has no
jurisdiction over him or, in the alternative, that it should
exercise its discretion not to assert jurisdiction over him on
the ground of forum non conveniens. CEB opposed
Mr. Palatins application, and on December 22,
2002, the court rejected the application at the same time that
it rejected Mr. Palatins and Klamaths
jurisdictional challenges to the other claims brought by the
Group against the Palatins and Klamath in the UK, discussed
above. CEB has now filed its motion for summary judgement on its
claim; the motion is to be heard on May 23, 2003.

At the annual shareholders meeting held
June 12, 2002, the shareholders approved a proposal to
retire and cancel the Klamath Shares then held of record by CEB.
As a result of this approval, the Klamath shares were cancelled.



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

Not Applicable

12



---



##### 



PART II



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

As of March 20, 2003, there were outstanding
7,360,080 common shares. They were held of record by
approximately 354 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, 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 | 
|March 31, 2002     |  | $           | 5.000 |     |  | $ | 3.600 | 
|June 30, 2002      |  | $           | 4.240 |     |  | $ | 3.000 | 
|September 30, 2002 |  | $           | 4.450 |     |  | $ | 3.803 | 
|December 31, 2002  |  | $           | 4.010 |     |  | $ | 2.500 | 

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
Luxembourg law, by the Companys Articles of Incorporation
or otherwise, other than those restrictions which apply equally
to Luxembourg holders of common shares.

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.

On December 10, 2002, the Board of Directors
of the Company resolved to commence the payment of quarterly
dividends on the outstanding common shares of the Company,
subject to the Companys ongoing ability to pay such
dividends. Because under Luxembourg law and the Companys
Articles of Association, dividends may not be declared during
the first six months of the year unless a meeting of
shareholders is held and the shareholders approve the financial
statements for the prior calendar year, and because the annual
meeting of shareholders is scheduled to be held during the
second quarter of 2003, the Board of Directors declared a
dividend of 4 cents per common share on the outstanding common
shares of the Company, 2 cents per common share for the fourth
quarter of 2002 (which was paid January 9, 2003 to
shareholders of record as of December 23, 2002), and 2
cents per common share for the first calendar quarter of 2003,
payable April 17, 2003 to shareholders of record on
March 28, 2003.

In addition, on December 10, 2002, the Board
of Directors authorized the repurchase of up to 200,000 of the
Companys common shares. Repurchases of common shares are
limited to block purchases, as defined by the
SECs Rule 10b-18 (generally, purchases of 2,000
shares or more) and will be made in the open

13



---



##### 



market, at times and prices considered
appropriate by the Company, until no later than
December 10, 2003 (unless extended by the Board). Depending
on market conditions and other factors, share repurchases may be
commenced or suspended at any time or from time-to-time, without
prior notice. The Company has retained Deutsche Bank Securities,
Inc. to effect all repurchases under the program.


As of December 31, 2002, the Company had
repurchased 12,000 of its common shares at an aggregate price of
$37,200 or, on average, $3.10 per share. Subject to the
conditions stated above, up to an additional 188,000 common
shares may be repurchased under the program.

14



---



##### 



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 2002 Consolidated Financial Statements and related notes
thereto included elsewhere in this Annual Report.

|                                                         |                                                        |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |       | 
|-------------------------------------------------------- | ------------------------------------------------------ | ------------------------------------- | ------- | ----- |  | ---- | ------- | ----- |  | ---- | ------- | ----- |  | - | ------- | ----- |  | - | ------- | ----- | 
|                                                         |                                                        |                                      
|                                                         |                                                        | Years Ended December 31,             
|                                                         |                                                        |                                      
|                                                         |                                                        | 2002                                  |         | 2001  |  | 2000 |         | 1999  |  | 1998
|                                                         |                                                        |                                       |         |       |  |      |         |       |  |     
|                                                         |                                                        |                                      
|                                                         |                                                        | (in thousands, except per share data)
|Statements of Operations Data:                           |                                                        |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Gross lease revenue                                      |                                                        | $                                     | 113,643 |       |  | $    | 120,345 |       |  | $    | 137,605 |       |  | $ | 132,140 |       |  | $ | 157,546 |      
|Equipment trading revenue                                |                                                        |                                       | 1,045   |       |  |      | 5,279   |       |  |      |        |       |  |   |        |       |  |   |        |      
|Commissions, fees and other operating income             |                                                        |                                       | 4,390   |       |  |      | 5,449   |       |  |      | 5,026   |       |  |   | 5,949   |       |  |   | 4,955   |      
|Interest income                                          |                                                        |                                       | 307     |       |  |      | 282     |       |  |      | 877     |       |  |   | 1,011   |       |  |   | 1,154   |      
|Equity in earnings of affiliate                          |                                                        |                                       | 306     |       |  |      |        |       |  |      |        |       |  |   |        |       |  |   |        |      
|Gain on sale of investment                               |                                                        |                                       |        |       |  |      | 301     |       |  |      | 3,631   |       |  |   | 1,278   |       |  |   |        |      
|                                                         |                                                        |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Total revenues                                           |                                                        |                                       | 119,691 |       |  |      | 131,656 |       |  |      | 147,139 |       |  |   | 140,378 |       |  |   | 163,655 |      
|                                                         |                                                        |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Direct operating expenses                                |                                                        |                                       | 26,793  |       |  |      | 30,857  |       |  |      | 26,626  |       |  |   | 31,179  |       |  |   | 35,318  |      
|Payments to Managed Container Owners                     |                                                        |                                       | 55,120  |       |  |      | 56,965  |       |  |      | 71,659  |       |  |   | 63,943  |       |  |   | 75,527  |      
|Equipment trading expenses                               |                                                        |                                       | 969     |       |  |      | 4,942   |       |  |      |        |       |  |   |        |       |  |   |        |      
|Depreciation and amortization                            |                                                        |                                       | 15,487  |       |  |      | 15,791  |       |  |      | 16,055  |       |  |   | 16,200  |       |  |   | 18,714  |      
|Selling, general and administrative expenses             |                                                        |                                       | 14,272  |       |  |      | 14,099  |       |  |      | 17,580  |       |  |   | 16,569  |       |  |   | 21,164  |      
|Financing and recomposition expenses(1)                  |                                                        |                                       |        |       |  |      |        |       |  |      |        |       |  |   |        |       |  |   | 5,375   |      
|Interest expense                                         |                                                        |                                       | 6,150   |       |  |      | 7,754   |       |  |      | 9,367   |       |  |   | 10,809  |       |  |   | 15,718  |      
|Income from recovery of related party loans(2)           |                                                        |                                       |        |       |  |      | (6,000  | )     |  |      |        |       |  |   |        |       |  |   |        |      
|Reversal of unrealized holding gain on
    securities(3) |                                                        |                                       |        |       |  |      |        |       |  |      |        |       |  |   |        |       |  |   | 1,929   |      
|Impairment losses(4)                                     |                                                        |                                       |        |       |  |      | 4,000   |       |  |      |        |       |  |   |        |       |  |   | 6,500   |      
|                                                         |                                                        |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Total expenses                                           |                                                        |                                       | 118,791 |       |  |      | 128,408 |       |  |      | 141,287 |       |  |   | 138,700 |       |  |   | 180,245 |      
|                                                         |                                                        |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Income (loss) before income
    taxes                    |                                                        |                                       | 900     |       |  |      | 3,248   |       |  |      | 5,852   |       |  |   | 1,678   |       |  |   | (16,590 | )    
|Income taxes (benefit) provision(5)                      |                                                        |                                       | (2,158  | )     |  |      | 78      |       |  |      | 636     |       |  |   | (236    | )     |  |   | 306     |      
|                                                         |                                                        |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Net income (loss) available for common
    shares        |                                                        | $                                     | 3,058   |       |  | $    | 3,170   |       |  | $    | 5,216   |       |  | $ | 1,914   |       |  | $ | (16,896 | )    
|                                                         |                                                        |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Basic net income (loss) per share                        |                                                        | $                                     | 0.42    |       |  | $    | 0.40    |       |  | $    | 0.57    |       |  | $ | 0.21    |       |  | $ | (1.91   | )    
|                                                         |                                                        |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Diluted net income (loss) per share                      |                                                        | $                                     | 0.41    |       |  | $    | 0.39    |       |  | $    | 0.57    |       |  | $ | 0.21    |       |  | $ | (1.91   | )    
|                                                         |                                                        |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Shares used in:                                          |                                                        |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|                                                         |  basic net income (loss) per
    share calculations   |                                       |         | 7,365 |  |      |         | 8,001 |  |      |         | 9,158 |  |   |         | 8,983 |  |   |         | 8,858 | 
|                                                         |  diluted net income (loss) per
    share calculations |                                       |         | 7,425 |  |      |         | 8,052 |  |      |         | 9,214 |  |   |         | 8,998 |  |   |         | 8,858 | 
|Balance Sheet Data (at end of
    period):               |                                                        |                                       |         |       |  |      |         |       |  |      |         |       |  |   |         |       |  |   |         |      
|Cash and cash equivalents                                |                                                        | $                                     | 4,626   |       |  | $    | 4,914   |       |  | $    | 6,601   |       |  | $ | 8,701   |       |  | $ | 9,281   |      
|Total assets                                             |                                                        |                                       | 214,189 |       |  |      | 225,819 |       |  |      | 230,893 |       |  |   | 231,867 |       |  |   | 279,979 |      
|Long-term debt and capital lease obligations             |                                                        |                                       | 87,911  |       |  |      | 95,101  |       |  |      | 81,228  |       |  |   | 93,401  |       |  |   | 61,195  |      
|Total debt and capital lease obligations                 |                                                        |                                       | 100,997 |       |  |      | 107,920 |       |  |      | 99,379  |       |  |   | 109,978 |       |  |   | 148,466 |      
|Shareholders equity                                     |                                                        |                                       | 64,206  |       |  |      | 61,479  |       |  |      | 64,753  |       |  |   | 60,370  |       |  |   | 56,087  |      




|    |                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | In 1998, the Group incurred costs in connection
    with certain financing and other transactions and the
    restructuring of the Board of Directors, senior management and
    other employee positions. 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, 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.
|   
|(4) | During 2001 and 1998, the Group recorded
    accounting charges relating to the impairment of certain
    long-lived assets.                                                                                                                                                                                                                                                                           
|   
|(5) | In 2002, the Group recorded a tax benefit of
    $2.5 million further to a settlement with an overseas tax
    authority.                                                                                                                                                                                                                                                                              

15



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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 2002 Consolidated Financial Statements and
the notes thereto and the other financial and statistical
information appearing elsewhere in this annual report. The 2002
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 2002 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
comprise Container Equity Programs and Other Managed Container
Owners. Owned Containers include 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, 2002, approximately 31%, 44% and 25% of the
Groups fleet (by original equipment cost) was owned by way
of Container Equity Programs, 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
(SFAS 13) Accounting for Leases,
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 2002, 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
with fixed payment terms are presented in Note 11 (c) to
the Groups 2002 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
are the costs 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
herein), fees from the disposal of used containers, and
miscellaneous other fees and income. This item is affected by
the size of managed programs and the contracted acquisition fee,
the level of consultancy and design work undertaken, the
quantity of CPCs acquired by third-parties, 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
inception of a managed container

16



---



##### 



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, business insurance 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 specific containers include gross lease revenue,
direct operating expenses, equipment trading revenue and
expenses, payments to Managed Container Owners, commissions,
fees and other operating income, equity in earnings of Container
Equity Programs, 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.



| |                                                                          
| | -------------------------------------------------------------------------
| | Material Off-Balance Sheet Arrangements,
    Transactions and Obligations

Joint Venture Container Purchase Entity.In September 2002, Cronos established
the Joint Venture Program with a major international financial
services provider (the Bank), and a current lender
to the Company. The purpose of the Joint Venture Program is to
acquire and lease to third party lessees marine cargo containers
through a joint venture 50% owned by a subsidiary of the Company
and 50% owned by an affiliate of the Bank. The joint venture
entity is a bankruptcy-remote, special purpose company organized
under the laws of Bermuda and is accounted for under the equity
method of accounting.

The Bank and another financial institution have
committed a total of $50 million in debt financing to the
Joint Venture Program, and the Group and the Bank have each
committed approximately $6.5 million in equity to the Joint
Venture Program. The intention is to expand the Joint Venture
Program, as additional lenders become part of the lending group,
with the lenders providing up to 80% of the cost of acquiring
the containers and the joint venture partners each providing
one-half of the equity to fund the balance of the capital
requirements of the Joint Venture Program.

Interest in Other Managed Container Owner.(see Critical Accounting Policies
herein and Note 10 to the Groups 2002 Consolidated
Financial Statements). Cronos holds a 0.1% share in a Managed
Container Owner to which it sold $49.7 million of
containers in a series of transactions in prior years. Cronos
manages the containers in return for a management fee and holds
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 had a carrying value of
$5.3 million at December 31, 2002, are subordinate to
other loan notes due to third-parties and fall due for repayment
after the other loan notes have been repaid from funds generated
from the containers.

Fixed Non-Cancellable Operating
Leases.Cronos, as lessee, has entered
into fixed operating lease contracts for container equipment,
computer equipment and office space. In 2002 the rental expense
was $11.6 million of which the fixed operating lease rental
expense for container equipment was $10.4 million. Fixed
non-cancellable operating lease rental expense for containers is
shown in the statements of income as payments to Managed
Container Owners.

Guarantee to US Limited Partnership.During 2000, the Group provided a
guarantee under a $5 million 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

17



---



##### 



Note in the event of a default by the
US Limited Partnership. At December 31, 2002, the
balance outstanding under the Note was $2.9 million.


Guarantee of third-party loan & rent
support agreement.During 1996 and
1997, the Group sold a total of $26.3 million 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 $26.3 million, with a 2004
maturity date, to which the Group provided a first loss
guarantee for 20% of the outstanding debt. The Group can
collateralize up to 50% of the guarantee with a first security
interest in additional equipment. At December 31, 2002, the
balance outstanding under the loan was $4.6 million. In
addition, under the terms of a rent support agreement for which
Cronos earns a fee of $0.1 million per annum, 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
$3.5 million.

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. The transaction was accounted for as a sale. 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 $0.5 million per annum of
which the Group remits $0.4 million to the financial
institution as rent and $0.1 million to a retention account
held as security by the institution. As compensation for this
service, the Group earns an agency fee. 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 2005.

Agreements with Other Managed Container
Owners  early termination
options.Approximately 49% (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,
2002, approximately 37% (based on original equipment cost) of
total Agreements were eligible for early termination. Cronos
believes that early termination of these Agreements by the Other
Managed Container Owners is unlikely.

Agreements with Other Managed Container
Owners  change of control
provisions.Approximately 54% (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, 31% of total 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 23%
of total 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.

The following table sets forth the payments by
period where Cronos has entered into fixed non-cancellable
operating leases, and the commitment expiration by period where
it 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
2002 Consolidated Financial Statements.

Amount of Operating Lease Payments and
Commitment Expiration by Period

|                        |  |                                      |        |      |  |      |       |      |  |      |       |      |  |            |       |  |  |   |       |  |  |   |       |  |  |   |        | 
|----------------------- |  | ------------------------------------ | ------ | ---- |  | ---- | ----- | ---- |  | ---- | ----- | ---- |  | ---------- | ----- |  |  | - | ----- |  |  | - | ----- |  |  | - | ------ | 
|                        |  |                                      |        |      |  |      |       |      |  |      |       |      |  | 2008 and  
|                        |  | Total                                |        | 2003 |  | 2004 |       | 2005 |  | 2006 |       | 2007 |  | thereafter
|                        |  |                                      |        |      |  |      |       |      |  |      |       |      |  |           
|                        |  |                                     
|                        |  | (US dollar equivalent, in thousands)
|Fixed operating leases  |  | $                                    | 48,920 |      |  | $    | 7,697 |      |  | $    | 9,089 |      |  | $          | 8,024 |  |  | $ | 5,437 |  |  | $ | 2,793 |  |  | $ | 15,880 | 
|Loan guarantees         |  | $                                    | 7,594  |      |  | $    | 5,345 |      |  | $    | 989   |      |  | $          | 841   |  |  | $ | 419   |  |  | $ |      |  |  | $ |       | 
|Rent support agreements |  | $                                    | 4,431  |      |  | $    | 3,952 |      |  | $    | 380   |      |  | $          | 99    |  |  | $ |      |  |  | $ |      |  |  | $ |       | 

18



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| |                             
| | ----------------------------
| | Critical Accounting Policies

Amounts receivable from Other Managed
Container Owner(see Note 10 to
the Groups 2002 Consolidated Financial Statements). 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 recorded an impairment charge against
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.

Under current projections, gross lease revenue is
forecast to increase in 2003 by approximately 10% over the level
reported in 2002 and remain at this level until the fleet size
decreases due to container disposals. Projected gross lease
revenue is based on current per diem and utilization rates. 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 9.5 years.

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. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets. 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 disposals
due to various factors including age, condition, suitability for
continued leasing, as well as geographic location of the
containers where disposed.

Deferred Taxation.Under SFAS No. 109 (SFAS 109)
Accounting for Income Taxes, the Group is required
to record a valuation allowance if realization of a deferred tax
asset is not more-likely-than-not. Substantial
weight must be given to recent historical results and near term
projections, and management must assess the availability of tax
planning strategies that might impact either the need for, or
the amount of, any valuation allowance.

19



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Based on the recent history of operating losses
in its US subsidiaries, the near term outlook and
managements evaluation of available tax planning
strategies, the Group has maintained a 100% valuation allowance
for its deferred tax asset related to net operating loss
carryforwards in the US since 1998. As of December 31,
2002, the Groups valuation allowance aggregated
$2.5 million. In the event the Group were to determine that
it would be able to realize its deferred tax asset, a reversal
of part or all of the valuation allowance would be recorded.

Allowance for doubtful accounts.Cronos continually tracks its credit
exposure to each customer using specialist third-party credit
information services and reports prepared by local staff to
assess credit applications. 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. Over the last 10 years, bad debts have approximated
1% of lease revenues. Based on this information, Cronos has
calculated an allowance for doubtful accounts comprising
specific amounts provided against known probable losses plus an
additional amount based on loss experience. However, the Group
may be subject to unexpected loss in rental revenue from
container lessees that default under their container lease
agreements.

Intangibles.Intangible assets consist of goodwill
and patents. On January 1, 2002, the Group adopted SFAS
No. 142 (SFAS 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. Patents will continue to be amortized on a
straight-line basis over their estimated useful lives, to a
residual of zero. In addition to market valuations, the annual
impairment test uses cash flow discounting techniques to
determine the fair value of respective reporting units.
Management discounts the projected future net cash flows to be
generated by the reporting units based on historic and projected
trends for per diem revenues, utilization, container disposal
proceeds and funding costs over the expected remaining life of
the unit. 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.

Results of Operations

Improved market conditions for all container
types and the implementation of several Cronos marketing
initiatives during 2002 resulted in a 46% reduction in off-hire
container inventories. Utilization increased by 12% from 73% at
the beginning of the year to 85% by the end of December.

Lower levels of new worldwide container
production in 2001 and the first half of 2002 addressed, to some
extent, the problems of container over-supply caused by higher
levels of production in 1999 and 2000. As a result, demand
increased for the existing container fleets of leasing companies
and shipping lines. In many parts of Asia and particularly in
the south eastern ports, demand exceeded supply. In addition, in
2002, imports to Europe and the US declined thereby slowing
the build up in container inventories in these locations. To
exploit such opportunities, the Group repositioned off-hire
equipment to locations of greatest demand and pursued leasing
opportunities through its global network of marketing resources.

Since December 2001, the combined per diem rate
for the Cronos fleet of dry cargo containers declined by
approximately 12%. Most of this decline occurred in the first
three months of 2002 and is attributable to three main factors.



| |    |                                                                                                                                                                                                           
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Per diem rental rates decreased in line with the
    reduction in container prices and interest rates.                                                                                                    
|
| | 2. | Cronos converted lease agreements with several
    shipping lines from master to long-term lease. These conversions
    provide greater revenue stability but at lower lease rates than
    master leases.
|
| | 3. | Cronos initiated new long-term leases for older
    equipment which, while resulting in lower per diem rates,
    significantly lowered inventory levels.                                                 

The combined effect of the reduction in per diem
rates resulted in reduced gross lease revenue, but also
significantly lowered direct operating expenses due to the
reduction in storage and other inventory costs.

20



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

|                                    |  |      |    |      |  |      |    |   |  |  |    |  
|----------------------------------- |  | ---- | -- | ---- |  | ---- | -- | - |  |  | -- | -
|                                    |  | 2002 |    | 2001 |  | 2000
|                                    |  |      |    |      |  |     
|Utilization at December 31          |  |      | 85 | %    |  |      | 73 | % |  |  | 75 | %
|Average utilization during the year |  |      | 80 | %    |  |      | 72 | % |  |  | 79 | %

Cronos uses debt and capital leases to finance
the acquisition of container equipment and investments in direct
financing leases. The primary facilities include financial
covenants that are tested on a quarterly basis 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 2002, 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 110% 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 $3.1 million,
$3.2 million and $5.2 million for the years ended
December 31, 2002, 2001 and 2000, respectively. The
following chart represents certain key performance measurements,
expressed as a percentage of total revenues:

|                                             |  |              |    |      |  |      |    |  |  |  |    | 
|-------------------------------------------- |  | ------------ | -- | ---- |  | ---- | -- |  |  |  | -- | 
|                                             |  |             
|                                             |  | Year Ended  
|                                             |  | December 31,
|                                             |  |             
|                                             |  | 2002         |    | 2001 |  | 2000
|                                             |  |              |    |      |  |     
|                                             |  | %            |    | %    |  | %   
|Gross lease revenue                          |  |              | 95 |      |  |      | 91 |  |  |  | 94 | 
|Payments to Managed Container Owners         |  |              | 46 |      |  |      | 43 |  |  |  | 49 | 
|Direct operating expenses                    |  |              | 22 |      |  |      | 23 |  |  |  | 18 | 
|Depreciation and amortization                |  |              | 13 |      |  |      | 12 |  |  |  | 11 | 
|Selling, general and administrative expenses |  |              | 12 |      |  |      | 11 |  |  |  | 12 | 
|Interest expense                             |  |              | 5  |      |  |      | 6  |  |  |  | 6  | 

Year
Ended December 31, 2002 Compared to Year Ended
December 31, 2001

Gross lease revenueof $113.6 million for the year
ended December 31, 2002, was $6.7 million, or 6%,
lower than for the year ended December 31, 2001. Revenue
from dry cargo and refrigerated containers accounted for all of
the decline as the effect of the increase in utilization
reported during 2002 was more than offset by the effect of
reduced per diem rates and the disposal of older dry cargo
equipment.

Equipment trading revenueof $1 million in 2002 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. Equipment trading
expenses represented equipment and related costs for this
activity. The Group earned $0.1 million from equipment
trading activity during 2002, compared with $0.3 million in
2001.

Commissions, fees and other operating incomeof $4.4 million in 2002 was
$1.1 million, or 19%, lower than in 2001. Reductions of
$0.9 million in CPC license fee income due to lower
third-party demand for new CPC containers during 2002,
$0.4 million in amortized acquisition fee income reflecting
a maturing portfolio of managed container programs,
$0.1 million on fees earned on the disposal of managed
container program containers, $0.1 million in design and
consultancy fee income, $0.1 million in property rental
income and $0.3 in other items were partly offset by an
$0.8 million increase in income earned on direct financing
leases.

Interest incomeof
$0.3 million for the year ended December 31, 2002 was
unchanged when compared to the prior year. In both 2002 and
2001, the reduction in interest rates reduced the amount of
interest income earned when compared to previous years.

21



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Equity in earnings of affiliateof $0.3 million in 2002
represents the recognition of the Cronos share of earnings from
the Joint Venture Program entity that was set up in September of
2002.

Direct operating expenseswere $26.8 million in 2002, a
decrease of $4.1 million, or 13%, compared to 2001. Reduced
storage costs accounted for almost all of the decline and
reflected lower inventory levels due to increased demand for dry
cargo containers during the year.

Payments to Managed Container Ownerswere $55.1 million for the year
ended December 31, 2002, a decrease of $1.8 million,
or 3%, when compared to the prior year. This is due primarily to
the decline in dry cargo container net lease revenue for each of
the managed segments.

Depreciation and amortizationwas $15.5 million for 2002,
compared with $15.8 million for 2001. Depreciation expense
for leasehold and computer assets was $0.6 million lower
than in 2001. This is due to certain computer assets reaching
the end of their useful life and the relocation of the UK office
to new leasehold premises in the second quarter of 2002. This
was offset by a $0.7 million increase in container
depreciation expense reflecting the addition of new container
equipment. The amortization of intangible assets declined by
$0.4 million in 2002 due to the adoption of SFAS
No. 142.

Selling, general and administrative expenseswere $14.3 million in 2002, an
increase of $0.2 million, when compared to 2001. Reductions
of $0.3 million in information technology costs and
$0.1 million in occupancy costs were more than offset by
increased manpower costs of $0.3 million, increased
professional services expenses of $0.1 million and
increased business insurance and other costs of
$0.2 million. The decrease in occupancy costs was mainly
due to an office relocation in the UK during 2002. During 2002,
the decline in the US dollar relative to the UK pound and to the
Euro had the effect of increasing the cost of overheads in these
economic areas.

Interest expenseof
$6.2 million in 2002, was $1.6 million, or 21%, lower
than in 2001. The decline in interest expense was attributable
to the reduction in interest rates and lower total debt balances
in 2002.

Income Taxes.During
the second quarter of 2002, the Group agreed to a settlement
with a foreign taxation authority. This followed a review that
focused primarily on the transfer prices under the terms of the
principal trading agreements between Cronos Group companies
prior to December 31, 1998. The Group had previously
recorded a charge of $2.9 million in this regard. As a
result of the settlement, the Group reversed $2.5 million
of the tax liability and recorded a tax benefit of the same
amount. Further to the settlement, the Group performed an
evaluation of its worldwide tax position during the third
quarter. Based on this review, the Group recorded a net tax
benefit of $0.4 million in its US subsidiaries. The total
income tax benefit for 2002 was partly offset by
$0.7 million of income tax charges. In 2001, 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. The 2001 charge for income taxes of
$0.1 million represented 2% of income before income taxes.

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 13%,
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%, higher than in 2000. Increases of
$0.3 million earned in connection with equipment design
services, $0.3 million in

22



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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 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 reduced the amount of interest income earned.

Direct operating expenseswere $30.9 million in 2001, an
increase of $4.2 million, or 16%, 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 21%, when compared to the prior year. This was a result of a
decline in net lease revenue due to the 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 16%, 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 20%, 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%, 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.

23



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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 uses 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 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).

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 ten 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 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, 2002, the Group had
$106 million of available container borrowing facilities
under which $101 million was outstanding. In addition, the
Group had $1.7 million of credit facilities under which
there were no amounts outstanding. The credit facilities are
available, if required, for operating cash flow purposes.

On December 10, 2002, the Board of Directors
declared a quarterly dividend of 2 cents per common share
which was paid on January 9, 2003. In addition the Board
declared a quarterly dividend of 2 cents per common share
for the first calendar quarter of 2003, payable April 17,
2003 to shareholders of record as of March 28, 2003.

24



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Cash
Flow Statements for the years ended December 31, 2002, 2001
and 2000

Cash from Operating
Activities.Net cash provided by
operating activities during 2002, 2001 and 2000 was
$19.1 million, $19.1 million and $17.8 million,
respectively. The net cash generated in 2002 reflected earnings
from operations including $1.2 million of income tax
repayments relating primarily to a settlement with a foreign
taxation authority during the year. 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.

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
worldwide office network and, on occasion, to acquire
subsidiaries and other investments. Net cash used in investing
activities was $3.5 million in 2002. Proceeds from the sale
of container equipment of $12.3 million included
$9.8 million of equipment that was sold to a new Container
Equity Program. In addition, the Group received a dividend of
$1.4 million from a Container Equity Program. These items
were more than offset by total expenditure of $17.2 million
on fixed assets and direct finance lease equipment. 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 was
$10.7 million. 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.

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 used in financing activities was
$15.8 million for 2002. Proceeds from the issuance of new
term debt of $17.9 million was more than offset by the
repayment of $33.7 million of debt and capital lease
obligations, including $11.3 million that was repaid at the
inception of the Joint Venture Program. 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 was
$30.7 million. 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.

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, 2002, the Group owed container
manufacturers $8.6 million for equipment. The Group will
fund $6.1 million of this equipment utilizing available
container funding facilities and the remaining $2.5 million
will be sold to a Container Equity Program.

In addition, the Group had outstanding orders to
purchase container equipment at December 31, 2002 of
$0.9 million. These orders relate to containers to be
financed by the Group using available container funding
facilities.

Capital expenditures for containers in 2002, 2001
and 2000 were $10.9 million, $22.3 million and
$2.1 million respectively. Other capital expenditures in
2002, 2001 and 2000 were $0.3 million, $0.1 million
and $0.1 million, respectively.

On September 18, 2002, Cronos established
the Joint Venture Program with a major international financial
services provider, and a current lender to the Company. The
purpose of the Joint Venture Program is to acquire and lease to
third-party lessees marine cargo containers through a joint
venture 50% owned by a

25



---



##### 



subsidiary of the Company and 50% owned by an
affiliate of the Bank. The joint venture entity is a
bankruptcy-remote, special purpose company organized under the
laws of Bermuda.


The Group sold approximately $18.8 million
of containers to the Joint Venture Program and transferred an
additional $4.7 million of containers as a capital
contribution. The Group utilized the proceeds from the sale of
containers to repay approximately $10.2 million of
indebtedness outstanding under its existing revolving line of
credit with the Bank. In addition, an initial distribution from
the Joint Venture Program of approximately $1.1 million was
utilized to further reduce the existing revolving line of credit
with the Bank. The sale of the containers by the Group to the
Joint Venture Program did not result in a material gain (or
loss).

On July 19, 2001, the Group entered into a
$60 million revolving credit facility with the Bank. This
facility was for a term of three years with an interest rate of
London Inter Bank Offered Rate (Libor) plus 2.25%,
payable monthly in arrears. The first drawdown under the
facility was utilized to refinance existing loan facilities and
to fund new container additions.

In connection with the establishment of the Joint
Venture Program and the repayment of a portion of the
outstanding balance under the revolving credit facility with the
Bank, the Group has amended its revolving line of credit
agreement with the Bank to reduce the maximum commitment of the
Bank thereunder from $60 million to $50 million, and
has agreed to amortize the balance outstanding under the
revolving line of credit, as of September 18, 2003, over
five years.

On December 10, 2002, the Board of Directors
authorized the repurchase of up to 200,000 of the Companys
common shares. Repurchases of common shares are limited to
block purchases, as defined by the SECs
Rule 10b-18 (generally, purchases of 2,000 shares or
more) and will be made in the open market, at times and prices
considered appropriate by the Company, until no later than
December 10, 2003 (unless extended by the Board). Depending
on market conditions and other factors, share repurchases may be
commenced or suspended at any time or from time-to-time, without
prior notice. The Company has retained Deutsche Bank Securities,
Inc. to effect all repurchases under the program.

As of December 31, 2002, the Company had
repurchased 12,000 of its common shares at an aggregate price of
$37,200 or, on average, $3.10 per share. Subject to the
conditions stated above, up to an additional 188,000 common
shares may be repurchased under the program.

On December 10, 2002, the Board of
Directors, declared an interim dividend of 4 cents per
common share. The Company paid 50% of this dividend on
January 9, 2003, to shareholders of record as of
December 23, 2002. The remaining 50% will be paid on
April 17, 2003, to shareholders of record as of
March 28, 2003.

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

In June 2002, the Financial Accounting Standards
Board issued SFAS No. 146 (SFAS 146),
Accounting for Costs Associated with Exit or Disposals
Activities. The Company does not consider the provisions
of SFAS 146 to have any effect on the results from
operations presented herein.

In December 2002, the Financial Accounting
Standards Board issued SFAS No. 148
(SFAS 148), Accounting for Stock-Based
Compensation  Transition and Disclosure.
SFAS 148 provides alternative methods of transition for a
voluntary change to the fair value based method of accounting
for stock-based compensation. In addition, SFAS 148 amends
the disclosure requirements of SFAS 123 to require prominent

26



---



##### 



disclosures in both annual and interim financial
statements of the method of accounting for stock-based employee
compensation and the method used to report results. The Company
has already adopted the disclosure requirements under
SFAS 123, and will adopt the interim disclosure
requirements from the first quarter of 2003.


In November 2002, the Financial Accounting
Standards Board issued Interpretation No. 45
(FIN 45), Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. FIN 45 requires
(i) that for financial statements issued after the issuance
of FIN 45, certain disclosures be made by the guarantor in
its financial statements and (ii) that for guarantees
issued after December 31, 2002 a guarantor recognize, at
the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. Accounting
for guarantees issued prior to the initial application of
FIN 45 shall not be revised or restated to reflect the
recognition or measurement provisions of FIN 45.

In January 2003, the Financial Accounting
Standards Board issued Interpretation No. 46
(FIN 46), Consolidation of Variable
Interest Entities. The Group has not yet completed the
process of identifying whether it has variable interests in any
variable interest entities. The Group is evaluating the impact
that will result from adopting FIN 46 and is therefore
unable to disclose the impact that adopting FIN 46 will
have on its financial position and results of operation when
such statement is adopted.

Inflation

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



|          |                                                               
|--------- | --------------------------------------------------------------
|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, 2002:

|                                              |                         |                                      |   |                                                              |  |          |   |       |  |      |   |        |  |            |   |        |  |  |   |        |  |  |   |        |  |  |   |        | 
|--------------------------------------------- | ----------------------- | ------------------------------------ | - | ------------------------------------------------------------ |  | -------- | - | ----- |  | ---- | - | ------ |  | ---------- | - | ------ |  |  | - | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                              |                         |                                      |   |                                                             
|                                              |                         |                                      |   | Expected Maturity Date of Debt and Capital Lease Obligations
|                                              |                         |                                      |   |                                                             
|                                              |                         |                                      |   |                                                              |  | 2008 and
|                                              |                         | Total                                |   | 2003                                                         |  | 2004     |   | 2005  |  | 2006 |   | 2007   |  | thereafter
|                                              |                         |                                      |   |                                                              |  |          |   |       |  |      |   |        |  |           
|                                              |                         |                                     
|                                              |                         | (US dollar equivalent, in thousands)
|Long-term debt and capital lease obligations: |                         |                                      |   |                                                              |  |          |   |       |  |      |   |        |  |            |   |        |  |  |   |        |  |  |   |        |  |  |   |       
|                                              | Fixed rate ($US)        |                                      | $ | 14,952                                                       |  |          | $ | 4,064 |  |      | $ | 10,888 |  |            | $ |       |  |  | $ |       |  |  | $ |       |  |  | $ |       | 
|                                              | Average interest rate % |                                      |   |                                                             |  |          |   | 8.6   |  |      |   | 8.6    |  |            |   |       |  |  |   |       |  |  |   |       |  |  |   |       | 
|                                              | Variable rate ($US)     |                                      | $ | 86,045                                                       |  |          | $ | 9,022 |  |      | $ | 16,525 |  |            | $ | 14,544 |  |  | $ | 12,223 |  |  | $ | 13,934 |  |  | $ | 19,797 | 
|                                              | Average interest rate % |                                      |   |                                                             |  |          |   | 3.3   |  |      |   | 3.3    |  |            |   | 3.4    |  |  |   | 3.4    |  |  |   | 3.3    |  |  |   | 3.2    | 

Interest rate risk:Outstanding borrowings are subject to
interest rate risk. At December 31, 2002, 85% 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 $0.3 million.

Exchange rate risk:In 2002, over 96% 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 2002
were incurred and paid in US dollars. Of the remaining
costs, approximately 77% 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 2002, 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 $1.2 million in any given year.

27



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##### 





|         |                                                
|-------- | -----------------------------------------------
|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, 2002 and 2001

Consolidated Statements of Income for the Years
Ended December 31, 2002, 2001 and 2000



| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | Consolidated Statements of Shareholders
    Equity for the Years Ended December 31, 2002, 2001 and 2000

Consolidated Statements of Cash Flows for the
Years Ended December 31, 2002, 2001 and 2000

Notes to Consolidated Financial Statements



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

None

28



---



##### 



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.



|          |                        
|--------- | -----------------------
|Item 14  | Controls and Procedures

The principal executive and principal financial
officers of the Company have evaluated the disclosure controls
and procedures of the Group within 90 days prior to the
filing of this annual report. As used herein, the term
disclosure controls and procedures has the meaning
given to the term by Rule 13a-14 under the Securities
Exchange Act of 1934, as amended (Exchange Act), and
includes the controls and other procedures of the Group that are
designed to ensure that information required to be disclosed by
the Company in the reports that it files with the SEC under the
Exchange Act is recorded, processed, summarized and reported
within the time periods specified in the SECs rules and
forms. Based upon their evaluation, the principal executive and
financial officers of the Company have concluded that the
Groups disclosure controls and procedures provide
reasonable assurance that the information required to be
disclosed by the Company in this report is recorded, processed,
summarized and reported within the time periods specified in the
SECs rules and forms applicable to the preparation of this
report.

There have been no significant changes in the
Groups internal controls or in other factors that could
significantly affect the Groups internal controls
subsequent to the evaluation described above conducted by the
Companys principal executive and financial officers.

29



---



##### 



PART IV

Item 15  Exhibits,
Financial Statement Schedules, and Reports on
Form 8-K

(a)(1) Financial Statements

Independent Auditors Report

Consolidated Balance Sheets  At
December 31, 2002 and 2001

Consolidated Statements of Income for the Years
Ended December 31, 2002, 2001 and 2000



| |                                                                                                         
| | --------------------------------------------------------------------------------------------------------
| | Consolidated Statements of Shareholders
    Equity for the Years Ended December 31, 2002, 2001 and 2000

Consolidated Statements of Cash Flows for the
Years Ended December 31, 2002, 2001 and 2000

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

30



---



##### 



|                                              |       |                     |  |                                                                                                                                                                                                                                                                                                                                         
|--------------------------------------------- | ----- | ------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number                                        |       | Exhibit Description
|                                              |       |                    
|                                              | 10.5  |                     |  | Amendment No. 2 to the Amended and Restated
    Loan Agreement dated as of November 20, 2001, by and
    between CFBL and Fortis (incorporated by reference to
    Exhibit 10.5 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2001).                                                                  
|                                              | 10.6  |                     |  | Amendment No. 3, dated as of
    September 18, 2002, to Amended and Restated Loan Agreement,
    dated as of July 19, 2001, by and between CFBL and Fortis,
    as Agent and Initial Noteholder (incorporated by reference
    Exhibit 10.22 to the Companys Current Report on
    Form 8-K, dated September 18, 2002).                
|                                              | 10.7  |                     |  | Amendment No. 4, dated as of March 5,
    2003, to Amended and Restated Loan Agreement, dated as of
    July 19, 2001, by and between CFBL and Fortis, as Agent and
    Initial Noteholder.                                                                                                                                             
|                                              | 10.8  |                     |  | Management Agreement by and between
    CF Leasing Limited and Cronos Containers (Cayman) Limited,
    dated as of September 18, 2002 (incorporated by reference
    Exhibit 10.23 to the Companys Current Report on
    Form 8-K, dated September 18, 2002).                                                                          
|                                              | 10.9  |                     |  | Amendment No. 1, dated as of March 7,
    2003 to the Management Agreement, dated as of September 18,
    2002, by and between the CF Leasing Limited and Cronos
    Containers (Cayman) Limited.                                                                                                                                       
|                                              | 10.10 |                     |  | 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. (incorporated by reference to
    Exhibit 10.6 to the Companys Annual Report on
    Form 10-K for the year ended December 31, 2001).              
|                                              | 10.11 |                     |  | 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. (incorporated by reference to Exhibit 10.7
    to the Companys Annual Report on Form 10-K for the
    year ended December 31, 2001).  
|Executive Compensation Plans and Arrangements
|                                              | 10.12 |                     |  | 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).                                                                             
|                                              | 10.13 |                     |  | 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).                                                                                                                                                                                 
|                                              | 10.14 |                     |  | 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).                                                           
|                                              | 10.15 |                     |  | 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).                        
|                                              | 10.16 |                     |  | Amendment, dated November 5, 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 (incorporated by reference to
    Exhibit 10.19 to the Companys Annual Report on
    Form 10-K, for the year ended December 31, 2001).
|                                              | 10.17 |                     |  | Amendment, dated November 5, 2002, to the
    Employment Agreement between Cronos Containers Inc. and John
    Foy, dated April 1, 1999, as amended on December 1,
    1999, December 1, 2000, December 1, 2001 and
    October 15, 2002.                                                                                               
|                                              | 10.18 |                     |  | Service Agreement by and between Cronos
    Containers Limited and John Kirby, dated February 29, 2000.                                                                                                                                                                                                                                 
|                                              | 10.19 |                     |  | Amendment, dated November 5, 2002, to the
    Service Agreement by and between Cronos Containers Limited and
    John Kirby, dated February 29, 2000.                                                                                                                                                                                   
|                                              | 10.20 |                     |  | 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).                                                                                  

31



---



##### 



|               |       |                     |  |                                                                                                                                                                                                                                                                                            
|-------------- | ----- | ------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number         |       | Exhibit Description
|               |       |                    
|               | 10.21 |                     |  | 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). 
|               | 10.22 |                     |  | Amendment, dated December 18, 2001, to the
    Employment Agreement between Cronos Containers S.R.L. and Nico
    Sciacovelli, dated April 7, 2000 (incorporated by reference
    to Exhibit 10.21 to the Companys Annual Report on
    Form 10-K for the period ended December 31, 2001).
|               | 10.23 |                     |  | Amendment, dated November 5, 2002, to the
    Employment Agreement between Cronos Containers S.R.L. and Nico
    Sciacovelli, dated April 7, 2000, as amended
    December 18, 2001.                                                                                                       
|               | 10.24 |                     |  | Amendment to the 1999 Stock Option Plan, dated
    June 1, 2001 (incorporated by reference to
    Exhibit 10.16 to the Companys Annual Report on
    Form 10-K for the period ended December 31, 2001).                                                                                   
|               | 10.25 |                     |  | Amended and Restated Employment Agreement between
    Cronos and Dennis J. Tietz, dated November 8, 2001
    (incorporated by reference to Exhibit 10.17 to the
    Companys Annual Report on Form 10-K for the period
    ended December 31, 2001).                                      
|               | 10.26 |                     |  | Amended and Restated Employment Agreement between
    Cronos and Peter J. Younger, dated December 1, 2001
    (incorporated by reference to Exhibit 10.18 to the
    Companys Annual Report on Form 10-K for the period
    ended December 31, 2001).                                     
|               | 10.27 |                     |  | Amended and Restated Indemnification Agreement
    between Cronos and Charles Tharp, dated November 6, 2002.                                                                                                                                                                               
|               | 10.28 |                     |  | Amended and Restated Indemnification Agreement
    between Cronos and Maurice Taylor, dated November 6, 2002.                                                                                                                                                                              
|               | 10.29 |                     |  | Amended and Restated Indemnification Agreement
    between Cronos and Dennis J. Tietz, dated November 6, 2002.                                                                                                                                                                             
|               | 10.30 |                     |  | Amended and Restated Indemnification Agreement
    between Cronos and Peter J. Younger, dated November 6, 2002.                                                                                                                                                                            
|               | 10.31 |                     |  | Indemnification Agreement between Cronos and
    S. Nicholas Walker, dated November 6, 2002.                                                                                                                                                                                               
|               | 10.32 |                     |  | Indemnification Agreement between Cronos and
    Robert M. Melzer, dated November 6, 2002.                                                                                                                                                                                                 
|               | 10.33 |                     |  | Indemnification Agreement between Cronos
    Containers Limited and John C. Kirby, dated November 22,
    2002.                                                                                                                                                                            
|               | 10.34 |                     |  | Indemnification Agreement between Cronos
    Containers Inc. and John M. Foy, dated November 1, 2002.                                                                                                                                                                                      
|               | 10.35 |                     |  | Indemnification Agreement between Cronos
    Containers S.R.L. and Nico Sciacovelli, dated November 22,
    2002.                                                                                                                                                                          
|               | 10.36 |                     |  | Stock Option Agreement between Cronos and Charles
    Tharp, dated January 10, 2003.                                                                                                                                                                                                       
|               | 10.37 |                     |  | Stock Option Agreement between Cronos and Maurice
    Taylor, dated January 10, 2003.                                                                                                                                                                                                      
|               | 10.38 |                     |  | Stock Option Agreement between Cronos and S.
    Nicholas Walker, dated January 10, 2003.                                                                                                                                                                                                  
|               | 10.39 |                     |  | Stock Option Agreement between Cronos and Robert
    M. Melzer, dated January 10, 2003.                                                                                                                                                                                                    
|Other Exhibits
|               | 21.1  |                     |  | List of principal wholly-owned subsidiaries at
    December 31, 2002.                                                                                                                                                                                                                      
|               | 23.1  |                     |  | Consent of Independent Auditors dated
    March 21, 2003.                                                                                                                                                                                                                                  
|               | 99.1  |                     |  | Certification pursuant to
    18 U.S.C. § 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                  
|               | 99.2  |                     |  | Certification pursuant to
    18 U.S.C. § 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                  

(b) Reports on Form 8K



| |                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On May 23, 2002, a Current Report on
    Form 8-K was filed by the Company announcing the grant of
    common shares of the Company to certain eligible employees and
    agents.

32



---



##### 





| |                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | On October 2, 2002, a Current Report on
    Form 8-K was filed by the Company announcing the
    establishment of a joint venture container purchase program with
    a major European financial institution.                                                                                                               
|
| | On December 10, 2002, a Current Report on
    Form 8-K was filed by the Company declaring a quarterly
    dividend of 2 cents per common share, to be paid
    January 9, 2003, to shareholders of record as of
    December 23, 2002, and authorized the repurchase of up to
    200,000 of the Registrants common shares.

33



---



##### 



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 20,
2003

| |                 
| | ----------------
| | 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 20, 2003
|By /s/ PETER J YOUNGERPeter J Younger                 |  | Director, Chief Operating Officer,
    Chief Financial Officer, and
    Chief Accounting Officer
    (Principal Financial and
    Accounting Officer) |  | March 20, 2003
|By /s/ MAURICE TAYLORMaurice Taylor                   |  | Director                                                                                                                                              |  | March 20, 2003
|By /s/ CHARLES THARPCharles Tharp                     |  | Director                                                                                                                                              |  | March 20, 2003
|By /s/ STEPHEN NICHOLAS WALKERStephen Nicholas Walker |  | Director                                                                                                                                              |  | March 20, 2003
|By /s/ ROBERT M MELZERRobert M Melzer                 |  | Director                                                                                                                                              |  | March 20, 2003

34



---



##### 



CERTIFICATION

I, Dennis J. Tietz, certify that:



|   |                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | I have reviewed this annual report on
    Form 10-K of The Cronos Group (the Registrant);                                                                                                                                                                                                                                                 
|  
|2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|  
|3. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the Registrant as of,
    and for, the periods presented in this annual report;                       
|  
|4. | The Registrants other certifying officer
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the Registrant and have:                                                                                                           



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the Registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;



| |    |                                                                                                                                                                                                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | evaluated the effectiveness of the
    Registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and



| |    |                                                                                                                                                                             
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;



|   |                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | The Registrants other certifying officer
    and I have disclosed, based on our most recent evaluation, to
    the Registrants auditors and the audit committee of
    Registrants Board of Directors (or persons performing the
    equivalent functions):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    Registrants ability to record, process, summarize and
    report financial data and have identified for the
    Registrants auditors any material weaknesses in internal
    controls; and



| |    |                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    Registrants internal controls; and



|   |                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | The Registrants other certifying officer
    and I have indicated in this annual report whether there were
    significant changes in internal controls or in other factors
    that could significantly affect internal controls subsequent to
    the date of our most recent evaluation, including any corrective
    actions with regard to significant deficiencies and material
    weaknesses.

Date: March 20, 2003



|                        | 
|----------------------- | 
|/s/ DENNIS J. TIETZ     | 
|                        | 
|Dennis J. Tietz         | 
|Chief Executive Officer | 

35



---



##### 



CERTIFICATION

I, Peter J. Younger, certify that:



|   |                                                                                                                                                                                                                                                                                                                                             
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | I have reviewed this annual report on
    Form 10-K of The Cronos Group (the Registrant);                                                                                                                                                                                                                                                 
|  
|2. | Based on my knowledge, this annual report does
    not contain any untrue statement of a material fact or omit to
    state a material fact necessary to make the statements made, in
    light of the circumstances under which such statements were
    made, not misleading with respect to the period covered by this
    annual report;
|  
|4. | Based on my knowledge, the financial statements,
    and other financial information included in this annual report,
    fairly present in all material respects the financial condition,
    results of operations and cash flows of the Registrant as of,
    and for, the periods presented in this annual report;                       
|  
|4. | The Registrants other certifying officer
    and I are responsible for establishing and maintaining
    disclosure controls and procedures (as defined in Exchange Act
    Rules 13a-14 and 15d-14) for the Registrant and have:                                                                                                           



| |    |                                                                                                                                                                                                                                                                                                             
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | designed such disclosure controls and procedures
    to ensure that material information relating to the Registrant,
    including its consolidated subsidiaries, is made known to us by
    others within those entities, particularly during the period in
    which this annual report is being prepared;



| |    |                                                                                                                                                                                                       
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | evaluated the effectiveness of the
    Registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and



| |    |                                                                                                                                                                             
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) | presented in this annual report our conclusions
    about the effectiveness of the disclosure controls and
    procedures based on our evaluation as of the Evaluation Date;



|   |                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|5. | The Registrants other certifying officer
    and I have disclosed, based on our most recent evaluation, to
    the Registrants auditors and the audit committee of
    Registrants Board of Directors (or persons performing the
    equivalent functions):



| |    |                                                                                                                                                                                                                                                                                                                   
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) | all significant deficiencies in the design or
    operation of internal controls which could adversely affect the
    Registrants ability to record, process, summarize and
    report financial data and have identified for the
    Registrants auditors any material weaknesses in internal
    controls; and



| |    |                                                                                                                                                               
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b) | any fraud, whether or not material, that involves
    management or other employees who have a significant role in the
    Registrants internal controls; and



|   |                                                                                                                                                                                                                                                                                                                                                                                                       
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|6. | The Registrants other certifying officer
    and I have indicated in this annual report whether there were
    significant changes in internal controls or in other factors
    that could significantly affect internal controls subsequent to
    the date of our most recent evaluation, including any corrective
    actions with regard to significant deficiencies and material
    weaknesses.

Date: March 20, 2003



|                                                               | 
|-------------------------------------------------------------- | 
|/s/ PETER J. YOUNGER                                           | 
|_______________________________________ 
     Peter J. Younger | 
|Chief Financial Officer                                        | 

36



---



##### 



THE CRONOS GROUP

Consolidated financial statements as of
December 31, 2002 and 2001

and for the years ended December 31,
2002, 2001 and 2000


and Independent Auditors
Report


F-1



---



##### 



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,
2002, and 2001, and the related consolidated statements of
income, cash flows and shareholders equity for each of the
three years in the period ended December 31, 2002. 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, 2002 and 2001, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2002, in conformity with
accounting principles generally accepted in the United States of
America.

As discussed in Notes 2 and 9 to the
consolidated financial statements, in 2002 the Company changed
its method of accounting for goodwill and other intangible
assets to conform to Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets.

/s/ Deloitte & Touche LLP

San Francisco, CA


February 14, 2003


F-2



---



##### 



THE CRONOS GROUP

CONSOLIDATED STATEMENTS OF INCOME

For the years ended December 31, 2002,
2001 and 2000


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


|                                              |                                                                                        |      |         |        |  |      |         |        |   |   |         |        |  
|--------------------------------------------- | -------------------------------------------------------------------------------------- | ---- | ------- | ------ |  | ---- | ------- | ------ | - | - | ------- | ------ | -
|                                              |                                                                                        | 2002 |         | 2001   |  | 2000
|                                              |                                                                                        |      |         |        |  |     
|Gross lease revenue                           |                                                                                        | $    | 113,643 |        |  | $    | 120,345 |        |   | $ | 137,605 |       
|Equipment trading revenue                     |                                                                                        |      | 1,045   |        |  |      | 5,279   |        |   |   |        |       
|Commissions, fees and other operating income: |                                                                                        |      |         |        |  |      |         |        |   |   |         |       
|                                              | - Container Equity Programs                                                            |      |         | 1,240  |  |      |         | 1,334  |   |   |         | 1,318  |  
|                                              | - Unrelated parties                                                                    |      |         | 3,150  |  |      |         | 4,115  |   |   |         | 3,708  |  
|Interest income                               |                                                                                        |      | 307     |        |  |      | 282     |        |   |   | 877     |       
|Gain on sale of investment:                   |                                                                                        |      |         |        |  |      |         |        |   |   |         |       
|                                              | - gain on conversion of investment                                                     |      |         |       |  |      |         |       |   |   |         | 1,502  |  
|                                              | - realized holding gain                                                                |      |         |       |  |      |         | 301    |   |   |         | 2,129  |  
|Equity in earnings of affiliate               |                                                                                        |      | 306     |        |  |      |        |        |   |   |        |       
|                                              |                                                                                        |      |         |        |  |      |         |        |   |   |         |       
|Total revenues                                |                                                                                        |      | 119,691 |        |  |      | 131,656 |        |   |   | 147,139 |       
|                                              |                                                                                        |      |         |        |  |      |         |        |   |   |         |       
|Direct operating expenses                     |                                                                                        |      | 26,793  |        |  |      | 30,857  |        |   |   | 26,626  |       
|Payments to Managed Container Owners:         |                                                                                        |      |         |        |  |      |         |        |   |   |         |       
|                                              | - Container Equity Programs                                                            |      |         | 18,214 |  |      |         | 19,033 |   |   |         | 26,696 |  
|                                              | - Other Managed Container Owners                                                       |      |         | 36,906 |  |      |         | 37,932 |   |   |         | 44,963 |  
|Equipment trading expenses                    |                                                                                        |      | 969     |        |  |      | 4,942   |        |   |   |        |       
|Amortization of intangible assets             |                                                                                        |      | 188     |        |  |      | 560     |        |   |   | 710     |       
|Depreciation                                  |                                                                                        |      | 15,299  |        |  |      | 15,231  |        |   |   | 15,345  |       
|Selling, general and administrative expenses  |                                                                                        |      | 14,272  |        |  |      | 14,099  |        |   |   | 17,580  |       
|Interest expense                              |                                                                                        |      | 6,150   |        |  |      | 7,754   |        |   |   | 9,367   |       
|Income from recovery of related party loans   |                                                                                        |      |        |        |  |      | (6,000  | )      |   |   |        |       
|Impairment losses                             |                                                                                        |      |        |        |  |      | 4,000   |        |   |   |        |       
|                                              |                                                                                        |      |         |        |  |      |         |        |   |   |         |       
|Total expenses                                |                                                                                        |      | 118,791 |        |  |      | 128,408 |        |   |   | 141,287 |       
|                                              |                                                                                        |      |         |        |  |      |         |        |   |   |         |       
|Income before income taxes                    |                                                                                        |      | 900     |        |  |      | 3,248   |        |   |   | 5,852   |       
|Income taxes (benefit) provision              |                                                                                        |      | (2,158  | )      |  |      | 78      |        |   |   | 636     |       
|                                              |                                                                                        |      |         |        |  |      |         |        |   |   |         |       
|Net income                                    |                                                                                        |      | 3,058   |        |  |      | 3,170   |        |   |   | 5,216   |       
|Other comprehensive income (loss):            |                                                                                        |      |         |        |  |      |         |        |   |   |         |       
|                                              | - unrealized holding loss arising during the
    year on available for sale securities |      |         |       |  |      |         | (150   | ) |   |         | (300   | )
|                                              | - reclassification adjustment                                                          |      |         |       |  |      |         | (294   | ) |   |         | (533   | )
|                                              |                                                                                        |      |         |        |  |      |         |        |   |   |         |       
|Comprehensive income                          |                                                                                        | $    | 3,058   |        |  | $    | 2,726   |        |   | $ | 4,383   |       
|                                              |                                                                                        |      |         |        |  |      |         |        |   |   |         |       
|Basic net income per common share             |                                                                                        | $    | 0.42    |        |  | $    | 0.40    |        |   | $ | 0.57    |       
|                                              |                                                                                        |      |         |        |  |      |         |        |   |   |         |       
|Diluted net income per common share           |                                                                                        | $    | 0.41    |        |  | $    | 0.39    |        |   | $ | 0.57    |       
|                                              |                                                                                        |      |         |        |  |      |         |        |   |   |         |       

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

F-3



---



##### 



THE CRONOS GROUP

CONSOLIDATED BALANCE SHEETS

December 31, 2002 and 2001


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


|                                                                                                                                 |  |      |         |      |  |   |         | 
|-------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | 
|                                                                                                                                 |  | 2002 |         | 2001
|                                                                                                                                 |  |      |         |     
|Assets                                                                                                                           |  |      |         |      |  |   |         | 
|Cash and cash equivalents                                                                                                        |  | $    | 4,626   |      |  | $ | 4,914   | 
|Restricted cash                                                                                                                  |  |      | 493     |      |  |   | 452     | 
|Amounts due from lessees, net                                                                                                    |  |      | 22,580  |      |  |   | 22,825  | 
|Amounts receivable from container owners,
    including amounts due from related parties of $3,400 and $4,333,
    respectively  |  |      | 7,542   |      |  |   | 8,675   | 
|New container equipment for resale                                                                                               |  |      | 2,570   |      |  |   | 1,463   | 
|Net investment in direct financing leases,
    including amounts due within twelve months of $1,885 and $1,268,
    respectively |  |      | 7,912   |      |  |   | 7,306   | 
|Investment in unconsolidated affiliate                                                                                           |  |      | 3,603   |      |  |   |        | 
|Container equipment, net of accumulated
    depreciation of $91,726 and $81,162, respectively                                    |  |      | 136,926 |      |  |   | 150,440 | 
|Other equipment, net of accumulated depreciation
    of $10,354 and $11,986, respectively                                        |  |      | 513     |      |  |   | 375     | 
|Goodwill, net                                                                                                                    |  |      | 11,038  |      |  |   | 11,038  | 
|Other intangible assets, net                                                                                                     |  |      | 909     |      |  |   | 1,097   | 
|Other assets                                                                                                                     |  |      | 15,477  |      |  |   | 17,234  | 
|                                                                                                                                 |  |      |         |      |  |   |         | 
|Total assets                                                                                                                     |  | $    | 214,189 |      |  | $ | 225,819 | 
|                                                                                                                                 |  |      |         |      |  |   |         | 

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

F-4



---



##### 



THE CRONOS GROUP

CONSOLIDATED BALANCE SHEETS

December 31, 2002 and 2001


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


|                                                                                                                                              |  |      |         |      |  |   |         |  
|--------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                                                                                                                              |  | 2002 |         | 2001
|                                                                                                                                              |  |      |         |     
|Liabilities and shareholders
    equity                                                                                                      |  |      |         |      |  |   |         |  
|Amounts payable to container owners, including
    amounts payable to related parties of $8,243 and $7,966,
    respectively                  |  | $    | 18,583  |      |  | $ | 16,889  |  
|Amounts payable to container manufacturers                                                                                                    |  |      | 8,590   |      |  |   | 12,888  |  
|Direct operating expense payables and accruals                                                                                                |  |      | 5,071   |      |  |   | 7,171   |  
|Debt and capital lease obligations, including
    amounts due within twelve months of $13,086 and $12,819,
    respectively                   |  |      | 100,997 |      |  |   | 107,920 |  
|Income taxes                                                                                                                                  |  |      | 565     |      |  |   | 2,555   |  
|Deferred income taxes                                                                                                                         |  |      | 4,971   |      |  |   | 4,357   |  
|Deferred income and deferred acquisition fees                                                                                                 |  |      | 5,201   |      |  |   | 6,711   |  
|Other amounts payable and accrued expenses                                                                                                    |  |      | 6,005   |      |  |   | 5,849   |  
|                                                                                                                                              |  |      |         |      |  |   |         |  
|Total liabilities                                                                                                                             |  |      | 149,983 |      |  |   | 164,340 |  
|                                                                                                                                              |  |      |         |      |  |   |         |  
|Commitments and contingencies                                                                                                                 |  |      |         |      |  |   |         |  
|Shareholders equity                                                                                                                          |  |      |         |      |  |   |         |  
|Common shares, par value $2 per share (25,000,000
    shares authorized; shares issued and outstanding, 2002:
    7,372,080, 2001: 9,158,378) |  |      | 14,744  |      |  |   | 18,317  |  
|Additional paid-in capital                                                                                                                    |  |      | 47,125  |      |  |   | 49,846  |  
|Common shares held in treasury (2002: 12,000,
    2001: 1,793,798)                                                                            |  |      | (37     | )    |  |   | (6,000  | )
|Restricted retained earnings                                                                                                                  |  |      | 1,832   |      |  |   | 1,832   |  
|Retained earnings/(accumulated deficit)                                                                                                       |  |      | 542     |      |  |   | (2,516  | )
|                                                                                                                                              |  |      |         |      |  |   |         |  
|Total shareholders equity                                                                                                                    |  |      | 64,206  |      |  |   | 61,479  |  
|                                                                                                                                              |  |      |         |      |  |   |         |  
|Total liabilities and shareholders
    equity                                                                                                |  | $    | 214,189 |      |  | $ | 225,819 |  
|                                                                                                                                              |  |      |         |      |  |   |         |  

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

F-5



---



##### 



THE CRONOS GROUP

CONSOLIDATED STATEMENTS OF CASH
FLOWS

For the years ended December 31, 2002,
2001 and 2000


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


|                                                                                      |                                                                    |                             |         |        |       |      |         |        |        |   |        |        |        |  
|------------------------------------------------------------------------------------- | ------------------------------------------------------------------ | --------------------------- | ------- | ------ | ----- | ---- | ------- | ------ | ------ | - | ------ | ------ | ------ | -
|                                                                                      |                                                                    | 2002                        |         | 2001   |       | 2000
|                                                                                      |                                                                    |                             |         |        |       |     
|Cash flows from operating activities                                                  |                                                                    |                             |         |        |       |      |         |        |        |   |        |       
|Net income                                                                            |                                                                    | $                           | 3,058   |        |       | $    | 3,170   |        |        | $ | 5,216  |       
|Adjustments to reconcile net income to net cash
    provided by operating activities: |                                                                    |                             |         |        |       |      |         |        |        |   |        |       
|                                                                                      | - impairment losses                                                |                             |         |       |       |      |         | 4,000  |        |   |        |       |       
|                                                                                      | - depreciation and amortization                                    |                             |         | 15,487 |       |      |         | 15,791 |        |   |        | 16,055 |       
|                                                                                      | - income from recovery of related party loans                      |                             |         |       |       |      |         | (6,000 | )      |   |        |       |       
|                                                                                      | - decrease in unamortized acquisition fees                         |                             |         | (1,403 | )     |      |         | (1,647 | )      |   |        | (1,664 | )     
|                                                                                      | - provision for losses on accounts receivable                      |                             |         | 440    |       |      |         | 630    |        |   |        | 1,326  |       
|                                                                                      | - loss (gain) on disposal of fixed
    assets                      |                             |         | 146    |       |      |         | (94    | )      |   |        | (103   | )     
|                                                                                      | - gain on sale of investment securities                            |                             |         |       |       |      |         | (301   | )      |   |        | (550   | )     
|                                                                                      | - equity in earnings of affiliate                                  |                             |         | (306   | )     |      |         |       |        |   |        |       |       
|                                                                                      | - (decrease) increase in current and
    deferred income taxes     |                             |         | (1,376 | )     |      |         | (205   | )      |   |        | 59     |       
|                                                                                      | - (increase) decrease in new container
    equipment for resale    |                             |         | (1,107 | )     |      |         | 6,282  |        |   |        | (9,255 | )     
|                                                                                      | - decrease (increase) in amounts
    receivable:                   |                             |         |        |       |      |         |        |        |   |        |        |       
|                                                                                      |                                                                    | - Container Equity Programs |         |        | 933   |      |         |        | 1,532  |   |        |        | (8     | )
|                                                                                      |                                                                    | - unrelated parties         |         |        | 3,537 |      |         |        | 4,447  |   |        |        | (1,285 | )
|                                                                                      | - increase (decrease) in amounts
    payable and accrued expenses: |                             |         |        |       |      |         |        |        |   |        |        |       
|                                                                                      |                                                                    | - Container Equity Programs |         |        | 277   |      |         |        | (2,538 | ) |        |        | (1,787 | )
|                                                                                      |                                                                    | - unrelated parties         |         |        | (599  | )    |         |        | (5,952 | ) |        |        | 9,807  |  
|                                                                                      |                                                                    |                             |         |        |       |      |         |        |        |   |        |       
|Net cash provided by operating
    activities                                         |                                                                    |                             | 19,087  |        |       |      | 19,115  |        |        |   | 17,811 |       
|                                                                                      |                                                                    |                             |         |        |       |      |         |        |        |   |        |       
|Cash flows from investing activities                                                  |                                                                    |                             |         |        |       |      |         |        |        |   |        |       
|Purchase of container equipment                                                       |                                                                    |                             | (10,886 | )      |       |      | (22,324 | )      |        |   | (2,111 | )     
|Purchase of other equipment                                                           |                                                                    |                             | (269    | )      |       |      | (43     | )      |        |   | (65    | )     
|Investment in direct financing leases                                                 |                                                                    |                             | (1,372  | )      |       |      | (6,526  | )      |        |   |       |       
|Change in accrued equipment purchases                                                 |                                                                    |                             | (4,625  | )      |       |      |        |        |        |   |       |       
|Proceeds from sales of container equipment                                            |                                                                    |                             | 12,250  |        |       |      | 4,379   |        |        |   | 2,165  |       
|Dividends received from container equity programs                                     |                                                                    |                             | 1,375   |        |       |      |        |        |        |   |       |       
|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  |       
|                                                                                      |                                                                    |                             |         |        |       |      |         |        |        |   |        |       
|Net cash (used in) provided by investing
    activities                               |                                                                    |                             | (3,527  | )      |       |      | (24,030 | )      |        |   | 10,745 |       
|                                                                                      |                                                                    |                             |         |        |       |      |         |        |        |   |        |       

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

F-6



---



##### 



THE CRONOS GROUP

CONSOLIDATED STATEMENTS OF CASH
FLOWS

For the years ended December 31, 2002,
2001 and 2000


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


|                                                          |                                                                    |      |         |       |  |      |         |       |  |   |         |        | 
|--------------------------------------------------------- | ------------------------------------------------------------------ | ---- | ------- | ----- |  | ---- | ------- | ----- |  | - | ------- | ------ | 
|                                                          |                                                                    | 2002 |         | 2001  |  | 2000
|                                                          |                                                                    |      |         |       |  |     
|Cash flows from financing activities                      |                                                                    |      |         |       |  |      |         |       |  |   |         |       
|Proceeds from issuance of term debt                       |                                                                    |      | 17,919  |       |  |      | 62,114  |       |  |   |        |       
|Repayments of term debt and capital lease
    obligations |                                                                    |      | (33,689 | )     |  |      | (59,852 | )     |  |   | (29,238 | )     
|Shares repurchased                                        |                                                                    |      | (37     | )     |  |      |        |       |  |   |        |       
|Cash deposits (restricted)                                |                                                                    |      | (41     | )     |  |      | 966     |       |  |   | (1,418  | )     
|                                                          |                                                                    |      |         |       |  |      |         |       |  |   |         |       
|Net cash (used in) provided by financing
    activities   |                                                                    |      | (15,848 | )     |  |      | 3,228   |       |  |   | (30,656 | )     
|                                                          |                                                                    |      |         |       |  |      |         |       |  |   |         |       
|Net decrease in cash and cash
    equivalents             |                                                                    |      | (288    | )     |  |      | (1,687  | )     |  |   | (2,100  | )     
|Cash and cash equivalents at beginning of
    year        |                                                                    |      | 4,914   |       |  |      | 6,601   |       |  |   | 8,701   |       
|                                                          |                                                                    |      |         |       |  |      |         |       |  |   |         |       
|Cash and cash equivalents at end of
    year              |                                                                    | $    | 4,626   |       |  | $    | 4,914   |       |  | $ | 6,601   |       
|                                                          |                                                                    |      |         |       |  |      |         |       |  |   |         |       
|Supplementary disclosure of cash flow information:        |                                                                    |      |         |       |  |      |         |       |  |   |         |       
|Cash paid during the year for:                            |                                                                    |      |         |       |  |      |         |       |  |   |         |       
|                                                          | - interest                                                         |      | $       | 5,407 |  |      | $       | 8,178 |  |   | $       | 8,407  | 
|                                                          | - income taxes                                                     |      |         | 568   |  |      |         | 339   |  |   |         | 1,029  | 
|Cash received during the year for:                        |                                                                    |      |         |       |  |      |         |       |  |   |         |       
|                                                          | - dividends                                                        |      |         | 1,375 |  |      |         |      |  |   |         |       | 
|                                                          | - interest                                                         |      |         | 240   |  |      |         | 409   |  |   |         | 657    | 
|                                                          | - income taxes                                                     |      |         | 1,198 |  |      |         | 58    |  |   |         | 30     | 
|Non-cash items:                                           |                                                                    |      |         |       |  |      |         |       |  |   |         |       
|                                                          | - container equipment contributed to joint
    venture             |      |         | 4,672 |  |      |         |      |  |   |         |       | 
|                                                          | - container equipment acquired under capital
    leases            |      |         | 7,612 |  |      |         | 4,985 |  |   |         | 17,476 | 
|                                                          | - direct finance lease equipment acquired
    under capital leases |      |         | 1,235 |  |      |         | 1,018 |  |   |         |       | 
|                                                          | - other fixed assets acquired under capital
    leases             |      |         |      |  |      |         | 276   |  |   |         |       | 
|                                                          | - transfer to long-term ownership of
    container equipment       |      |         | 225   |  |      |         | 4,045 |  |   |         |       | 
|                                                          | - capital lease/ amounts payable to
    container manufacturers    |      |         |      |  |      |         |      |  |   |         | 1,163  | 

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

F-7



---



##### 



THE CRONOS GROUP

CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY

For the years ended December 31, 2002,
2001 and 2000


(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, 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 |  
|Net income                                                             |  |        |        |            |  |               |        |               |  |             |     |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   | 3,058   |   |  |   | 3,058  |  
|Retirement and cancellation of treasury shares                         |  |        | (3,588 | )          |  |               | (2,412 | )             |  |             |     |            |  |              |       |               |  |   | 6,000  |   |  |   |       |  |  |   |         |   |  |   |       |  
|Employee share grant                                                   |  |        | 15     |            |  |               | (15    | )             |  |             |     |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   |         |   |  |   |       |  
|Declaration of dividend                                                |  |        |        |            |  |               | (294   | )             |  |             |     |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   |         |   |  |   | (294   | )
|Purchase of treasury shares                                            |  |        |        |            |  |               |        |               |  |             |     |            |  |              |       |               |  |   | (37    | ) |  |   |       |  |  |   |         |   |  |   | (37    | )
|                                                                       |  |        |        |            |  |               |        |               |  |             |     |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   |         |   |  |   |        |  
|Balance, December 31, 2002                                             |  | $      | 14,744 |            |  | $             | 47,125 |               |  | $           |    |            |  | $            |      |               |  | $ | (37    | ) |  | $ | 1,832 |  |  | $ | 542     |   |  | $ | 64,206 |  
|                                                                       |  |        |        |            |  |               |        |               |  |             |     |            |  |              |       |               |  |   |        |   |  |   |       |  |  |   |         |   |  |   |        |  

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

F-8



---



##### 



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 worldwide 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 managed container owners
(Managed Container Owners) to manage the leasing of
their containers to ocean carriers. These Agreements have taken
two principal forms. Under the first principal form, the Company
has organized Container Equity Programs (Container Equity
Programs), where the Group has entered into two types of
arrangements. Firstly, the Group 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. Secondly, the Group
has a 50% equity investment in a joint venture container
purchase entity. A subsidiary of the Group manages the
containers held in the joint venture entity. Container Equity
Programs are considered to be related parties of the Group (see
Note 7).

Under the second principal 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 operates
without regard to ownership. The Group has discretion over which
ocean carriers, container manufacturers and suppliers of goods
and services with which it may deal. 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 subsidiary of
the Company which acts as general partner, thereby terminating
the Agreement with the Group. For the joint venture arrangement,
the Agreement with the Group may be terminated should an event
of default, as stipulated in the Agreement, occur. 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 2002,
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).

F-9



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


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.

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 a residual interest in
leased containers (see Note 10 herein), the calculation of
bad debt allowances, the annual impairment testing of intangible
assets with indefinite lives and the carrying value of equipment
including estimates relating to 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. Gross lease revenue is recognized on the accrual basis
based on the terms of the contractual agreement with the ocean
carrier.

d)  Equipment trading revenue and
expenses

Equipment trading revenue represents revenue
earned from the sale of equipment to third-parties. Equipment
trading expenses are the costs 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 the agreement. Equipment trading
revenue and expenses are recognized on the accrual basis based
on the terms of the respective contractual agreements.

e)  Commissions, fees and other
operating income

This comprises acquisition fees, income on direct
financing leases, fees earned in connection with equipment
consultancy and design services, license fees earned in
connection with the patented Cellular

F-10



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


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. Licence fees and fees earned in connection with
equipment consultancy and design services are recognized on the
accrual basis based on the terms of the contractual 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
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:

|                                             |                                       |      |           |        |  |      |           |        |  |   |           |        | 
|-------------------------------------------- | ------------------------------------- | ---- | --------- | ------ |  | ---- | --------- | ------ |  | - | --------- | ------ | 
|                                             |                                       | 2002 |           | 2001   |  | 2000
|                                             |                                       |      |           |        |  |     
|Net income available for common shareholders |                                       | $    | 3,058     |        |  | $    | 3,170     |        |  | $ | 5,216     |       
|                                             |                                       |      |           |        |  |      |           |        |  |   |           |       
|Average outstanding shares of common stock   |                                       |      | 7,364,850 |        |  |      | 8,001,089 |        |  |   | 9,158,378 |       
|Dilutive effect of:                          |                                       |      |           |        |  |      |           |        |  |   |           |       
|                                             | - 1998 stock option plan              |      |           | 17     |  |      |           | 21,451 |  |   |           | 31,358 | 
|                                             | - Warrants                            |      |           |       |  |      |           | 12,929 |  |   |           | 19,473 | 
|                                             | - 1999 stock option plan              |      |           |       |  |      |           | 2,510  |  |   |           | 5,153  | 
|                                             | - Non employee directors equity plan |      |           | 60,517 |  |      |           | 14,056 |  |   |           |       | 
|                                             |                                       |      |           |        |  |      |           |        |  |   |           |       
|Common shares and common share equivalents   |                                       |      | 7,425,384 |        |  |      | 8,052,035 |        |  |   | 9,214,362 |       
|                                             |                                       |      |           |        |  |      |           |        |  |   |           |       
|Basic net income per share                   |                                       | $    | 0.42      |        |  | $    | 0.40      |        |  | $ | 0.57      |       
|                                             |                                       |      |           |        |  |      |           |        |  |   |           |       
|Diluted net income per share                 |                                       | $    | 0.41      |        |  | $    | 0.39      |        |  | $ | 0.57      |       
|                                             |                                       |      |           |        |  |      |           |        |  |   |           |       

h)  Cash
equivalents

Cash equivalents are highly liquid commercial
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 deposit limits. No losses have been
experienced in

F-11



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


such accounts and management believes it is not
exposed to any significant credit risk. The Group places its
cash and 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.

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 income 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.

F-12



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


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.  Investments in Container Equity
Programs

Investments in Container Equity Programs are
accounted for using the equity method and take two forms:

Under the first form, investments comprise the
Groups general and limited partner interests in US Limited
Partnerships, in which a subsidiary company, Cronos Capital
Corp., acts as a general partner.

Under the second form the Group has a 50% equity
investment in a joint venture container purchase entity. The
joint venture entity is a bankruptcy-remote, special purpose
entity organized under the laws of Bermuda.

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 for leasehold
improvements is recorded on a straight-line basis over the lower
of the useful life or the lease term. Depreciation for other
equipment is recorded on a straight-line basis over a life of
four to seven years.

o)  Restricted cash

Under the terms of a loan facility, the Group is
required to hold a minimum balance equivalent to two months of
interest due under the facility on deposit in a restricted cash
account. The 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 was amortized
over a period of 40 years and patents were amortized on a
straight-line basis over their estimated useful lives, to a
residual of zero. On January 1, 2002, the Group adopted
SFAS No. 142 (SFAS 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. As a result of the
implementation of SFAS 142, annual goodwill amortization
expense declined by $373. Patents will continue to be amortized
on a straight-line basis over their estimated useful lives, to a
residual of zero.

F-13



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


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 statements of income.

r)  Stock-based
compensation

The Group has adopted disclosure requirements
under SFAS No. 123 (SFAS 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. In accordance with SFAS 123, the Company
discloses the fair value of its stock options which is
calculated based on the Black Scholes model.

If the Stock Options 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:

|                              |                                                            |      |   |       |   |      |   |       |   |  |   |       |  
|----------------------------- | ---------------------------------------------------------- | ---- | - | ----- | - | ---- | - | ----- | - |  | - | ----- | -
|                              |                                                            | 2002 |   | 2001  |   | 2000
|                              |                                                            |      |   |       |   |     
|Net income:                   |                                                            |      |   |       |   |      |   |       |   |  |   |      
|                              | - as reported                                              |      | $ | 3,058 |   |      | $ | 3,170 |   |  | $ | 5,216 |  
|                              | - stock-based compensation expense, net of
    tax effects |      |   | (235  | ) |      |   | (365  | ) |  |   | (309  | )
|                              |                                                            |      |   |       |   |      |   |       |   |  |   |      
|                              | - pro forma                                                |      | $ | 2,823 |   |      | $ | 2,805 |   |  | $ | 4,907 |  
|                              |                                                            |      |   |       |   |      |   |       |   |  |   |      
|Basic net income per share:   |                                                            |      |   |       |   |      |   |       |   |  |   |      
|                              | - as reported                                              |      | $ | 0.42  |   |      | $ | 0.40  |   |  | $ | 0.57  |  
|                              | - pro forma                                                |      | $ | 0.38  |   |      | $ | 0.35  |   |  | $ | 0.54  |  
|Diluted net income per share: |                                                            |      |   |       |   |      |   |       |   |  |   |      
|                              | - as reported                                              |      | $ | 0.41  |   |      | $ | 0.39  |   |  | $ | 0.57  |  
|                              | - pro forma                                                |      | $ | 0.38  |   |      | $ | 0.35  |   |  | $ | 0.53  |  

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. 144
(SFAS 144), Accounting for the Impairment
or Disposal of Long-Lived Assets. 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.

F-14



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


t)  New
pronouncements

In June 2002, the Financial Accounting Standards
Board issued SFAS No. 146 (SFAS 146),
Accounting for Costs Associated with Exit or Disposals
Activities. The Company does not consider the provisions
of SFAS 146 to have any effect on the results from
operations presented herein.

In December 2002, the Financial Accounting
Standards Board issued SFAS No. 148
(SFAS 148), Accounting for Stock-Based
Compensation  Transition and Disclosure. SFAS
148 provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for
stock-based compensation. In addition, SFAS 148 amends the
disclosure requirements of SFAS 123 to require prominent
disclosures in both annual and interim financial statements of
the method of accounting for stock-based employee compensation
and the method used to report results. The Company has already
adopted the disclosure requirements under SFAS 123 (see
discussion in r)above), and will adopt the interim
disclosure requirements beginning in the first quarter of 2003.

In November 2002, the Financial Accounting
Standards Board issued Interpretation No. 45
(FIN 45), Guarantors Accounting and
Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. FIN 45 requires
(i) that for financial statements issued after the issuance
of FIN 45, certain disclosures be made by the guarantor in
its financial statements and (ii) that for guarantees
issued after December 31, 2002 a guarantor recognize, at
the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. Accounting
for guarantees issued prior to the initial application of
FIN 45 shall not be revised or restated to reflect the
recognition or measurement provisions of FIN 45.

In January 2003, the Financial Accounting
Standards Board issued Interpretation No. 46
(FIN 46), Consolidation of Variable
Interest Entities. The Group has not yet completed the
process of identifying whether it has variable interests in any
variable interest entities. The Group is evaluating the impact
that will result from adopting FIN 46 and is therefore
unable to disclose the impact that adopting FIN 46 will
have on its financial position and results of operation when
such statement is adopted.

F-15



---



##### 



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     |   |            |        |        
|                                                   |                                                    | Container |        | Managed   |   |            |        |        
|                                                   |                                                    | Equity    |        | Container |   | Owned      |        |        
|                                                   |                                                    | Programs  |        | Owners    |   | Containers |        | Total  
|                                                   |                                                    |           |        |           |   |            |        |        
|Year ended December 31, 2002                       |                                                    |           |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Items directly attributable to operating segments: |                                                    |           |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|                                                   | - gross lease revenue                              |           | $      | 29,925    |   |            | $      | 50,890  |   |   | $       | 32,828  |   |   | $       | 113,643 |  
|                                                   | - direct operating expenses                        |           |        | (8,130    | ) |            |        | (13,583 | ) |   |         | (5,080  | ) |   |         | (26,793 | )
|                                                   |                                                    |           |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|                                                   | - net lease revenue                                |           |        | 21,795    |   |            |        | 37,307  |   |   |         | 27,748  |   |   |         | 86,850  |  
|                                                   | - equipment trading revenue                        |           |        |          |   |            |        |        |   |   |         | 1,045   |   |   |         | 1,045   |  
|                                                   | - payments to Managed Container Owners             |           |        | (18,214   | ) |            |        | (36,906 | ) |   |         |        |   |   |         | (55,120 | )
|                                                   | - commissions, fees and other operating
    income |           |        | 1,240     |   |            |        | 840     |   |   |         | 2,310   |   |   |         | 4,390   |  
|                                                   | - equity in earnings of affiliate                  |           |        | 306       |   |            |        |        |   |   |         |        |   |   |         | 306     |  
|                                                   | - equipment trading expenses                       |           |        |          |   |            |        |        |   |   |         | (969    | ) |   |         | (969    | )
|                                                   | - container depreciation                           |           |        |          |   |            |        |        |   |   |         | (15,169 | ) |   |         | (15,169 | )
|                                                   | - container interest expense                       |           |        |          |   |            |        |        |   |   |         | (6,025  | ) |   |         | (6,025  | )
|                                                   |                                                    |           |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Operating profit before indirect items             |                                                    |           | 5,127  |           |   |            | 1,241  |         |   |   | 8,940   |         |   |   | 15,308  |        
|                                                  
|Indirect allocations:                              |                                                    |           |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|                                                   | - interest income                                  |           |        | 7         |   |            |        | 180     |   |   |         | 120     |   |   |         | 307     |  
|                                                   | - depreciation                                     |           |        | (34       | ) |            |        | (58     | ) |   |         | (38     | ) |   |         | (130    | )
|                                                   | - interest expense                                 |           |        | (33       | ) |            |        | (56     | ) |   |         | (36     | ) |   |         | (125    | )
|                                                   | - selling, general and administrative
    expenses |           |        | (4,238    | ) |            |        | (4,859  | ) |   |         | (3,132  | ) |   |         | (12,229 | )
|                                                   |                                                    |           |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Operating profit (loss)                            |                                                    | $         | 829    |           |   | $          | (3,552 | )       |   | $ | 5,854   |         |   | $ | 3,131   |        
|                                                   |                                                    |           |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Segment assets                                     |                                                    | $         | 13,436 |           |   | $          | 21,034 |         |   | $ | 153,748 |         |   | $ | 188,218 |        
|                                                   |                                                    |           |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Expenditure for segment assets                     |                                                    | $         | 71     |           |   | $          | 120    |         |   | $ | 18,801  |         |   | $ | 18,992  |        
|                                                   |                                                    |           |        |           |   |            |        |         |   |   |         |         |   |   |         |        

Reconciliation of operating loss for reportable
segments to income before income taxes:

|                                                             |  |   |        |  
|------------------------------------------------------------ |  | - | ------ | -
|Operating profit                                             |  | $ | 3,131  |  
|Unallocated selling, general and administrative
    expenses |  |   | (2,043 | )
|Amortization of intangibles                                  |  |   | (188   | )
|                                                             |  |   |        |  
|Income before income taxes                                   |  | $ | 900    |  
|                                                             |  |   |        |  

Reconciliation of assets for reportable segments
to total assets:

|                                     |  |   |         | 
|------------------------------------ |  | - | ------- | 
|Total assets for reportable segments |  | $ | 188,218 | 
|General corporate assets             |  |   | 25,971  | 
|                                     |  |   |         | 
|Total assets                         |  | $ | 214,189 | 
|                                     |  |   |         | 

F-16



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


|                                                   |                                                    |           |        |           |   |            |        |         |   |   |         |         |   |   |         |         |  
|-------------------------------------------------- | -------------------------------------------------- | --------- | ------ | --------- | - | ---------- | ------ | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                   |                                                    |           |        | Other     |   |            |        |        
|                                                   |                                                    | Container |        | Managed   |   |            |        |        
|                                                   |                                                    | Equity    |        | Container |   | Owned      |        |        
|                                                   |                                                    | Programs  |        | 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 |           |   | $          | 21,372 |         |   | $ | 165,603 |         |   | $ | 197,564 |        
|                                                   |                                                    |           |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Expenditure for segment assets                     |                                                    | $         | 89     |           |   | $          | 145    |         |   | $ | 31,439  |         |   | $ | 31,673  |        
|                                                   |                                                    |           |        |           |   |            |        |         |   |   |         |         |   |   |         |        

Reconciliation of operating profit for reportable
segments to income before income 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 income taxes                                   |  | $ | 3,248  |  
|                                                             |  |   |        |  

Reconciliation of assets for reportable segments
to total assets:

|                                     |  |   |         | 
|------------------------------------ |  | - | ------- | 
|Total assets for reportable segments |  | $ | 197,564 | 
|General corporate assets             |  |   | 28,255  | 
|                                     |  |   |         | 
|Total assets                         |  | $ | 225,819 | 
|                                     |  |   |         | 

F-17



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


|                                                   |                                                    |           |        |           |   |            |        |         |   |   |         |         |   |   |         |         |  
|-------------------------------------------------- | -------------------------------------------------- | --------- | ------ | --------- | - | ---------- | ------ | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                   |                                                    |           |        | Other     |   |            |        |        
|                                                   |                                                    | Container |        | Managed   |   |            |        |        
|                                                   |                                                    | Equity    |        | Container |   | Owned      |        |        
|                                                   |                                                    | Programs  |        | 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                        |           |        | (9,640    | ) |            |        | (11,090 | ) |   |         | (5,896  | ) |   |         | (26,626 | )
|                                                   |                                                    |           |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|                                                   | - net lease revenue                                |           |        | 33,648    |   |            |        | 50,697  |   |   |         | 26,634  |   |   |         | 110,979 |  
|                                                   | - payments to Managed Container Owners             |           |        | (26,696   | ) |            |        | (44,963 | ) |   |         |        |   |   |         | (71,659 | )
|                                                   | - commissions, fees and other operating
    income |           |        | 1,318     |   |            |        | 1,701   |   |   |         | 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 |           |   | $          | 25,336 |         |   | $ | 159,766 |         |   | $ | 199,895 |        
|                                                   |                                                    |           |        |           |   |            |        |         |   |   |         |         |   |   |         |        
|Expenditure for segment assets                     |                                                    | $         | 20     |           |   | $          | 29     |         |   | $ | 19,603  |         |   | $ | 19,652  |        
|                                                   |                                                    |           |        |           |   |            |        |         |   |   |         |         |   |   |         |        

Reconciliation of operating profit for reportable
segments to income before income 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 income taxes                                   |  | $ | 5,852  |  
|                                                             |  |   |        |  

Reconciliation of assets for reportable segments
to total assets:

|                                     |  |   |         | 
|------------------------------------ |  | - | ------- | 
|Total assets for reportable segments |  | $ | 199,895 | 
|General corporate assets             |  |   | 30,998  | 
|                                     |  |   |         | 
|Total assets                         |  | $ | 230,893 | 
|                                     |  |   |         | 

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 Container Equity Programs 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

F-18



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


reported. A significant portion of the selling,
general and administrative expenses relating to the operation of
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:

|                        |  |      |         |      |  |      |         |  |  |   |         | 
|----------------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                        |  | 2002 |         | 2001 |  | 2000
|                        |  |      |         |      |  |     
|Dry cargo containers    |  | $    | 78,760  |      |  | $    | 84,921  |  |  | $ | 99,853  | 
|Refrigerated containers |  |      | 21,293  |      |  |      | 22,422  |  |  |   | 24,899  | 
|Tanks                   |  |      | 6,123   |      |  |      | 5,908   |  |  |   | 6,481   | 
|Dry freight specials    |  |      | 7,467   |      |  |      | 7,094   |  |  |   | 6,372   | 
|                        |  |      |         |      |  |      |         |  |  |   |         | 
|Total                   |  | $    | 113,643 |      |  | $    | 120,345 |  |  | $ | 137,605 | 
|                        |  |      |         |      |  |      |         |  |  |   |         | 

No single customer accounted for 10% or more of
total revenues in the years ended December 31, 2002, 2001
and 2000, respectively.

Lease revenue is deemed to be earned based on the
physical location of the containers while on lease. 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 (benefit) provision for income taxes
comprises:

|                                           |             |      |        |        |   |      |      |       |   |   |     |      |  
|------------------------------------------ | ----------- | ---- | ------ | ------ | - | ---- | ---- | ----- | - | - | --- | ---- | -
|                                           |             | 2002 |        | 2001   |   | 2000
|                                           |             |      |        |        |   |     
|Current taxes:                             |             |      |        |        |   |      |      |       |   |   |     |     
|                                           | Federal     |      | $      | (611   | ) |      | $    |      |   |   | $   | (17  | )
|                                           | Foreign     |      |        | (1,690 | ) |      |      | (316  | ) |   |     | 717  |  
|                                           |             |      |        |        |   |      |      |       |   |   |     |     
|                                           |             |      | (2,301 | )      |   |      | (316 | )     |   |   | 700 |     
|                                           |             |      |        |        |   |      |      |       |   |   |     |     
|Deferred taxes:                            |             |      |        |        |   |      |      |       |   |   |     |     
|                                           | Federal     |      |        | (425   | ) |      |      | (843  | ) |   |     | (729 | )
|                                           | State       |      |        | 142    |   |      |      | (234  | ) |   |     | (135 | )
|                                           | Withholding |      |        |       |   |      |      | 145   |   |   |     | 11   |  
|                                           | Foreign     |      |        | 426    |   |      |      | 1,326 |   |   |     | 789  |  
|                                           |             |      |        |        |   |      |      |       |   |   |     |     
|                                           |             |      | 143    |        |   |      | 394  |       |   |   | (64 | )   
|                                           |             |      |        |        |   |      |      |       |   |   |     |     
|Total provision (benefit) for income taxes |             | $    | (2,158 | )      |   | $    | 78   |       |   | $ | 636 |     
|                                           |             |      |        |        |   |      |      |       |   |   |     |     

F-19



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


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

|                                                        |  |      |        |      |  |      |        |   |  |   |        |  
|------------------------------------------------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|                                                        |  | 2002 |        | 2001 |  | 2000
|                                                        |  |      |        |      |  |     
|US Federal provision                                    |  | $    | 307    |      |  | $    | 1,104  |   |  | $ | 1,989  |  
|Foreign income not subject to US corporate taxes        |  |      | (1,946 | )    |  |      | (2,429 | ) |  |   | (2,568 | )
|State taxes (net of federal tax benefit)                |  |      | (145   | )    |  |      | (234   | ) |  |   | (102   | )
|Foreign corporate taxes                                 |  |      | (1,299 | )    |  |      | 1,010  |   |  |   | 1,507  |  
|Tax on unremitted retained earnings of
    subsidiaries |  |      |       |      |  |      | 145    |   |  |   | 11     |  
|Valuation allowance                                     |  |      | 1,358  |      |  |      | 371    |   |  |   | (112   | )
|Other                                                   |  |      | (433   | )    |  |      | 111    |   |  |   | (89    | )
|                                                        |  |      |        |      |  |      |        |   |  |   |        |  
|Actual tax (benefit) provision                          |  | $    | (2,158 | )    |  | $    | 78     |   |  | $ | 636    |  
|                                                        |  |      |        |      |  |      |        |   |  |   |        |  

Income before income taxes comprises:

|              |  |      |        |      |  |      |        |   |  |   |        |  
|------------- |  | ---- | ------ | ---- |  | ---- | ------ | - |  | - | ------ | -
|              |  | 2002 |        | 2001 |  | 2000
|              |  |      |        |      |  |     
|United States |  | $    | (4,822 | )    |  | $    | (3,897 | ) |  | $ | (1,702 | )
|Foreign       |  |      | 5,722  |      |  |      | 7,145  |   |  |   | 7,554  |  
|              |  |      |        |      |  |      |        |   |  |   |        |  
|              |  | $    | 900    |      |  | $    | 3,248  |   |  | $ | 5,852  |  
|              |  |      |        |      |  |      |        |   |  |   |        |  

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

|                                                                              |  |      |        |      |  |   |       | 
|----------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | - | ----- | 
|                                                                              |  | 2002 |        | 2001
|                                                                              |  |      |        |     
|Assets                                                                        |  |      |        |      |  |   |       | 
|Acquisition fees                                                              |  | $    | 1,036  |      |  | $ | 1,506 | 
|Losses carried forward                                                        |  |      | 2,432  |      |  |   | 1,452 | 
|Disallowed interest expense carried forward                                   |  |      | 1,491  |      |  |   | 1,491 | 
|Alternative minimum tax credit                                                |  |      |       |      |  |   | 57    | 
|Other                                                                         |  |      | 372    |      |  |   | 283   | 
|                                                                              |  |      |        |      |  |   |       | 
|Total deferred income tax assets                                              |  |      | 5,331  |      |  |   | 4,789 | 
|                                                                              |  |      |        |      |  |   |       | 
|Liabilities                                                                   |  |      |        |      |  |   |       | 
|Depreciation                                                                  |  |      | 6,603  |      |  |   | 6,465 | 
|Partnership income taxable in different periods
    for book and tax purposes |  |      | 776    |      |  |   | 1,116 | 
|Unremitted retained earnings of subsidiaries                                  |  |      | 422    |      |  |   | 422   | 
|Valuation allowance                                                           |  |      | 2,501  |      |  |   | 1,143 | 
|                                                                              |  |      |        |      |  |   |       | 
|Total deferred income tax liabilities                                         |  |      | 10,302 |      |  |   | 9,146 | 
|                                                                              |  |      |        |      |  |   |       | 
|Net deferred income tax liabilities                                           |  | $    | 4,971  |      |  | $ | 4,357 | 
|                                                                              |  |      |        |      |  |   |       | 

F-20



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


Tax losses have arisen in certain US entities. As
of December 31, 2002, the deferred tax asset associated
with these losses carried forward will expire as follows:

|                    |  |   |       | 
|------------------- |  | - | ----- | 
|2002                |  | $ | 48    | 
|2003                |  |   | 130   | 
|2004                |  |   | 69    | 
|2005                |  |   | 41    | 
|2006                |  |   | 80    | 
|2007                |  |   | 34    | 
|2008 and thereafter |  |   | 2,021 | 
|                    |  |   |       | 
|Total               |  | $ | 2,423 | 
|                    |  |   |       | 

At December 31, 2002, the Group had net
operating loss carryforwards available of approximately $5,830,
$4,945 and $- 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.

4   Amounts due from
lessees

a)  Lease rentals

As of December 31, 2002, the minimum lease
rentals receivable in future years under term operating leases
were:

|                    |  |   |        | 
|------------------- |  | - | ------ | 
|2003                |  | $ | 36,429 | 
|2004                |  |   | 27,704 | 
|2005                |  |   | 17,963 | 
|2006                |  |   | 11,033 | 
|2007                |  |   | 3,038  | 
|2008 and thereafter |  |   | 464    | 
|                    |  |   |        | 
|Total               |  | $ | 96,631 | 
|                    |  |   |        | 

Contingent rentals approximated $65,000, $82,000,
and $103,000 of gross lease revenue, respectively, in the years
ended December 31, 2002, 2001 and 2000, respectively.

F-21



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


b)  Allowance for doubtful
accounts

The activity in the allowance for doubtful
accounts was:

|                                |  |      |       |      |  |      |       |   |  |   |        |  
|------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- | - |  | - | ------ | -
|                                |  | 2002 |       | 2001 |  | 2000
|                                |  |      |       |      |  |     
|Beginning of year               |  | $    | 2,601 |      |  | $    | 2,765 |   |  | $ | 3,569  |  
|Provision for doubtful accounts |  |      | 440   |      |  |      | 630   |   |  |   | 1,326  |  
|Write-offs, net of recoveries   |  |      | (978  | )    |  |      | (794  | ) |  |   | (2,130 | )
|                                |  |      |       |      |  |      |       |   |  |   |        |  
|End of year                     |  | $    | 2,063 |      |  | $    | 2,601 |   |  | $ | 2,765  |  
|                                |  |      |       |      |  |      |       |   |  |   |        |  

5   New container equipment for
resale

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

|                                                              |                                          |      |        |        |   |      |        |        |   |   |        |         |  
|------------------------------------------------------------- | ---------------------------------------- | ---- | ------ | ------ | - | ---- | ------ | ------ | - | - | ------ | ------- | -
|                                                              |                                          | 2002 |        | 2001   |   | 2000
|                                                              |                                          |      |        |        |   |     
|Beginning of year                                             |                                          | $    | 1,463  |        |   | $    | 11,790 |        |   | $ | 2,535  |        
|Container purchases                                           |                                          |      | 11,920 |        |   |      | 8,947  |        |   |   | 45,592 |        
|Container disposals:                                          |                                          |      |        |        |   |      |        |        |   |   |        |        
|                                                              | - sold to Container Equity Programs      |      |        | (9,062 | ) |      |        | (18    | ) |   |        | (6,425  | )
|                                                              | - sold to Other Managed Container Owners |      |        |       |   |      |        | (7,451 | ) |   |        | (26,833 | )
|                                                              | - sold to other parties                  |      |        | (1,677 | ) |      |        | (4,942 | ) |   |        |        |  
|Transferred to net investment in direct financing
    leases  |                                          |      |       |        |   |      | (932   | )      |   |   |       |        
|Transferred to long-term ownership of container
    equipment |                                          |      | (74    | )      |   |      | (5,931 | )      |   |   | (3,079 | )      
|                                                              |                                          |      |        |        |   |      |        |        |   |   |        |        
|End of year                                                   |                                          | $    | 2,570  |        |   | $    | 1,463  |        |   | $ | 11,790 |        
|                                                              |                                          |      |        |        |   |      |        |        |   |   |        |        

As part of organizing Container Equity Programs,
the Group purchases containers for resale to these programs.
These transactions were entered into on normal commercial terms.

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, 2001  |                       | $           | 7,306 |              |       | $              | 3,009 |       |       | $ | 10,315 |      
|                   |                       |             |       |              |       |                |       |       |       |   |        |      
|December 31, 2002: |                       |             |       |              |       |                |       |       |       |   |        |      
|                   | - 2003                |             |       | 1,885        |       |                |       | 1,180 |       |   |        | 3,065 |       
|                   | - 2004                |             |       | 2,042        |       |                |       | 755   |       |   |        | 2,797 |       
|                   | - 2005                |             |       | 1,495        |       |                |       | 487   |       |   |        | 1,982 |       
|                   | - 2006                |             |       | 1,409        |       |                |       | 258   |       |   |        | 1,667 |       
|                   | - 2007                |             |       | 563          |       |                |       | 106   |       |   |        | 669   |       
|                   | - 2008 and thereafter |             |       | 518          |       |                |       | 33    |       |   |        | 551   |       
|                   |                       |             |       |              |       |                |       |       |       |   |        |      
|                   |                       | Total       |       | $            | 7,912 |                |       | $     | 2,819 |   |        | $     | 10,731 | 
|                   |                       |             |       |              |       |                |       |       |       |   |        |      

F-22



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


7   Investments, including
investments in related parties

Investments comprise:

|                                       |  |      |       |      |  |   |   | 
|-------------------------------------- |  | ---- | ----- | ---- |  | - | - | 
|                                       |  | 2002 |       | 2001
|                                       |  |      |       |     
|Investment in unconsolidated affiliate |  | $    | 3,603 |      |  | $ |  | 
|                                       |  |      |       |      |  |   |   | 

i.   Investment in Container
Equity Programs

Investments in Container Equity Programs take two
forms:

Under the first form, the investments comprise
interests as a general partner and as a limited partner in eight
US Limited Partnerships. These general and limited partner
investments are accounted for using the equity method. At
December 31, 2002 and 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
$1,749 and $853, respectively. For these partnerships, the net
balance is included in amounts payable to container owners.

Under the second form, the Group has a 50% equity
investment in CF Leasing Ltd., a joint venture container
purchase entity. The joint venture entity is a
bankruptcy-remote, special purpose entity organized under the
laws of Bermuda and is accounted for using the equity method.
For segment reporting, the investment in unconsolidated
affiliate is included in Container Equity Programs. At
December 31, 2002, the joint venture had total assets of
$29,560 and total liabilities of $22,354. During the period from
September 18, 2002 (date of inception) to December 31,
2002, the joint venture reported net income of $611. During
2002, Cronos received a distribution of $1,125 representing a
repayment of excess capital at the inception of the joint
venture together with a subsequent distribution of $250 from
earnings.

The activity in the investment in unconsolidated
affiliate was:

|                                          |  |      |        |  
|----------------------------------------- |  | ---- | ------ | -
|                                          |  | 2002
|                                          |  |     
|Beginning of year                         |  | $    |       |  
|Investment in joint venture               |  |      | 4,672  |  
|Equity in earnings of affiliate           |  |      | 306    |  
|Distributions received from joint venture |  |      | (1,375 | )
|                                          |  |      |        |  
|End of year                               |  | $    | 3,603  |  
|                                          |  |      |        |  

ii.  Investment
Securities

During 2000, the Group recorded a gain of $3,170
resulting from the sale of shares in Aegon N.V. The shares were
previously held in two escrow accounts, pending final
determination of post-closing reports and adjustments, following
the acquisition by Aegon of Transamerica Corporation during
1999. In addition, the Group recorded a gain of $461 in
connection with an interim settlement of the escrow subject to
the terms of a 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.

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.

F-23



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


8       Container
equipment

The activity in container equipment for the years
ended December 31, 2002 and 2001, was:

|                                                                |  |   |         |  
|--------------------------------------------------------------- |  | - | ------- | -
|Cost                                                            |  |   |         |  
|Balance, December 31, 2000                                      |  | $ | 219,525 |  
|Additions                                                       |  |   | 31,354  |  
|Disposals                                                       |  |   | (17,277 | )
|Impairment loss                                                 |  |   | (2,000  | )
|                                                                |  |   |         |  
|Balance, December 31, 2001                                      |  |   | 231,602 |  
|Additions                                                       |  |   | 18,723  |  
|Disposals                                                       |  |   | (14,126 | )
|Container equipment contributed to unconsolidated
    affiliate |  |   | (7,547  | )
|                                                                |  |   |         |  
|Balance, December 31, 2002                                      |  | $ | 228,652 |  
|                                                                |  |   |         |  
|Accumulated depreciation                                        |  |   |         |  
|Balance, December 31, 2000                                      |  | $ | 78,774  |  
|Depreciation expense                                            |  |   | 14,459  |  
|Disposals                                                       |  |   | (12,071 | )
|                                                                |  |   |         |  
|Balance, December 31, 2001                                      |  |   | 81,162  |  
|Depreciation expense                                            |  |   | 15,169  |  
|Disposals                                                       |  |   | (1,730  | )
|Container equipment contributed to unconsolidated
    affiliate |  |   | (2,875  | )
|                                                                |  |   |         |  
|Balance, December 31, 2002                                      |  | $ | 91,726  |  
|                                                                |  |   |         |  
|Book value                                                      |  |   |         |  
|December 31, 2002                                               |  | $ | 136,926 |  
|                                                                |  |   |         |  
|December 31, 2001                                               |  | $ | 150,440 |  
|                                                                |  |   |         |  

Depreciation expense in 2000 was $14,122.



| |                
| | ---------------
| | 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.

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 most of the countries that are members of the European Union.

Several of the major shipping lines that lease
from Cronos and other leasing companies made a commitment in
2001 to eliminate containers with the R12 refrigerant gas from
their fleets. Over the course of 2001, these factors together
with the deteriorating economic environment resulted in a very
slow leasing market for R12 equipment. In addition, it was
forecast that residual prices for R12 containers would decrease
as equipment was returned.

F-24



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


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. In accordance with SFAS 144, the containers that
remained unsold at June 2002, were reclassified from other
assets to container equipment in the third quarter of 2002. At
December 31, 2002, 107 assets remained unsold.

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.

9       Intangible
assets

The activity in the intangible assets was:

|                           |  |          |        |         |  |       |       |  |  |   |        | 
|-------------------------- |  | -------- | ------ | ------- |  | ----- | ----- |  |  | - | ------ | 
|                           |  | Goodwill |        | Patents |  | Total
|                           |  |          |        |         |  |      
|Cost                       |  |          |        |         |  |       |       |  |  |   |        | 
|Balance, December 31, 2000 |  | $        | 16,231 |         |  | $     | 2,096 |  |  | $ | 18,327 | 
|Additions                  |  |          |       |         |  |       |      |  |  |   |       | 
|                           |  |          |        |         |  |       |       |  |  |   |        | 
|Balance, December 31, 2001 |  |          | 16,231 |         |  |       | 2,096 |  |  |   | 18,327 | 
|Additions                  |  |          |       |         |  |       |      |  |  |   |       | 
|                           |  |          |        |         |  |       |       |  |  |   |        | 
|Balance, December 31, 2002 |  | $        | 16,231 |         |  | $     | 2,096 |  |  | $ | 18,327 | 
|                           |  |          |        |         |  |       |       |  |  |   |        | 
|Accumulated amortization   |  |          |        |         |  |       |       |  |  |   |        | 
|Balance, December 31, 2000 |  | $        | 4,820  |         |  | $     | 812   |  |  | $ | 5,632  | 
|Amortization expense       |  |          | 373    |         |  |       | 187   |  |  |   | 560    | 
|                           |  |          |        |         |  |       |       |  |  |   |        | 
|Balance, December 31, 2001 |  |          | 5,193  |         |  |       | 999   |  |  |   | 6,192  | 
|Amortization expense       |  |          |       |         |  |       | 188   |  |  |   | 188    | 
|                           |  |          |        |         |  |       |       |  |  |   |        | 
|Balance, December 31, 2002 |  | $        | 5,193  |         |  | $     | 1,187 |  |  | $ | 6,380  | 
|                           |  |          |        |         |  |       |       |  |  |   |        | 
|Book value                 |  |          |        |         |  |       |       |  |  |   |        | 
|December 31, 2002          |  | $        | 11,038 |         |  | $     | 909   |  |  | $ | 11,947 | 
|                           |  |          |        |         |  |       |       |  |  |   |        | 
|December 31, 2001          |  | $        | 11,038 |         |  | $     | 1,097 |  |  | $ | 12,135 | 
|                           |  |          |        |         |  |       |       |  |  |   |        | 

The amortization expense in 2000 was $710.

i.   Goodwill

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

F-25



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


ii.   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 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.

In accordance with SFAS 142, patents are
amortized on a straight-line basis over their estimated useful
life to a residual value of $0.

SFAS 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 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 be tested
annually for impairment. Cronos will conduct its impairment test
in December of each year. The impact of the adoption of
SFAS 142 on the results of operations of the Group may be
presented as follows:

|                                      |  |                     |       |      |  |      |       |  |  |   |       | 
|------------------------------------- |  | ------------------- | ----- | ---- |  | ---- | ----- |  |  | - | ----- | 
|                                      |  |                    
|                                      |  | For the Years Ended
|                                      |  | December 31,       
|                                      |  |                    
|                                      |  | 2002                |       | 2001 |  | 2000
|                                      |  |                     |       |      |  |     
|Net income:                           |  |                     |       |      |  |      |       |  |  |   |       | 
|Reported net income                   |  | $                   | 3,058 |      |  | $    | 3,170 |  |  | $ | 5,216 | 
|Add back Goodwill amortization        |  |                     |      |      |  |      | 373   |  |  |   | 524   | 
|                                      |  |                     |       |      |  |      |       |  |  |   |       | 
|Adjusted net income                   |  | $                   | 3,058 |      |  | $    | 3,543 |  |  | $ | 5,740 | 
|                                      |  |                     |       |      |  |      |       |  |  |   |       | 
|Earnings per share:                   |  |                     |       |      |  |      |       |  |  |   |       | 
|Reported basic net income per share   |  | $                   | 0.42  |      |  | $    | 0.40  |  |  | $ | 0.57  | 
|Add back Goodwill amortization        |  |                     |      |      |  | $    | 0.05  |  |  | $ | 0.06  | 
|                                      |  |                     |       |      |  |      |       |  |  |   |       | 
|Adjusted basic net income per share   |  | $                   | 0.42  |      |  | $    | 0.45  |  |  | $ | 0.63  | 
|                                      |  |                     |       |      |  |      |       |  |  |   |       | 
|Reported diluted net income per share |  | $                   | 0.41  |      |  | $    | 0.39  |  |  | $ | 0.57  | 
|Add back Goodwill amortization        |  |                     |      |      |  | $    | 0.05  |  |  | $ | 0.06  | 
|                                      |  |                     |       |      |  |      |       |  |  |   |       | 
|Adjusted diluted net income per share |  | $                   | 0.41  |      |  | $    | 0.44  |  |  | $ | 0.63  | 
|                                      |  |                     |       |      |  |      |       |  |  |   |       | 

10  Other assets

Other assets includes the following items:

|                                                                              |  |      |        |      |  |   |        | 
|----------------------------------------------------------------------------- |  | ---- | ------ | ---- |  | - | ------ | 
|                                                                              |  | 2002 |        | 2001
|                                                                              |  |      |        |     
|Residual interests in leased containers
    (non-interest bearing loan notes) |  | $    | 5,305  |      |  | $ | 5,305  | 
|Retention deposits                                                            |  |      | 4,010  |      |  |   | 4,004  | 
|Unamortized loan origination fees                                             |  |      | 1,743  |      |  |   | 2,370  | 
|Deposits held in escrow for third-party container
    owner                   |  |      | 1,267  |      |  |   | 1,175  | 
|Prepaid expenses                                                              |  |      | 1,146  |      |  |   | 923    | 
|Other                                                                         |  |      | 2,006  |      |  |   | 3,457  | 
|                                                                              |  |      |        |      |  |   |        | 
|                                                                              |  | $    | 15,477 |      |  | $ | 17,234 | 
|                                                                              |  |      |        |      |  |   |        | 

F-26



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


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, 2002 and 2001, amounts of $4,010 and $4,004,
respectively, were held as retention deposits by financial
institutions in connection with long-term funding transactions.
At December 31, 2002, the remaining release dates for these
amounts ranged between 2003 and 2005 in accordance with the
terms of the funding transactions (see Note 11).

iii.At
December 31, 2002 and 2001, deposits of $1,267 and $1,175,
respectively, were held in escrow accounts relating to amounts
due to a third-party container owner (see Note 13).

11  Debt and lease
obligations

As of December 31, 2002, the Group had
$106,390 of term facilities (including capital lease financing)
under which $100,997 was outstanding and $1,661 of credit
facilities under which $0 was outstanding. Interest rates under
these facilities ranged from 2.9% to 8.6%. The terms of these
facilities extend to various dates through 2012. The rate of
interest for the majority of floating rate facilities is based
on a three month London Inter Bank Offered Rate
(Libor) plus a margin. The size of the margin is
dependent on the financial institution and the nature, size and
term of the facility.

Debt and capital lease obligations are comprised
of:

|                                 |  |      |         |      |  |                    |         |  |  |  |                       | 
|-------------------------------- |  | ---- | ------- | ---- |  | ------------------ | ------- |  |  |  | --------------------- | 
|                                 |  |      |         |      |  | Interest Rate % at
|                                 |  | 2002 |         | 2001 |  | December 2002/2001
|                                 |  |      |         |      |  |                   
|Floating rate debt               |  | $    | 51,750  |      |  | $                  | 59,886  |  |  |  | 2.9  3.6 / 4.1  4.5 | 
|Fixed rate debt                  |  |      | 13,861  |      |  |                    | 16,588  |  |  |  | 8.6                   | 
|Other loans                      |  |      | 62      |      |  |                    | 80      |  |  |  | 8.3 / 6.2             | 
|                                 |  |      |         |      |  |                    |         |  |  |  |                       | 
|Total debt                       |  |      | 65,673  |      |  |                    | 76,554  |  |  |  |                       | 
|Obligations under capital leases |  |      | 35,324  |      |  |                    | 31,366  |  |  |  | 2.9  8.3 / 3.5  8.3 | 
|                                 |  |      |         |      |  |                    |         |  |  |  |                       | 
|Total                            |  | $    | 100,997 | ]    |  | $                  | 107,920 |  |  |  |                       | 
|                                 |  |      |         |      |  |                    |         |  |  |  |                       | 

F-27



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


a)  Debt

Debt is comprised of:

|                                           |                 |      |        |        |   |   |        |        | 
|------------------------------------------ | --------------- | ---- | ------ | ------ | - | - | ------ | ------ | 
|                                           |                 | 2002 |        | 2001  
|                                           |                 |      |        |       
|Long-term debt:                            |                 |      |        |        |   |   |        |       
|Bank term loans                            |                 |      |        |        |   |   |        |       
|                                           | - fixed rate    |      | $      | 13,923 | ] |   | $      | 16,588 | 
|                                           | - variable rate |      |        | 51,750 |   |   |        | 59,966 | 
|                                           |                 |      |        |        |   |   |        |       
|                                           |                 |      | 65,673 |        |   |   | 76,554 |       
|Less: current maturities of long-term debt |                 |      | 6,899  |        |   |   | 8,094  |       
|                                           |                 |      |        |        |   |   |        |       
|                                           |                 | $    | 58,744 | ]      |   | $ | 68,460 |       
|                                           |                 |      |        |        |   |   |        |       

Bank loans are secured by the Groups
container equipment with installments payable through 2008 and
with interest rates fixed or floating dependent upon the
facilities. The weighted average interest rates for the years
ended December 31, 2002, 2001 and 2000, were 5.6%, 6.7% and
8.4%, respectively.

As of December 31, 2002, the estimated fair
value of fixed rate long-term debt was $14,851 (2001 
$17,501) for which the carrying value was $13,861
(2001  $16,588). The fair value of fixed rate
long-term debt has been calculated using the market rates
prevailing at December 31, 2002 and 2001, respectively.

In July 2001, the Group entered into a $60,000
revolving credit facility for a term of three years with a major
international financial services provider (the
Bank). On September 18, 2002, Cronos
established a container purchase program (the
Program) with the Bank. In connection with the
establishment of the Program, and the repayment of a portion of
the outstanding balance under the revolving line of credit with
the Bank, the Group has amended its revolving line of credit
agreement to reduce the maximum commitment of the Bank
thereunder from $60,000 to $50,000, and has agreed to amortize
the balance outstanding under the revolving line of credit, as
of September 18, 2003, over five years.

The primary facilities include financial
covenants that are tested on a quarterly basis 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, 2002, the Group was
in compliance with each covenant. 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 110% 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.

As of December 31, 2002, the annual
maturities of debt were:

|      |  |   |        | 
|----- |  | - | ------ | 
|2003  |  | $ | 6,899  | 
|2004  |  |   | 21,035 | 
|2005  |  |   | 8,923  | 
|2006  |  |   | 8,923  | 
|2007  |  |   | 10,038 | 
|2008  |  |   | 9,855  | 
|      |  |   |        | 
|Total |  | $ | 65,673 | 
|      |  |   |        | 

F-28



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


b)  Capital lease
obligations

The cost and net book value of assets acquired
through capital leases was $47,418 and $37,210, respectively, at
December 31, 2002 ($40,222 and $31,897, respectively, at
December 31, 2001). Amortization in respect of these leases
is included in depreciation expense. In addition, $2,731 of
direct finance lease equipment was acquired through capital
leases. At December 31, 2002, the net investment in direct
finance lease for this equipment was $2,336. The aggregate
capital lease obligations are secured by container equipment.

As of December 31, 2002, the minimum lease
payments under capital leases representing interest and
principal were:

|                    |  |           |        |          |  |       |       |   |  |   |        | 
|------------------- |  | --------- | ------ | -------- |  | ----- | ----- | - |  | - | ------ | 
|                    |  | Principal |        | Interest |  | Total
|                    |  |           |        |          |  |      
|2003                |  | $         | 6,187  |          |  | $     | 1,698 | ] |  | $ | 7,885  | 
|2004                |  |           | 6,378  |          |  |       | 1,371 |   |  |   | 7,749  | 
|2005                |  |           | 5,621  |          |  |       | 1,045 |   |  |   | 6,666  | 
|2006                |  |           | 3,300  |          |  |       | 870   |   |  |   | 4,170  | 
|2007                |  |           | 3,896  |          |  |       | 709   |   |  |   | 4,605  | 
|2008 and thereafter |  |           | 9,942  |          |  |       | 1,003 |   |  |   | 10,945 | 
|                    |  |           |        |          |  |       |       |   |  |   |        | 
|Total               |  | $         | 35,324 | ]        |  | $     | 6,696 | ] |  | $ | 42,020 | 
|                    |  |           |        |          |  |       |       |   |  |   |        | 

At December 31, 2001, the current maturities
under capital leases were $4,725.

c)  Operating
leases

i.  Group as lessee

The total fixed operating lease rental expense
for container equipment, computer equipment and office space was
$11,618, $11,926 and $10,291 for the years ended
December 31, 2002, 2001 and 2000, respectively. Of this,
the fixed operating lease rental expense for container equipment
was $10,382, $10,379 and $8,675 for the years ended
December 31, 2002, 2001 and 2000, 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, 2002, future minimum
lease payments under these non-cancellable operating leases were:

|                    |  |   |        |  
|------------------- |  | - | ------ | -
|2003                |  | $ | 7,697  | ]
|2004                |  |   | 9,089  |  
|2005                |  |   | 8,024  |  
|2006                |  |   | 5,437  |  
|2007                |  |   | 2,793  |  
|2008 and thereafter |  |   | 15,880 |  
|                    |  |   |        |  
|Total               |  | $ | 48,920 | ]
|                    |  |   |        |  

ii.  Group as lessor

The Group leases containers to ocean carriers
under operating leases, as described in Note 1. The Group
also leases office space and earned revenue of $319, $380 and
$315 for the years ended December 31, 2002, 2001 and 2000,
respectively.

F-29



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


Rental income from leasing containers owned by
Managed Container Owners to ocean carriers was $80,815, $88,459
and $105,075 for the years ended December 31, 2002, 2001
and 2000, respectively (see Note 2). These amounts are
included in gross lease revenue in the statements of income.

Future 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:

|                          |  |      |       |      |  |   |       | 
|------------------------- |  | ---- | ----- | ---- |  | - | ----- | 
|                          |  | 2002 |       | 2001
|                          |  |      |       |     
|Advance billings          |  | $    | 1,436 |      |  | $ | 1,543 | 
|Deferred acquisition fees |  |      | 3,765 |      |  |   | 5,168 | 
|                          |  |      |       |      |  |   |       | 
|                          |  | $    | 5,201 |      |  | $ | 6,711 | 
|                          |  |      |       |      |  |   |       | 

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, 2002, deferred acquisition fees are scheduled
to be recognized as follows:

|                    |  |   |       | 
|------------------- |  | - | ----- | 
|2003                |  | $ | 1,145 | 
|2004                |  |   | 881   | 
|2005                |  |   | 656   | 
|2006                |  |   | 445   | 
|2007                |  |   | 338   | 
|2008 and thereafter |  |   | 300   | 
|                    |  |   |       | 
|Total               |  | $ | 3,765 | 
|                    |  |   |       | 

13  Commitments and
contingencies

i.   Commitments

At December 31, 2002, the Group had
outstanding orders to purchase container equipment of $916.

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, 2002, the balance outstanding under the Note
was $2,942.

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 guarantee for 20% of the outstanding debt. The
Group can collateralize up to 50% of the guarantee with a first
security interest in additional equipment. At December 31,
2002, the balance outstanding under the loan was $4,652.

F-30



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


In addition, under the terms of a rent support
agreement for which Cronos earns a fee of $70 per annum, 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 $3,490.

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 2005.

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

Approximately 49% (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, 2002, approximately 37%
(based on original equipment cost) of total 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 54% (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, 31% of total 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 23% of total 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 Holding S.A. itself (collectively,
Contrin).

As described further below, 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 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.

F-31



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


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, 2002, the
balance of this accrual was $3,016.

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 million, 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, the parties have supplemented their
pleadings and filed documentary evidence with the court to
respond to assertions made by the other party. No date has been
set for a final hearing on CWCs claims against the Company.

On September 26, 2002, the Company issued
its intervening summons in the proceeding, naming
Mr. Palatin, his wife, and Klamath Enterprises, S.A.
(Klamath) as cross-defendants. By its intervening
summons, the Company claims the right to indemnity from the
Palatins and Klamath for any liability imposed upon the Company
in favor of Contrin on Contrins claims against the
Company. Klamath is a Panamanian company and the record owner of
an estate located in Amersham, England. The Company alleges that
a substantial portion of the $2,600 transferred by Contrin for
the purchase of containers was diverted by the Palatins to
improve and furnish the Amersham estate, in which they lived in
1994, and that Mr. Palatin is the beneficial owner of
Klamath. The Company has served the summons on Klamath and is
currently in the process of serving the summons on the Palatins.
Once served, the cross-defendants will have the opportunity to
file responsive pleadings and evidence. Klamath, through its
Austrian counsel has indicated that it will challenge the
jurisdiction of the Luxembourg court over it.

In anticipation of the filing of Contrins
claims against the Company in Luxembourg, the Group, in June of
2000, filed claims for indemnity against Mr. Palatin and
his wife in the High Court of Justice, London, England, and in
July 2000, separately, a claim against Barclays Bank PLC
(Barclays). Barclays was the bank that received the
$2,600 from Contrin. For a description of these claims, see
Legal Proceedings.

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. The trial of
CWCs claim, initially set for January 27, 2003, has
been postponed. The new trial date has yet to be scheduled.

Concurrently with the filing of its defense to
CWCs claims, CNV filed a separate claim against the
Palatins and Klamath, seeking recovery of $500 from the Palatins
that CNV alleges was misappropriated from CNV by
Mr. Palatin. For the status of this separate claim by CNV
against the Palatins and Klamath, see Legal
Proceedings.

On September 18, 2002, three Austrian
affiliates of Contrin filed a claim against CNV in the High
Court of Justice, London, England (the Disposals
Claim). The claimants assert that CNV has breached
container management agreements entered into in 1993 by selling
containers without obtaining the consent of the claimants, in
violation of the terms of the container management agreements.
The claimants assert that they are entitled to all sums received
by CNV from the sale of containers wrongfully disposed of under
the container management agreements or, alternatively, that CNV
is liable for damages for wrongfully depriving the claimants of
the use and possession of the containers sold. Claimants assert
damages in excess of $100, and request an accounting, interest,
and costs.

F-32



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


CNV filed its defense to the Disposals Claim on
December 13, 2002, denying the substantive allegations of
the claim and that the claimants are entitled to the relief
claimed or to any other relief.

Contrin has also asserted an interest in the
containers managed by the Group for Transocean Equipment
Manufacturing and Trading 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 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 $3,200.

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, 2002, the Group had $1,245 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. Contrin has provided the Group
with copies of default judgements that Contrin secured in
January and June 2001 from the Commercial Court of Vienna,
Austria, against TOEMT, the UK company, in the amount of $100,
and against TOEMT, the Isle of Man company, in the amount of
$400. Contrin has recently retained separate UK insolvency
counsel, and has initiated proceedings to place TOEMT (Isle of
Man) in liquidation. Contrin has claimed an entitlement to all
of the distributions that the Group has set aside in the
separate bank account on the TOEMT containers, and its
insolvency counsel, which also represents the liquidator of the
UK TOEMT and the proposed liquidator of TOEMT (Isle of Man) has
requested an accounting and extensive information on the
Groups management of the containers for TOEMT. Until
clarification is secured by the court(s) overseeing the
liquidation(s) of UK TOEMT and TOEMT (Isle of Man) and / or
through agreement with the liquidators 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

|                               |  |      |           |      |  |      |            |   |  |  |           | 
|------------------------------ |  | ---- | --------- | ---- |  | ---- | ---------- | - |  |  | --------- | 
|                               |  | 2002 |           | 2001 |  | 2000
|                               |  |      |           |      |  |     
|Common shares outstanding:     |  |      |           |      |  |      |            |   |  |  |           | 
|At beginning of year           |  |      | 7,364,580 |      |  |      | 9,158,378  |   |  |  | 9,158,378 | 
|New common shares issued       |  |      | 7,500     |      |  |      |           |   |  |  |          | 
|Common shares held in treasury |  |      | (12,000   | )    |  |      | (1,793,798 | ) |  |  |          | 
|                               |  |      |           |      |  |      |            |   |  |  |           | 
|At end of year                 |  |      | 7,360,080 |      |  |      | 7,364,580  |   |  |  | 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

F-33



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##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


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 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 authorized 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. Cronos formally
cancelled and retired the 1,793,798 shares in June 2002.

On December 10, 2002, a stock repurchase
plan (the Repurchase Plan) was approved, whereby the
Board of Directors has authorized the expenditure of up to $500
over the period ending December 10, 2003, for the
repurchase of not more than 200,000 shares of the
Companys common shares. At December 31, 2002,
12,000 shares had been repurchased at $3.10 per share.

On December 1, 2002, a total of
7,500 shares were granted to eligible employees and agents
of the Company and its subsidiaries. The purpose of the
Companys restricted stock grants is to increase the number
of shareholders of the Company and to further align the
interests of the grantees with the interests of the shareholders
of the Company. No cash payment will be required of the grantees
for the shares. A total of 8,000 Cronos shares have been
authorized for grant hereunder. The shares vest upon the second
anniversary of the date of grant if the grantee has remained an
employee from the date of grant. Upon vesting, the shares are no
longer subject to forfeiture. A grantee shall be entitled to all
rights of a shareholder of the Company during the time the
shares are subject to forfeiture. The fair value of the grant
was determined to be $21 calculated at $2.80 per share, being
the market value of the shares on the date of the grant. At
December 31, 2002, the remaining contractual life was
1.92 years.

All 7,360,080 of common shares outstanding rank
equally in respect of shareholder rights.

15  Stock-Based
Compensation

Stock-based compensation comprises:

i.    Management Equity
Investment Plan (the MEIP)

The MEIP was introduced in 1994 and included a
total of 440,000 common shares, which were reserved for key
employees of the Company. From its inception to expiration, no
options were exercised and on November 25, 2001, all
unexercised options expired.

F-34



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


ii.  1998 Stock Option
Plan

In December 1998, the Company granted
Dennis J. Tietz, on his appointment as chief executive
officer of the Company, the option to acquire 300,000 common
shares in the Company. 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. If the options are exercised, payment for shares is to
be made by cash, the surrender 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.

iii.  1999 Stock Option
Plan

The 1999 Stock Option 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 Plan terminated on
December 31, 2002. A total of 500,000 options have
been granted under the Plan and the exercise price of each
option was determined by the Committee on the date of each
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.

iv.  The Non-Employee
Directors Equity Plan

A non-employee director will participate in the
Non-Employee Directors Equity Plan (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
(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 originally 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 option may be exercised within
10 years of the grant date. The Directors Options
shall vest and become exercisable over three years, with one
third exercisable on the first three anniversary dates following
the date of the 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 award of Directors Stock Units and
Directors Options after December 31, 2002, will be
subject to and conditional upon shareholder approval at the next
annual meeting of the Company of an amendment to the Equity Plan
to reserve an additional 325,000 shares of the Company for
issuance upon exercise of Directors Options and in
settlement of Directors Stock Units.

During the years ended December 31, 2002 and
2001, the number of Directors Stock Units awarded in lieu
of compensation and the related weighted average fair values was
49,563 and 28,932, respectively, and $3.86 and $4.89,
respectively. In addition, and subject to the proposed amendment
to the Equity Plan, non-employee directors accumulated a further
14,784 Directors Stock Units in lieu of compensation in
January 2003. Compensation expense of $195 and $164 was
recognized for the years ending December 31, 2002 and 2001,
respectively. At December 31, 2002 the weighted average
remaining contractual life was 9 years.

F-35



---



##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


v.   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. On October 13, 2002, the SARs became
fully vested.

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. In 2001, the current
non-employee directors were granted the option to convert the
SARs into Directors Options under the Equity Plan discussed
above. This right of conversion was exercised by all
non-employee directors.

In accordance with SFAS 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. For the
year ended December 31, 2002, a credit of $94 was recorded
to compensation expense. Compensation expense of $32 and $47 was
recognized for the years ended December 31, 2001 and 2000,
respectively.

No SARs were redeemed during the three years
ended December 31, 2002.

vi.  Summary of Stock Option
Activity Under All Plans

|                           |  |                                  |         |          |  |        |       |          |  |        |          |          |  |   |        |  |  |  |          |   |  |   |       | 
|-------------------------- |  | -------------------------------- | ------- | -------- |  | ------ | ----- | -------- |  | ------ | -------- | -------- |  | - | ------ |  |  |  | -------- | - |  | - | ----- | 
|                           |  |                                 
|                           |  | For the Years Ended December 31,
|                           |  |                                 
|                           |  |                                  |         |          |  |       
|                           |  | 2002                             |         | 2001     |  | 2000  
|                           |  |                                  |         |          |  |       
|                           |  |                                  |         | Weighted |  |        |       | Weighted |  |        |          | Weighted
|                           |  |                                  |         | Average  |  |        |       | Average  |  |        |          | Average 
|                           |  |                                  |         | Exercise |  |        |       | Exercise |  |        |          | Exercise
|                           |  | Shares                           |         | Price    |  | Shares |       | Price    |  | Shares |          | Price   
|                           |  |                                  |         |          |  |        |       |          |  |        |          |         
|Outstanding on January 1   |  |                                  | 920,000 |          |  | $      | 4.755 |          |  |        | 717,600  |          |  | $ | 6.457  |  |  |  | 408,000  |   |  | $ | 7.518 | 
|Granted                    |  |                                  | 60,000  |          |  | $      | 4.390 |          |  |        | 245,000  |          |  | $ | 4.746  |  |  |  | 425,400  |   |  | $ | 5.390 | 
|SAR conversion             |  |                                  |        |          |  |        |      |          |  |        | 60,000   |          |  | $ | 4.094  |  |  |  |         |   |  |   |      | 
|Forfeited/expired          |  |                                  |        |          |  |        |      |          |  |        | (102,600 | )        |  | $ | 16.250 |  |  |  | (115,800 | ) |  | $ | 6.276 | 
|                           |  |                                  |         |          |  |        |       |          |  |        |          |          |  |   |        |  |  |  |          |   |  |   |       | 
|Outstanding on December 31 |  |                                  | 980,000 |          |  | $      | 4.733 |          |  |        | 920,000  |          |  | $ | 4.755  |  |  |  | 717,600  |   |  | $ | 6.457 | 
|                           |  |                                  |         |          |  |        |       |          |  |        |          |          |  |   |        |  |  |  |          |   |  |   |       | 
|Exercisable on December 31 |  |                                  | 543,750 |          |  | $      | 4.660 |          |  |        | 378,750  |          |  | $ | 4.557  |  |  |  | 354,000  |   |  | $ | 6.186 | 
|                           |  |                                  |         |          |  |        |       |          |  |        |          |          |  |   |        |  |  |  |          |   |  |   |       | 

For options outstanding at December 31,
2002, the exercise prices ranged from $4.09 to $5.25, and the
weighted average remaining contractual life was 7.1 years.

vii. Fair Value
Disclosures

The weighted average fair value of stock options
at the date of grant was $2.03, $1.88 and $2.94, per option for
options granted for the years ended December 31, 2002, 2001
and 2000, respectively. The weighted

F-36



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##### 



THE CRONOS GROUP


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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


average fair value of options was determined
based on the Black Scholes model, utilizing the following
assumptions:

|                        |  |      |      |      |  |      |      |   |  |  |     |  
|----------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | --- | -
|                        |  | 2002 |      | 2001 |  | 2000
|                        |  |      |      |      |  |     
|Expected term in years  |  |      | 10   |      |  |      | 10   |   |  |  | 10  |  
|Risk free interest rate |  |      | 5.0  | %    |  |      | 5.2  | % |  |  | 6.7 | %
|Volatility              |  |      | 11.5 | %    |  |      | 10.7 | % |  |  | 7.8 | %
|Dividends               |  |      | 0    | %    |  |      | 0    | % |  |  | 0   | %

During the year ended December 31, 2001,
120,000 options were granted at an exercise price that was less
than the market price on the date of the grant. The weighted
average exercise price and weighted average fair value for these
options was $4.23 and $2.14, respectively. In addition, 185,000
options were granted with an exercise price equal to the market
price of $4.875 on the date of the grant. The weighted average
fair value for such options was $1.71.

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, the legal reserve represented 10% of the
stated capital and no appropriation to the reserve was required.
At December 31, 2002, due to a reduction in share capital,
the reserve exceeded the legal minimum by $357.

17  Related party
transactions

The Group had the following transactions with
related parties during the years ended December 31, 2002,
2001 and 2000, respectively:

i.   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.

F-37



---



##### 



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 cancelled 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. As described in Note 13 herein, the Group continues to
pursue legal actions against Mr. Palatin. Any future
amounts received from the settlement will be recorded as income
when received.

ii.   In
September 2002, Cronos sold $18,800 of containers to a new
Container Equity Program in which it holds a 50% equity
interest. The Group transferred an additional $4,672 of
containers as a capital contribution.

18  Quarterly financial data
(unaudited)

|                                    |  |     |        |     |  |     |        |     |  |   |        |  |  |   |        | 
|----------------------------------- |  | --- | ------ | --- |  | --- | ------ | --- |  | - | ------ |  |  | - | ------ | 
|                                    |  | 1st |        | 2nd |  | 3rd |        | 4th
|                                    |  |     |        |     |  |     |        |    
|2002 quarterly financial data       |  |     |        |     |  |     |        |     |  |   |        |  |  |   |        | 
|Total revenues                      |  | $   | 29,992 |     |  | $   | 29,408 |     |  | $ | 29,463 |  |  | $ | 30,828 | 
|Net income                          |  |     | 188    |     |  |     | 2,593  |     |  |   | 219    |  |  |   | 58     | 
|Basic net income per common share   |  | $   | 0.03   |     |  | $   | 0.35   |     |  | $ | 0.03   |  |  | $ | 0.01   | 
|Diluted net income per common share |  | $   | 0.03   |     |  | $   | 0.35   |     |  | $ | 0.03   |  |  | $ |       | 
|                                   
|2001 quarterly financial data       |  |     |        |     |  |     |        |     |  |   |        |  |  |   |        | 
|Total revenues                      |  | $   | 33,025 |     |  | $   | 31,795 |     |  | $ | 31,498 |  |  | $ | 35,338 | 
|Net income                          |  |     | 594    |     |  |     | 2,008  |     |  |   | 216    |  |  |   | 352    | 
|Basic net income per common share   |  | $   | 0.06   |     |  | $   | 0.25   |     |  | $ | 0.03   |  |  | $ | 0.06   | 
|Diluted net income per common share |  | $   | 0.06   |     |  | $   | 0.25   |     |  | $ | 0.03   |  |  | $ | 0.05   | 

F-38