UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549FORM 10-K/AFOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended December 31, 2003
or[   ]   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 1-11862INTERPOOL, INC.(Exact name of registrant as specified in the charter)

|Delaware
(State or other jurisdiction of
Incorporation or organization) |  | 13-3467669
(I.R.S. Employer
Identification Number)
|----------------------------------------------------------------------- |  | --------------------------------------------------

|211 College Road East, Princeton, New Jersey
(Address of principal executive office) | 08540
(Zip Code)
|------------------------------------------------------------------------------------ | ----------------

(609) 452-8900
(Registrant's telephone number including area code)SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

|Title of Each ClassCOMMON STOCK, PAR VALUE $.001
9.25% CONVERTIBLE REDEEMABLE
SUBORDINATED DEBENTURES | Name on Each Exchangeon which RegisteredNEW YORK STOCK EXCHANGE
NEW YORK STOCK EXCHANGE
|----------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE

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 requirement for
the past 90 days. Yes [X] No [   ]
Indicate by check mark if disclosure of delinquent
fliers 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 the
Form 10-K or any amendment to this Form 10-K [   ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in the Exchange Act Rule 12b-2). Yes [X] No [   ]
As of May 31, 2005, the aggregate market value of the common stock, $.001
par value, held by non-affiliates of the registrant was approximately
$218,201,379 based upon the closing price of $21.72 per common share as quoted
on the New York Stock Exchange on May 31, 2005.
As of May 31, 2005, there were 27,639,853 shares of the registrants common
stock outstanding.

Explanatory
Note

Interpool, Inc. (the
"Company") is filing this Amendment No. 1 to Form 10-K (the
"Amendment No. 1") to amend its Form 10-K for the year ended December
31, 2003, originally filed with the Securities and Exchange Commission (the
"SEC") on August 18, 2004 (the "Original 2003 Form 10-K"),
to revise Item 9A, "Controls and Procedures," in order to more clearly
state the conclusion of our management that, due to the deficiencies in internal
controls that we identified in the Original 2003 Form 10-K, our disclosure
controls and procedures were not effective for the year ended December 31, 2003.
These revisions to Item 9A are located in the third from the last and second
from the last paragraphs of Item 9A. As required by SEC Rule 12b-15, we set
forth below in this Amendment No. 1 the entire text of Item 9A, as amended.

In addition, subsequent to
the filing of the Original 2003 Form 10-K, we determined that it would be
necessary to make certain changes to the financial statements included in our
Original 2003 Form 10-K. These changes, which have been reflected in our
financial statements included in our Form 10-K for the year ended December 31,
2004, are: (i) an immaterial adjustment to opening retained earnings for each period in our
historical financial statements included in the Original 2003 Form 10-K, and
(ii) a reclassification of certain types of revenue (consisting
primarily of fees charged to lessees for handling, repositioning and repairs),
which had previously been reported as a reduction to lease operating expenses
and will now be reported separately as other revenue on the face of the income statement.
These changes are more fully discussed in Note 1 to the Consolidated Financial
Statements included as part of this Amendment No. 1.

Because of these changes to
our financial statements, we are amending the Original 2003 Form 10-K to:

| |  | Revise Item 6, "Selected Financial Data." The revisions appear under "Income
Statement Data" in the line item "Equipment leasing revenue" and under "Balance Sheet Data" in
the line items "Leasing equipment, net," "Total assets" and "Stockholders'
equity."
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Revise Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations." We have amended Item 7 as follows:
| | - | ------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | added a third paragraph to the section entitled  "Restatement of Prior Consolidated  Financial
Statements;"
| |  | - | -----------------------------------------------------------------------------------------------------------

| |  |  | revised lease  operating  expense and  administrative  expense  percentages  within the eighth
from last paragraph of the section entitled "General;"
| |  | - | -----------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | revised  the return on average  shareholders'  equity for 2003  within the fifth from the last
paragraph of the section entitled "General;"
| |  | - | -------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | revised the discussions regarding "Equipment leasing revenue," "Other Revenue" and
"Lease Operating and Administrative Expenses" as a result of the change in
classification of certain types of revenue which had previously been reported as
a reduction to lease operating expenses and will now be reported as other
revenue.
| |  | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | revised the amount of retained earnings available for dividends within the
section entitled "Debt and Capital Lease Obligations-- Covenants;" and
| |  | - | -------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | revised the unremitted earnings and the deferred U.S. Federal Income Taxes
related to the unremitted earnings within the last paragraph of the section
entitled "United States Federal Income Tax-- Interpool Limited."
| |  | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Revise Item 8, "Financial Statements and Supplementary Data." The revisions
appear in:
| | - | --------------------------------------------------------------------------------------

| |  |  | the Company's Consolidated Balance Sheets in the line items "Leasing equipment,
net of accumulated depreciation and amortization," "Total assets," "Income
taxes, Current," "Total taxes," "Total liabilities," "Retained earnings," "Total
stockholders' equity" and "Total liabilities and stockholders' equity;"
| |  | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the Company's Consolidated Statements of Income in the line items "Equipment
leasing revenue, including income recognized on direct financing leases," "Other
revenue," "Total revenues", "Lease operating expenses" and total costs and expenses;
| |  | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the Company's Consolidated Statements of Changes in Stockholders' Equity in the
line items "Balance, December 31, 2000, as previously reported," "Adjustment
(Note 1)," "Balance, December 31, 2000, as adjusted," "Balance, December 31,
2001," "Balance, December 31, 2002" and "Balance, December 31, 2003;"
| |  | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  | the Company's Notes to Consolidated Financial Statements:
| |  | - | ---------------------------------------------------------

| |  |  |  | Note 1 - adding new subsections entitled "Reclassifications" and "Adjustments to
Opening Retained Earnings";
| |  |  | - | ------------------------------------------------------------------------------------------------------------

| |  |  |  | Note 2 - revising the fourth paragraph;
| |  |  | - | ---------------------------------------

| |  |  |  | Note 4 - revising the subsection "Covenants;"
| |  |  | - | ---------------------------------------------

| |  |  |  | Note 14 - revising years 2003, 2002 and 2001 in the table entitled "Segment
Information" and 2003 and 2002 in the table entitled "Geographic Information;"
and
| |  |  | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  |  |  | Note 19 - revising years 2003 and 2002 in order to disclose "Equipment Leasing
Revenue" by quarter.
| |  |  | - | ---------------------------------------------------------------------------------------------------

As required by SEC Rule
12b-15, set forth below in their entirety are Item 6 (Selected Financial Data),
Item 7 (Managements Discussion and Analysis of Financial Condition and
Results of Operations) and Item 8 (Financial Statements and Supplementary Data),
as amended, with these revisions incorporated.

As part of this Amendment
No. 1 the Company is also filing new certifications from our Chief Executive
Officer and Chief Financial Officer (Exhibits 31.1, 31.2, 32.1 and 32.2).

INTERPOOL,
INC.

FORM 10-K/A

TABLE OF
CONTENTS

|Item | Page
|---- | ----

|PART II
|-------

|ITEM 6.  | SELECTED FINANCIAL DATA                                                               | 1 
|-------- | ------------------------------------------------------------------------------------- | --
|        
|ITEM 7.  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 3 
|        
|ITEM 8.  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                           | 39
|        
|ITEM 9A. | CONTROLS AND PROCEDURES                                                               | 99
|        

|PART IV
|-------
|       

|ITEM 15.   | EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K | 104
|---------- | --------------------------------------------------------------- | ---
|          
|SIGNATURES |                                                                 | 105

---

|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------

The following table sets
forth our selected historical consolidated financial data, for the periods and
at the dates indicated. This information should be read in conjunction with our
historical consolidated financial statements included in this Annual Report on
Form 10-K and the notes thereto.

SELECTED FINANCIAL DATA(in thousands, except per share amounts)

`YEAR ENDED DECEMBER 31, (1)
                                                               2003        2002 (2)(4)       2001          2000 (3)          1999
                                                               ----        -----------       ----          --------          ----
INCOME STATEMENT DATA:

Equipment leasing revenue                                    $374,287       $325,080       $338,718       $287,553       $216,063
Income before cumulative effect of change in
accounting principle                                          $41,190         $4,389        $28,104        $44,040        $23,271
Income per share before change in accounting
principle:
Basic                                                           $1.51          $0.16          $1.03          $1.61          $0.84
Diluted                                                         $1.42          $0.15          $0.97          $1.61          $0.82
Weighted average shares outstanding:
Basic                                                          27,365         27,360         27,417         27,421         27,571
Diluted                                                        30,396         29,202         28,973         27,426         28,234
Cash dividends declared per common share:                       $0.25        $0.2275        $0.1925          $0.15          $0.15

                                                               2003           2002           2001           2000            1999
                                                               ----           ----           ----           ----            ----
BALANCE SHEET DATA:
Cash and cash equivalents                                    $141,019       $170,613       $103,760       $157,224       $207,853
Net investment in direct financing leases                    $426,815       $334,129       $275,372       $213,180       $185,350
Leasing equipment, net                                     $1,636,716     $1,557,639     $1,335,610     $1,231,037       $847,165
Total assets                                               $2,373,036     $2,241,944     $1,923,052     $2,204,590     $1,442,892
Debt and capital lease obligations                         $1,640,687     $1,597,211     $1,354,680     $1,631,985       $998,228
Stockholders' equity                                         $383,640       $336,996       $352,072       $341,322       $300,214`

|(1) | As a result of adopting Statement of Financial Accounting Standards No. 145
("SFAS 145") extraordinary gains related to the retirement of debt for all years
presented have been reclassified into operating income on a pretax basis. Income
before cumulative effect of change in accounting principle include net of tax
amounts of $558, $840 and $740 for years ended December 31, 2001, 2000 and 1999,
respectively.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Effective June 27, 2002, our financial statements include CAI as a consolidated
subsidiary. (See Note 12 to the Consolidated Financial Statements.)
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | The 2000 income statement data excludes $660 resulting from the cumulative
effect of change in accounting principle. The 2000 results include earnings from
the assets acquired from Transamerica ("TA"), which we acquired on October 24,
2000, with an effective date of October 1, 2000. The 2000 results include only
the chassis acquired from TA as the rail trailers and domestic containers were
identified as assets held for sale at the time of purchase.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Certain reclassifications have been made to the 2002 amounts in order to conform
to the 2003 presentation.
|--- | ----------------------------------------------------------------------------------------------------------

|ITEM 7. | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|------- | -------------------------------------------------------------------------------------

The following discussion of
our historical financial condition and results of operations should be read in
conjunction with the historical consolidated financial statements and the notes
thereto and the other financial information appearing elsewhere in this report.
(Unless otherwise indicated, all fleet statistics including the size of the
fleet, utilization of the leasing equipment or the rental rates per day that are
set forth in this Annual Report on Form 10-K exclude the information of our
50%-owned consolidated subsidiary CAI. This exclusion of information relative to
CAI, unless indicated otherwise, provides a focus on the drivers which are
critical to our core business.)

The information in this
Annual Report on Form 10-K contains certain "forward-looking
statements" within the meaning of the securities laws. These
forward-looking statements reflect the current view of the Company with respect
to future events and financial performance and are subject to a number of risks
and uncertainties, many of which are beyond our control. All statements other
than statements of historical facts included in this report, including the
statements under "Managements Discussion and Analysis of Financial
Condition and Results of Operations," regarding our strategy, future
operations, financial position, estimated revenues, projected costs, prospects,
plans and objectives of management are forward-looking statements. When used in
this report, the words "will," "believe,"
"anticipate," "intend," "estimate,"
"expect," "project" and similar expressions are intended to
identify forward-looking statements, although not all forward-looking statements
contain these identifying words.

All forward-looking
statements speak only as of the date of this report. We do not undertake any
obligation to update or revise publicly any forward-looking statements, whether
as a result of new information, future events or otherwise. Although we believe
that our plans, intentions and expectations reflected in or suggested by the
forward-looking statements we make in this report are reasonable, we can give no
assurance that these plans, intentions or expectations will be achieved. Future
economic and industry trends that could potentially impact revenues and
profitability are difficult to predict.

Restatement of Prior Consolidated Financial
Statements

Our Form 10-K for the year
ended December 31, 2002 was filed in January 2004 and contained, among other
things, restated consolidated financial statements for the years ended December
31, 2001 and 2000 and the first three quarters of 2002. For additional
information regarding this restatement, see Managements Discussion and
Analysis of Financial Condition and Results of Operations included in our 2002
Form 10-K.

In preparation for the 2003
audit, we determined that the previously reported quarterly results for the
quarters ended March 31, 2003, June 30, 2003 and September 30, 2003 required
restatement. For additional information regarding this restatement, see Note 19
to the Consolidated Financial Statements.

Subsequent to the initial
filing of our Form 10-K for the year ended December 31, 2003 and as previously
reported in our Form 10-K for December 31, 2004, we uncovered an
immaterial error related to financial statements not part of any current filing,
which has been reported as an adjustment to opening retained earnings for
purposes of the financial statements contained in our amended Form 10-K for the
year ended December 31, 2003. For further information regarding this adjustment,
see Note 1 to the Consolidated Financial Statements. All financial information
for 2003 and prior periods included in our amended Report on Form 10-K for the
year ended December 31, 2003 gives effect to the adjustment.

Reclassifications

Subsequent to the initial filing of our Form 10-K for the
year ended December 31, 2003, certain reclassifications have been made to the
2003, 2002 and 2001 amounts. More specifically, the Company determined it was
necessary to reclassify certain types of revenue which had been previously
reported as a reduction to lease operating expenses. This revenue consists
primarily of fees charged to lessees for handling, repositioning and repairs
which had previously reduced the related costs for these services. This
revenue will be reported separately as other revenue on the face of the Company's
Consolidated Statements of Income. These reclassifications have no impact
on net income.

General

Interpool is one of the
worlds leading suppliers of equipment and services to the transportation
industry. We believe we are the worlds largest lessor of intermodal
container chassis and a world-leading lessor of international dry freight
standard containers used in international trade.

Our primary sources of
revenues are rental income derived from operating leases and income earned on
direct financing leases. We generate revenues through leasing transportation
equipment, primarily intermodal container chassis and intermodal dry freight
standard containers. Operating lease equipment (operating leases) and direct
financing leases are the two major asset types that generate this revenue. In
the case of operating lease equipment, we retain the substantive risks and
rewards of equipment ownership. In the case of direct financing leases, the
lessee generally has the substantive risks and rewards of equipment ownership
and the right to purchase the equipment at the end of the lease term. This
revenue is supplemented by other sources of revenue such as fee income earned
under equipment management agreements. Revenue derived from an operating lease
generally consists of the monthly lease payments from the customer. For direct
financing leases, the lessees payment is segregated into principal and
interest components much like a loan. The interest component, calculated using
the effective interest method over the term of the lease, is recognized by us as
revenue. The principal component of the direct finance lease payment is
reflected as a reduction to the net investment in the direct finance lease.

Our mix of operating and
direct finance leases is a function of customer preference and demand and our
success in meeting those customer requirements. An operating lease, during its
initial lease term, will generally be more profitable than a direct finance
lease, primarily due to the return of principal inherent in a direct finance
lease. However, after the initial term (and any renewal) of an operating lease
expires, the operating lease will have redeployment costs and related risks that
are avoided under a direct finance lease. In evaluating the revenue performance
of our operating lease portfolio, the primary factors considered are utilization
and daily rental rates.

During 2003, our revenues
increased due to strong demand for equipment, resulting in a favorable increase
in utilization rates for our containers and chassis as compared to the prior
year. Our increased fleet size for containers and chassis as compared to the
prior year also contributed favorably to revenue. We have continued to
experience revenue increases and high utilization of equipment, both in our
chassis and container business segments, during the first half of 2004.
Utilization of our container fleet was at 99% at both December 31, 2003 and June
30, 2004, and chassis utilization was at 96% at December 31, 2003 and 97% at
June 30, 2004.

Although daily rental rates
for our operating lease container fleet remained relatively flat during 2003,
container daily lease rates have been rising during the first half of 2004 due
to the increased demand for equipment as well as the impact of recent steel
shortages. The steel shortage in the first half of 2004 has driven the cost of
new containers 40% higher than in 2003, with corresponding increases in daily
lease rates for newly manufactured containers. In some cases the steel shortages
have become so acute that production was slowed. The backlogged demand and
higher manufacturing costs have propelled leasing of used containers.

Chassis lease rates have
been driven more by the cost of new chassis than by recent increases in demand.
There are both positive and negative factors influencing production costs. A
recent shift in the manufacturing base, toward more production in China -- which
has lower labor and overhead costs (but higher delivery costs) -- has lowered
chassis prices. At the same time, the steel shortage has created upward pressure
on chassis prices. Overall, production costs have decreased slightly, with a
similar decrease in new equipment lease rates. Used chassis lease rates have
been heavily competitive during 2003 and early 2004, but as inventories around
the country have become depleted, we are now beginning to see upward pressure on
chassis lease rates.

We anticipate that our
customers demand for chassis and containers will continue to be strong
well into 2005. This projection is supported by the fact that all major
shipyards are reporting full order books through the end of 2006. Even after an
allowance of 1% for scrapping, the world container ship fleet is expected to
increase by 10.8% in 2004, 11.3% in 2005 and 11.6% in 2006 as reported in the
May 2004 edition of Containerisation International. In April 2004 alone,
48 new container ships were ordered with a capacity of 218,000 TEU. As of May 1,
2004, the total order book exceeded 800 ships with a total capacity of 3.2
million TEU, or approximately 47% of the current world fleet.

We believe a number of
factors have contributed to the strong demand for equipment we have seen since
early 2003. From 2001 to 2002, according to the Container International
Yearbook 2004, global containerized traffic increased by over 9%, from 243.8
million TEU in 2001 to 266.3 million TEU in 2002, fueling demand for
transportation equipment generally. In addition, as mentioned above, several
major shipping lines have announced plans to bring new very large 8,000-9,000
TEU ships to the West Coast of the United States of America in the fall of 2004.
When ships of this size are unloaded, they require the use of a large number of
chassis to move the containers to local railroad terminals or their final
destinations. These chassis, once loaded, may not be able to return to the port
before the next ship rotation arrives, thus requiring additional concentrations
of chassis at major ports. These larger vessels will also require additional
containers to support them. During 2004, we have been supplying chassis and
containers to several shipping lines in preparation for the arrival of these
ships. Demand for chassis has also been affected by the inability of large,
fully loaded ships to pass through the Panama Canal. These ships typically
discharge their cargo on the West Coast, with the cargo being moved by
"land bridges", by truck and rail inland and across the country, using
chassis at various stages during this process. At the same time, the demand for
chassis, along with increased congestion at many of the rail and marine
facilities around the country, have fueled an increase in the sharing of chassis
(chassis pooling) among shipping lines. Our PoolStat chassis management service
has experienced an increased interest in chassis sharing among shipping lines,
as well as use of our own Trac Lease chassis pools at railroads and marine
terminals. As of June 30, 2004, our chassis pools operating at railroad
terminals were at record utilization levels.

Although our chassis and
container fleet (including units on hire as direct financing leases) increased
in size by 2% and 9%, respectively, from 2002 to 2003, we were not able to take
full advantage of the strong customer demand for containers and chassis during
2003 and the first half of 2004, because the restatement of our financial
statements for the years ended December 31, 2000 and 2001 and the first three
quarters of 2002 and the related investigations by our audit committee and the
SEC, and the resulting delays in completion of our financial statements and SEC
filings, adversely affected our ability to obtain the financing necessary for us
to purchase equipment for lease to customers. We requested and received
necessary waivers from our financial institutions with respect to our financial
restatement and the delays in completing our financial statements. Since January
9, 2004, the date of our filing with the SEC of our Annual Report on Form 10-K
for the year ended December 31, 2002, we have successfully completed over $111.2
million of new financings, the proceeds of which have been used primarily to
acquire new equipment and to satisfy payment obligations to manufacturers for
equipment delivered and placed into service in our fleet during 2003. However,
the reduced availability of financing, combined with the requirement to maintain
certain levels of unrestricted cash until the delayed financial filings are
completed, have continued to limit the amount of new business we have written
with our customers during the first half of 2004. In addition, our cost of
financing during 2004 has been higher than we experienced in 2002 and early
2003, due to higher interest rates in general and increased borrowing costs
resulting from the lowering of our credit ratings over the past year. For the
year ended December 31, 2003, the average interest rate on our outstanding debt
(including the outstanding debt of CAI) was 6.0%, lower than the 6.6% for 2002.
This decrease is primarily the result of reduced interest rates, as well as a
decrease in interest costs related to swaps on our revolving credit facility
which matured in October 2002. We are currently in negotiations with a number of
potential lenders with regard to additional financings to support business
growth and to refinance certain existing debt facilities, and expect that
several of these will be completed during the second half of 2004.

As of December 31, 2003, we
had a total of $1,864.6 million in contractual obligations and commercial
commitments outstanding, primarily for amounts due to equipment manufacturers,
debt and capital lease obligations, operating lease obligations, and purchases
of leasing equipment. Our obligations to the equipment manufacturers included in
accounts payable and accrued expenses were paid in full during the first half of
2004, and we are current with regard to all other payment obligations. Based on
our existing cash balances, current negotiations with a number of prospective
lenders, and our financial projections of operating cash flow for the future, we
believe that we will have sufficient liquidity to grow our portfolio while
meeting our obligations and commitments as they become due.

Other than interest
expense, our primary expenses are lease operating and administrative expenses,
which include operating costs such as maintenance and repair expense, as well as
other ownership costs such as storage and positioning expense. Our lessees are
generally responsible for lease operating expenses during the term of their
lease. Our administrative expenses are primarily employee related costs such as
salary expense, costs of employee benefits and travel and entertainment costs,
as well as expenses incurred for outside services such as legal, consulting and
audit related fees. During 2003, lease operating expenses as a percentage of
revenues were 27.8%, up slightly from 27.2% during 2002. Administrative expenses
as a percentage of total revenues increased from 8.1% during 2002 to 12.4%
during 2003, primarily due to $20.2 million in costs associated with our
financial restatement and the related investigations as described previously.
Without those costs, administrative expenses as a percentage of revenues would
have declined to 7.3% during 2003. However, the additional personnel and systems
enhancements we are adding to improve our internal controls, as well as
additional procedures being implemented to comply with Sarbanes-Oxley
requirements, will add incremental administrative expenses in future periods. In
addition to lease operating and administrative expenses, we also incur
depreciation expense on our operating lease equipment as described in more
detail in Note 1 to the Consolidated Financial Statements.

As described above, our
lease operating and administrative expenses were negatively impacted during 2003
as a result of costs associated with our financial restatement. During 2003 and
continuing for the first seven months of 2004, we incurred significant costs
related to the investigations by our audit committee and the SEC, separation
agreements with our former Chief Financial Officer and our former President,
legal representation for the Company as well as our officers, directors and
employees, the payment of fees in order to obtain necessary waivers from our
financial institutions and, during 2004, the proceedings before The New York
Stock Exchange to delist our securities. We will continue to incur additional
costs in the second half of 2004 relating to the formal investigation by the
SEC, additional legal representation for the Company and our officers, directors
and employees, and possibly for bank fees should additional waivers be required.

Non-performing receivables
totaled $12.8 million at the end of 2003 compared with $11.1 million at the end
of 2002. Reserves of $11.9 million and $9.5 million, respectively, have been
established against these non-performing receivables. During 2003, receivable
write-offs net of recoveries totaled $1.9 million as compared with $2.4 million
for 2002.

Our net income per share
for 2003 was $1.42 on a fully diluted basis. This compared favorably with $0.15
per share during 2002 and $0.97 per share during 2001. Return on average
shareholders equity was 11.4% during 2003 compared with 1.3% during 2002
and 8.1% during 2001.

We conduct business with
shipping line customers throughout the world and are therefore subject to the
risks of operating in disparate political and economic conditions. Offsetting
this risk is the worldwide nature of the shipping business and the ability of
our shipping line customers to shift their operations from areas of unfavorable
political and/or economic conditions to more promising areas. Approximately 98%
of our revenues are billed and paid in U.S. dollars. We believe these factors
substantially mitigate foreign currency rate risks.

Our container leasing
operations are conducted through our subsidiary, Interpool Limited, a Barbados
corporation. Our effective tax rate benefits substantially from the application
of an income tax convention, pursuant to which the profits of Interpool Limited
from international container leasing operations are exempt from federal taxation
in the United States. As discussed below, these profits are subject to Barbados
tax at rates that are significantly lower than the applicable rates in the
United States. For further information regarding the United States and Barbados
Tax Treaty and the July 2004 Protocol to this Treaty, see Critical Accounting
Polices and Estimates section within Item 7.

Since June 27, 2002, our
Consolidated Financial Statements include our 50% owned subsidiary, CAI, which
concentrates on short term container leasing, as a consolidated subsidiary of
Interpool. Previously, CAI was accounted for under the equity method of
accounting. Transactions between the Company and CAI have been eliminated in
consolidation.

The sections that follow
analyze our results of operations by financial statement caption and provide a
more detailed discussion of our performance for the years ended December 31,
2003 and 2002 as compared to the prior year period.

Results of Operations

Year Ended December 31, 2003 Compared to Year
Ended December 31, 2002

Equipment Leasing
Revenue. Our equipment leasing revenues increased to $374.3
million for the year ended December 31, 2003, from $325.1 million in the
year ended December 31, 2002, an increase of $49.2 million or 15%. The
increase was partially attributable to $17.1 million of incremental leasing
revenues as a result of consolidating the activities of CAI for a full year in
2003 as compared to approximately six months in 2002. In addition, container and
chassis operating lease revenues increased $22.6 million and finance lease
revenues increased $10.1 million, partially offset by reduced operating lease
revenues of $0.6 million contributed by Microtech (which is currently being
liquidated) as compared to the prior year period. The incremental container and
chassis operating lease revenues are primarily due to our container and chassis
operating lease fleets which increased in size by 11% and 5%, respectively, and
an increase in the utilization rates for our containers and chassis, as compared
to the prior year period. The daily rental rates for containers and chassis were
relatively flat as compared to the prior year period. Utilization rates of our
container fleet have historically been calculated assuming containers managed by
CAI were 100% utilized since they were not available to us to put on hire. Under
this method, utilization rates of our container fleet and our domestic
intermodal chassis operating fleet at December 31, 2003 were 99% and 96%,
respectively, as compared to 98% and 93%, respectively, at December 31, 2002.
The utilization rates of our container fleet, considering CAIs actual
utilization rates for our containers managed by CAI, were 94% and 92% at
December 31, 2003 and 2002, respectively.

Other
Revenue. Our other revenues increased to $27.8 million for the
year ended December 31, 2003, from $19.9 million in the year ended December 31,
2002, an increase of $7.9 million or 40%. The increase was primarily
attributable to an increase in positioning revenue of $6.1 million (which was
primarily attributable to an increase in billable services for positioning of
equipment provided to the United States military) and an increase in billable
repairs to our lessees at the termination of a lease of $1.6 million.

Lease Operating and
Administrative Expenses. Our lease operating and administrative
expenses increased to $161.4 million for the year ended December 31, 2003 from
$121.7 million in the year ended December 31, 2002, an increase of $39.7
million or 33%.

The increase was primarily due to:

| |  | An increase of $13.0 million resulting from the consolidation of the activities
of CAI for the full year in 2003 compared to approximately six months in the
prior year.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in legal fees of $11.6 million primarily related to the Audit
Committee and SEC investigations as well as the restatement of our 2001 and 2000
annual financial results and the financial results of the first three quarters
of 2002.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in salary expense of $5.9 million due to recording of substantially
all costs related to separation agreements with our former Chief Financial
Officer who resigned in July 2003 and our former President who resigned in
October 2003. In addition, salary expense increased by $2.6 million as a result
of an increase in headcount and other employee related costs.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in maintenance and repair costs of $4.7 million primarily due to the
refurbishment of chassis for use within the chassis product line and an increase
in repairs within the container product line.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in audit expenses of $4.3 million primarily as a result of the
restatement of our 2001 and 2000 annual financial results and the financial
results of the first three quarters of 2002.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase of $3.5 million in positioning and handling expenses, primarily due
to an increase in services provided for the United States military during 2003.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in insurance expense of $0.8 million primarily due to premiums for
insurance coverage against customer insolvency and related equipment losses. The
premium rates and deductibles for this type of insurance have increased as a
result of higher claim experience by the Company and others within the industry.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A decrease in storage costs of $6.4 million primarily due to increased
utilization, as well as a reduction in storage related expenses as we sold
equipment recovered from a customer in default.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A decrease in computer leasing equipment segment lease operating and
administrative expenses of $0.4 million due to the liquidation of the computer
leasing segment which was taking place throughout 2003.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We will continue to incur
additional costs in 2004 related to the formal investigation of our activities
by the SEC, our proceedings before the New York Stock Exchange, additional legal
representation for the Company and our officers, directors and employees and for
certain bank fees in order to obtain additional waiver extensions related to our
delayed filings. The costs incurred during 2003 and the estimated costs incurred
in the first quarter of 2004 are as follows:

`Three Months Ended      Year Ended
                                                          March 31,          December 31,
(Dollars in millions):                                       2004                2003
----------------------                                       ----                ----

Audit fees for the reaudits
   and restatements                                          $0.5                $3.6
Cost of investigations                                        0.1                 5.9
Legal and consulting fees                                     1.6                 3.2
Separation agreements                                         --                  5.9
Bank waiver fees                                              2.1                 1.6
                                                              ---                 ---
Amounts before tax                                           $4.3               $20.2
                                                             ====               =====

Amounts net of tax                                           $3.0               $12.9
                                                             ====               =====`

Provision for
Doubtful Accounts. Our provision for doubtful accounts decreased
to $4.2 million for the year ended December 31, 2003 from $7.8 million for the
year ended December 31, 2002. The decrease was primarily attributable to reduced
provisions for Microtech ($2.0 million) and additional provisions for specific
customers which became part of our non-performing receivables during 2002.
During 2003, our non-performing receivables increased $1.7 million ($12.8
million at December 31, 2003 and $11.1 million at December 31, 2002). As of
December 31, 2003 and 2002, our non-performing receivables, net of applicable
reserves, were 1.27% and 2.54%, respectively, of accounts receivable, net. Our
provision for doubtful accounts is provided based upon a quarterly review of the
receivables. This review is based on the risk profile of the receivables, credit
quality indicators such as the level of past-due amounts and economic
conditions, as well as the value of underlying collateral in the case of finance
lease receivables. (See Note 3 to the Consolidated Financial Statements.)

Fair Value Adjustment
for Derivative Instruments. Our non-cash fair value adjustment
for derivative instruments income amounted to $0.8 million for the year ended
December 31, 2003 as compared to expense of $5.5 million in the year ended
December 31, 2002, a change of $6.3 million. This change is primarily related to
the change in the fair market value of interest rate swaps accounted for as free
standing derivatives.

Depreciation and
Amortization of Leasing Equipment. Our depreciation and
amortization expenses decreased to $91.6 million for the year ended December 31,
2003, from $93.5 million for the year ended December 31, 2002, a decrease of
$1.9 million or 2%.

While our operating fleet
grew, the related increase in depreciation was offset by the following:

| |  | A decrease related to the write-off of $7.5 million during the year ended
December 31, 2002, representing the book value of the unrecovered equipment from
a lease customer in default. No similar write off was recorded in 2003.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A depreciation reduction of $2.3 million and $0.2 million for chassis and
containers, respectively, due to the change to our estimated useful lives which
was effective April 1, 2002. For further discussion of leasing equipment see
Note 1 to the Consolidated Financial Statements.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A $1.0 million decrease in impairment write-downs recorded in 2003 ($3.1
million) as compared to 2002 ($4.1 million) based on an evaluation of the
carrying value of our long-lived assets.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in depreciation expense of $7.7 million resulting from the
consolidation of the activities of CAI for full year 2003, as opposed to
approximately six months in 2002.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Losses for
Investments Accounted for Under the Equity Method. The decrease
in losses for investments accounted for under the equity method of $4.9 million
during the year ended December 31, 2003 as compared to the prior year period
resulted primarily from decreased equity method losses of CAI that we recorded
through June 26, 2002, at which time CAI became our consolidated subsidiary. For
the period from January 1, 2002 through June 26, 2002, our share of the equity
losses of CAI was $4.0 million. In addition, for the year ended December 31,
2003, we recorded $1.7 million representing our share of equity losses as a
result of certain other investments accounted for under the equity method of
accounting, as compared to equity losses of $2.6 million for the year ended
December 31, 2002.

Other
(Income)/Expense, Net. We had other income of $5.1 million during
the year ended December 31, 2003 compared to $1.1 million of other expense for
the year ended December 30, 2002. The change of $6.2 million for the year ended
December 31, 2003 was primarily due to:

| |  | The establishment of reserves during 2002 for our notes receivable from
PCR ($4.0 million), which effectively reduced the carrying value of these notes
to zero during 2002, and the establishment of a reserve for our guarantee of PCR
debts due to third parties as well as other liquidation accruals which are our
responsibility ($5.7 million).
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Payments of $2.7 million made to PCR by a company controlled by certain of our
officers and directors which were expensed during 2002.
| | - | --------------------------------------------------------------------------------------------------------------------------------------

| |  | The write-off in 2002 of Microtech's $1.4 million of computer equipment related
receivables from PCR which have been determined to be uncollectible.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A $2.9 million gain recorded in October, 2003 resulting from the consolidation
of assets and liabilities of a special purpose entity (which no longer qualified
for off-balance sheet treatment for accounting purposes) formed as part of our
container lease securitization program. This gain resulted primarily from the
favorable credit loss experience through September 30, 2003 on the underlying
direct financing leases as compared to the assumed credit losses of 1.5%. See
Note 8 to the Consolidated Financial Statements for further discussion of the
accounting for this special purpose entity.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in fee income of $0.7 million as a result of our acting as an agent
and arranging a lease transaction between two parties during 2003.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Gains on equipment sales of $0.7 million during the year ended December 31, 2003
as compared to losses on equipment sales of $4.3 million during the prior year
period. The change of $5.0 million resulted primarily from gains on equipment
sales to third parties recognized by CAI which became a consolidated subsidiary
on June 27, 2002, as well as losses on the sale of leasing equipment of $3.0
million resulting primarily from equipment recovered from a customer in default
which generated losses during 2002.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In 2003 we recorded $0.5 million in insurance revenue, which resulted in the
recovery of costs incurred, resulting from a policy covering losses realized on
a defaulted loan as compared to $10.6 million recorded in 2002.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The sale of our Chicago property in 2002, which had been acquired as part of the
acquisition of TA and resulted in a pre-tax gain of $4.8 million.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A reduction in gains on retirement of debt of $1.1 million as compared to the
prior year period.
| | - | ------------------------------------------------------------------------------------------------

Interest Expense. Our interest expense decreased
to $106.7 million in the year ended December 31, 2003 from $108.3 million
in the year ended December 31, 2002, a decrease of $1.6 million or 1%. The
decrease in interest expense was primarily attributable to reduced interest
rates resulting in reduced interest expense of $10.2 million and a reduction in
amortization of deferred financing fees of $2.6 million as compared to the prior
year period. These decreases to interest expense were partially offset by
increased borrowings to fund capital expenditures, resulting in incremental
interest expense of $7.7 million, an increase in interest expense of $1.7
million related to CAI for a full year of expense in 2003 compared with
approximately six months in 2002 and $1.7 million of bank fees in order to
obtain waivers related to our delayed filings.

Interest Income. Our interest income decreased to
$4.0 million in the year ended December 31, 2003 from $4.6 million in the
year ended December 31, 2002, a decrease of $0.6 million or 13%. The decrease in
interest income was primarily due to reduced earnings on invested cash balances
due to lower interest rates, as well as a decline in invested cash balances.

Minority Interest Income/(Expense), Net. The
change in minority interest income/(expense), net of $0.1 million for the year
ended December 31, 2003 as compared to the prior year period resulted primarily
from a decrease in minority interest income of $0.1 million as a result of the
consolidation of CAI effective June 27, 2002.

Provision/(Benefit) for Income Taxes.
We recorded an income tax provision of $3.3 million for the year ended December
31, 2003 as compared to a tax benefit of $1.4 million for the year ended
December 31, 2002. This increase in the provision for income taxes was caused by
an increase in pre-tax income of $41.5 million and the mix between pre-tax
income and losses generated from international sources and United States
sources. The international container division that is taxed at lower rates
(approximately 3%) based upon the income tax convention between the United
States and Barbados, contributed favorably to net income. The domestic
intermodal division (including corporate activities) which is taxed at higher
United States tax rates, experienced reduced losses during the year ended
December 31, 2003, as compared to the prior year. Additionally, other provisions
for deferred tax asset valuation allowances increased the tax provision by $1.2
million during the year ended December 31, 2003 while the provisions for
deferred tax asset valuation allowances decreased tax benefits by $6.3 million
for the year ended December 31, 2002.

Net Income. As a result of the factors described
above, our net income increased to $41.2 million in the year ended December 31,
2003 from $4.4 million in the year ended December 31, 2002.

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

Equipment Leasing Revenue. Our revenues decreased
to $325.1 million for the year ended December 31, 2002, from $338.7 million in
the year ended December 31, 2001, a decrease of $13.6 million or 4%. The
decrease was primarily attributable to our December 31, 2001 sale of PCR that
resulted in reduced leasing revenues of $31.0 million, partially offset by $20.0
million of incremental leasing revenues as a result of consolidating CAI. In
addition, operating lease revenues decreased $12.4 million, partially offset by
increased finance lease revenues of $9.7 million. Although our container and
chassis fleets increased in size by 14% and 7%, respectively as compared to the
year ended December 31, 2001, the operating lease revenue declined due to
reductions in the daily rental rates of 15% for containers and 9% for chassis.
The decrease in container rates resulted from the termination of leases with
higher rates that were written when the cost of equipment was higher than it is
currently. These leases were replaced by leases with lower rates reflecting the
current cost of equipment. Our chassis rates declined as a result of the
acquisition, in December 2001, of 20,700 used chassis on hire at per diem rates
lower than our existing fleet. In addition, a change to California law, which
made the lessee of the equipment responsible for the payment of licensing costs,
lowered the rates since these costs were previously recovered through per diem
rates. Utilization rates of our container fleet have historically been
calculated assuming containers managed by CAI were 100% utilized since they were
not available to us to put on hire. Under this method, utilization rates of our
container fleet and our domestic intermodal chassis operating fleet at December
31, 2002 were 98% and 93%, respectively, as compared to 96% and 93%,
respectively, at December 31, 2001. The utilization rates of our container
fleet, considering CAIs actual utilization rates for our containers
managed by CAI, were 92% and 89% at December 31, 2002 and 2001, respectively.

Other Revenue. Our other revenues increased to
$19.9 million for the year ended December 31, 2002, from $14.7 million in the
year ended December 31, 2001, an increase of $5.2 million or 35%. The
increase was primarily attributable to $3.2 million of incremental other revenue
as a result of consolidating CAI and an increase in billable repairs to our lessees
at the termination of a lease of $2.5 million partially offset by a reduction in
billable services for positioning of equipment of $0.5 million.

Lease Operating and Administrative Expenses. Our
lease operating and administrative expenses decreased to $121.7 million for the
year ended December 31, 2002 from $143.6 million in the year ended December 31,
2001, a decrease of $21.9 million or 15%.

The decrease was primarily due to:

| |  | A reduction of $27.8 million resulting from the sale of PCR as of December 31,
2001.
| | - | ------------------------------------------------------------------------------------

| |  | A reduction in California licensing costs of $5.9 million due to a change in
California law, which made the user of the equipment, not the lessor,
responsible for the payment of the licensing fees. This reduction in expense has
brought about a reduction in operating lease revenues since these licensing
costs were previously recovered through increased rental rates.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A reduction in positioning and handling expense of $4.3 million primarily due to
the recovery of equipment from a customer in default for which the majority of
the recovery effort took place in 2001.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A reduction in insurance expense of $1.9 million primarily due to the
termination for a portion of 2002 of insurance to cover losses from lessee
insolvencies, bankruptcies and defaults.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A reduction in equipment rental expense of $1.9 million for equipment leased
from The Ivy Group, an entity which is controlled by certain current and former
officers and directors, for the period prior to July 1, 2001.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A reduction in California use taxes of $1.2 million related to the TA assets
acquired in October 2000.
| | - | ------------------------------------------------------------------------------------------------------

| |  | A decrease in salaries of $1.1 million primarily resulting from reduced
headcount following the completion of the integration of the assets acquired
from TA and the consolidation of the operations.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase of $14.1 million resulting from the consolidation of the activities of CAI.
| | - | ---------------------------------------------------------------------------------------

| |  | An increase in maintenance and repair costs of $6.7 million primarily due to the
refurbishment of chassis for use within the chassis product line.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in storage costs of $3.4 million primarily due to the recovery of
equipment from a customer in default and the increased size of our fleet.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------

Provision for Doubtful Accounts. Our provision for
doubtful accounts decreased to $7.8 million for the year ended December 31, 2002
from $9.0 million for the year ended December 31, 2001. The decrease was
primarily attributable to $3.1 million of provisions in 2001 related to amounts
billed to a lease customer that went into default which were no longer probable
of collection from the lessee, partially offset by increased reserves for a
specific customer which became part of our non-performing receivables during
2002. During 2002, we experienced an increase in our non-performing receivables
of $5.1 million ($11.1 million at December 31, 2002 and $6.0 million at December
31, 2001). As of December 31, 2002 and 2001, our non-performing receivables, net
of applicable reserves, were 2.54% and 5.96%, respectively, of accounts
receivable, net. Our provision for doubtful accounts is provided based upon a
quarterly review of the collectibility of our receivables. This review is based
on the risk profile of the receivables, credit quality indicators such as the
level of past-due amounts and economic conditions, as well as the value of
underlying collateral in the case of finance lease receivables. (See Note 3 to
the Consolidated Financial Statements.)

Fair Value Adjustment for Derivative Instruments.
Our non-cash market value adjustment for derivative instruments expense
decreased to $5.5 million for the year ended December 31, 2002 from $8.2 million
in the year ended December 31, 2001, a decrease of $2.7 million. This decrease
is comprised of the following items:

| |  | The change in the fair value of interest rate swaps accounted for as free
standing derivatives (including the amortization of amounts included in
accumulated other comprehensive income upon the adoption of SFAS No. 133 on
January 1, 2001) was a loss of $5.6 million in 2002 as compared to a loss of
$8.1 million in 2001; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The amount of ineffectiveness recognized for interest rate swaps that are
accounted for as cash flow hedges of variable rate debt was income of $.1
million in 2002 as compared to a loss of $.1 million in 2001.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Depreciation and Amortization of Leasing
Equipment. Our depreciation and amortization expenses increased to $93.5
million for the year ended December 31, 2002, from $79.7 million for the year
ended December 31, 2001, an increase of $13.8 million or 17%.

The increase was primarily
due to additions to our fleet as well as:

| |  | An increase in depreciation expense of $8.7 million resulting from the
consolidation of the activities of CAI.
| | - | --------------------------------------------------------------------------------------------------------------

| |  | Depreciation savings of $7.0 million and $.5 million due to the changes to our
depreciation policy for chassis and containers, respectively. (See Note 1 to the
Consolidated Financial Statements for further information regarding the
depreciation policy changes for chassis and containers).
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A decrease in depreciation expense of $6.0 million resulting from the sale of
PCR as of December 31, 2001.
| | - | ----------------------------------------------------------------------------------------------------------

| |  | An impairment write-down of $2.2 million based on an evaluation on the carrying
value of our long-lived assets.
| | - | ---------------------------------------------------------------------------------------------------------------

| |  | An impairment write-down of $1.9 million for defective units supplied by a
specific manufacturer for which the expenses are not recoverable due to the
bankruptcy of the manufacturer.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A write-off of $7.5 million which represents the book value of the unrecovered
equipment from a lease customer in default.
| | - | --------------------------------------------------------------------------------------------------------------------------

| |  | Reduced depreciation expense of $1.3 million as a result of our sale of rail
trailers and domestic containers to Transport Intermodal Pool.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------

Losses for Investments Accounted for Under the Equity
Method. The increase in losses for investments accounted for under the
equity method of $5.8 million during the year ended December 31, 2002 as
compared to the prior year period resulted primarily from increased equity
method losses of CAI that we recorded through June 26, 2002, at which time CAI
became our consolidated subsidiary. For the period from January 1, 2002 through
June 26, 2002, our share of the equity losses of CAI was $4.0 million, as
compared to equity losses of CAI of $.2 million for the year ended December 31,
2001. The increase in losses was primarily the result of CAI recording an
impairment loss of $3.5 million related to equipment held for sale that was
impaired, as well as a change in the container depreciation policy which
resulted in an increase in CAIs depreciation of $1.3 million. These two
items increased losses we recorded by $1.6 million, net of CAIs tax
benefit. The remaining increase in losses resulted from reduced operating
performance of the CAI fleet. In addition, for the year ended December 31, 2002,
we recorded $2.6 million representing our share of equity losses as a result of
certain other investments accounted for under the equity method of accounting,
as compared to equity losses of $0.6 million for the year ended December 31,
2001.

Other (Income)/Expense, Net. We had other
(income)/expense, net of $1.1 million during the year ended December 31, 2002
compared to $(9.8) million in 2001. The increase of $10.9 million from the year
ended December 31, 2001 was due to:

| |  | The establishment of a reserve for our notes receivable from PCR ($4.0 million),
which effectively reduced the carrying value of these notes to zero during 2002,
and the establishment of a reserve for our guarantee of PCR debts due to third
parties as well as other liquidation accruals which are our responsibility ($5.7
million).
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The write-off of Microtech's $1.4 million of computer equipment related
receivables from PCR which have been determined to be uncollectible.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------

| |  | The sale of our Chicago property, which had been acquired as part of the
acquisition of TA and resulted in a gain of $4.8 million recorded in the second
quarter of 2002.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Additional losses of $3.0 million primarily resulting from the sale of leasing
equipment recovered from a customer in default.
| | - | ------------------------------------------------------------------------------------------------------------------------------

| |  | A $1.6 million increase for income recorded in 2002 ($10.6 million) over 2001
($9.0 million) for costs incurred and losses realized on a defaulted lease that
we expect to recover through our insurance policy.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Payments of $2.7 million made to PCR by a company controlled by certain of our
officers and directors which were expensed.
| | - | --------------------------------------------------------------------------------------------------------------------------

| |  | Gain of $1.8 million on the sale of rail trailers and domestic containers
previously owned by us to Transport Intermodal Pool during the three months
ended March 31, 2001.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Fee income of $.5 million as a result of our acting as an agent and arranging a
lease transaction between two parties.
| | - | ----------------------------------------------------------------------------------------------------------------------

Interest
Expense. Our interest expense increased to $108.3 million in the
year ended December 31, 2002 from $98.3 million in the year ended December 30,
2001, an increase of $10.0 million or 10%. The increase in interest expense was
primarily attributable to $2.3 million of incremental interest expense as a
result of consolidating CAI, deferred financing fees of $4.8 million which were
written off when we refinanced certain of our debt instruments, and increased
borrowings to fund capital expenditures, resulting in incremental interest
expense of $10.3 million. These increases to interest expense were partially
offset by reduced interest rates resulting in reduced interest expense of $7.3
million.

Interest Income. Our interest income decreased to
$4.6 million in the year ended December 31, 2002 from $9.4 million in the year
ended December 31, 2001, a decrease of $4.8 million or 51%. The decrease in
interest income was primarily due to reduced earnings on invested cash balances
due to lower interest rates.

Minority Interest (Income)/Expense, Net. The
change in minority interest (income)/expense, net of $2.3 million for the year
ended December 31, 2002 as compared to the prior year period resulted primarily
from:

| |  | An increase in minority interest expense for dividends and distributions paid by
Chassis Holdings I LLC ("Chassis Holdings") of $3.2 million for the year ended
December 31, 2002 as compared to $1.7 million in 2001. This increase for 2002
reflects a full year of operation for Chassis Holdings, a consolidated
subsidiary which was formed on July 1, 2001.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A reduction in minority interest income of $2.1 million resulting from losses
sustained by Microtech and PCR for the year ended December 31, 2001. During
2001, we acquired the remaining 24.5% ownership stake in Microtech, thereby
increasing our ownership in Microtech to 100%. In addition, on December 31,
2001, we completed the contractual sale of its 51% ownership stake of PCR. As a
result, neither PCR nor Microtech are included in minority interest
(income)/expense, net for 2002.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | An increase in minority interest income of $1.3 million as a result of the
consolidation of CAI effective June 27, 2002.
| | - | ------------------------------------------------------------------------------------------------------------------------

(Benefit)/Provision for Income Taxes. We
recorded an income tax benefit of $1.4 million for the year ended December 31,
2002 as compared to a tax provision of $5.4 million for the year ended December
31, 2001. This reduction in the provision for income taxes was caused by lower
pre-tax income before cumulative effect of change in accounting principle of
$30.5 million. The international container division that is taxed at lower rates
based upon the income tax convention between the United States and Barbados,
contributed favorably to pre tax income. Losses contributed by the domestic
intermodal division, which are taxed at higher United States tax rates, provided
a tax benefit. These losses include certain expenses related to the liquidation
of PCR for which no tax benefit will be realized. The 35% statutory tax rate
applied to these losses would have given rise to additional tax benefits of $1.2
million. Additionally, other provisions for deferred tax asset valuation
allowances decreased tax benefits by $6.3 million.

Net Income. As a result of the factors described
above, our net income decreased to $4.4 million in the year ended December 31,
2002 from $28.1 million in the year ended December 31, 2001.

Liquidity and
Capital Resources

Historically, we have used
funds from various sources to meet our corporate obligations and to finance the
acquisition of equipment for lease to customers. The primary funding sources
have been cash provided by operations, borrowings (generally from banks),
securitization of lease receivables, the issuance of capital lease obligations
and the sale of our securities. In addition, we have generated cash from the
sale of equipment being retired from our fleet. In general, we have sought to
meet debt service requirements from the leasing revenue generated by our
equipment.

We have usually funded a significant portion of the purchase
price for new containers and chassis through borrowings under our revolving
credit facility and other lines of credit, or through secured financings with
financial institutions. While we successfully completed several financings
during 2003 and the first seven months of 2004, including financings of
approximately $44.5 million during December 2003 and $111.2 million during
March, May and July 2004, our ability to borrow funds on terms as favorable as
those available previously has been limited since March 31, 2003 because of
the restatement to our historical financial statements and the related Audit
Committee and SEC investigations, the delay in completing our audited 2002
financial statements and filing our Annual Report on Form 10-K for 2002 with the
SEC, and the delay in completing our quarterly and annual financial statements
for 2003 and filing our Quarterly and Annual Reports on Forms 10-Q and 10-K for
2003. These factors, coupled with the requirement to maintain certain levels of
unrestricted cash until the delayed financial filings are completed, have
affected the amount of business we have written with our customers. However, we
are currently evaluating a number of secured financing proposals for growth and
for refinancing existing facilities.

In addition, although we have in the past paid our equipment
manufacturers, most of which are located in China, for our acquisitions of
containers and chassis within normal trade terms (generally 60-90 days), we were
generally not able to make payments on this schedule during the latter part of
2003 because of the limited availability of new financings. As a result, we
negotiated extensions of these trade terms and obtained the approval of our
manufacturers to defer our payment obligations to them. As of December 31, 2003,
the total amount we owed to these manufacturers for equipment already delivered
(most of which had been placed into service in our fleet) or committed to
purchase was approximately $120.5 million. Of this amount, $54.6 million of such
trade debt was represented by promissory notes we issued to these manufacturers
during 2003. As of December 31, 2003, these obligations are included in accounts
payable and accrued expenses in the accompanying Consolidated Balance Sheets.
All past due obligations to the manufacturers, including the promissory notes,
were paid in March and April 2004.

Because our financial restatement and re-audits, as well as the
completion of the internal investigations by special counsel to our Audit
Committee, prevented the timely completion of our financial statements and Form
10-K for the year ended December 31, 2003 and our financial statements and SEC
filings for 2004, we requested and received necessary waivers under our debt
agreements. During February 2004, we provided our lenders with a revised
schedule for completing and filing our financial statements and periodic SEC
filings for 2003 and 2004, and requested that our lenders waive any default
resulting from the late preparation and filing of our financial statements and
required periodic reports contained in our loan documents and debt instruments
until the respective dates set forth in the revised schedule. The revised dates
provided to, and agreed by, our lenders are:

|Statement
2003 - 10-K
2004 - First Quarter 10-Q
2004 - Second Quarter 10-Q
2004 - Third Quarter 10-Q | Revised Completion Date
On or before August 31, 2004
On or before December 31, 2004
On or before December 31, 2004
On or before December 31, 2004
|---------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------

While we requested that our
lenders and financial institutions waive compliance with the applicable
reporting requirements until the respective dates shown in the table, we intend
to complete and file our SEC reports earlier than these deadlines. We have
received waivers from all of our lenders agreeing to the dates above.

As described below, in
connection with the receipt of certain waivers, we agreed to certain
modifications to the terms of several of our debt agreements, including in a few
cases, the pledging of additional collateral and changes to amortization
schedules. Several of the waivers we received from our financial institutions
during 2003 and 2004 provide by their terms that the waiver is void if certain
events occur, such as a declaration of default by one or more of our other
lenders, or the commencement of civil or criminal proceedings against us or any
adverse action by the SEC or the New York Stock Exchange, if such action has a
material adverse effect upon our ability to perform our contractual obligations.
Although we do not believe that any of these actions has occurred to date, there
can be no assurance that they will not occur in the future. In the event any of
our existing waivers ceased to be effective by its terms, we could be deemed to
be in violation of the terms of the indebtedness to which the waiver relates. In
this event, one or more of our lenders could exercise their right to declare us
in default, accelerate the indebtedness owed to such lender and take other
actions against us, such as attempting to exercise rights as a secured creditor
with respect to any collateral. If any of these circumstances were to occur, we
might not be able to meet our obligations to our lenders and other creditors and
might not be able to prevent such parties from taking actions that could
jeopardize our ability to continue to operate our business.

In connection with our
delayed SEC filings and the receipt of waivers from our lenders necessitated by
the delayed filings, beginning in January 2004, the members of our Board of
Directors and certain of their affiliates who own shares of our common stock
have agreed to defer their receipt of any dividend payments, including those we
may declare in the future, until we are in compliance with all SEC filing
requirements. As of July 15, 2004, recorded dividend payments in the amount of
$2.6 million have been deferred.

Over the years, we have
explored from time to time the possibility of raising capital or reducing our
leverage through the issuance and sale of our equity securities. Although our
financial restatement in 2003 prevented us from considering any such
transactions, during 2004 we have had discussions with several parties
(including certain holders of our existing debt securities) that have expressed
interest in making or arranging investments in our equity securities. As of the
date this Form 10-K is being filed, we have not entered into any agreement for
any such transaction. There is no assurance that any such transaction will occur
or, if a transaction occurs, what the terms thereof would be.

Cash Flow

Net cash provided by
operating activities amounted to $145.0 million in 2003, $120.1 million in 2002
and $410.8 million in 2001. The increase in net cash provided by these
activities in 2003 as compared to 2002 was primarily due to an increase in net
income, as well as changes in operating assets and liabilities in the ordinary
course of business. The decrease in net cash provided by operating activities in
2002 as compared to 2001 was primarily due to the cash flows generated during
2001 as a result of the sale of the assets classified as held for sale as of
December 31, 2000 without a similar sale during the year ended December 31, 2002
and the decrease in net income.

Net cash used for investing
activities amounted to $207.7 million in 2003, $176.4 million in 2002 and $247.7
million in 2001. In each year, investing activities consisted primarily of
capital expenditures for leasing equipment, partially offset by cash collections
on direct financing leases. The increase in net cash used in these activities in
2003 as compared to 2002 was primarily due to an increase in the acquisition of
leasing equipment ($5.8 million) and an increase in the investment in direct
financing leases ($45.2 million), partially offset by an increase in cash
collections on direct financing leases ($18.1 million). The decrease in net cash
used in these activities in 2002 as compared to 2001 was primarily due to a
decrease in the acquisition of leasing equipment ($9.5 million) and a decrease
in the investment in direct financing leases ($62.7 million).

Net cash provided by (used
for) financing activities amounted to $33.0 million in 2003, $123.1 million in
2002 and ($216.5) million in 2001. In each year, financing activities consisted
of proceeds from the issuance of debt and borrowings under revolving credit
facilities, offset by payments made by the Company under its debt obligations.
The decrease in net cash provided by these activities in 2003 as compared to
2002 was primarily due to a decrease in proceeds from the issuance of debt and
borrowings under revolving credit facilities ($974.6 million) partially offset
by a decrease in repayment of the Companys debt obligations ($884.8
million). The change in net cash provided by financing activities in 2002 as
compared to 2001 was primarily due to an increase in proceeds from the issuance
of debt and borrowings under revolving credit facilities ($889.1 million)
partially offset by an increase in repayment of the Companys debt
obligations ($549.4 million).

The following table sets
forth certain historical cash flow information for the three years ended
December 31, 2003.

`Year Ended December 31,

                                                                             2003       2002      2001
                                                                             ----       ----      ----
                                                                             (Dollars in millions)

Net cash provided by operating activities                                   $145.0    $120.1    $410.8
Proceeds from disposition of leasing equipment                                16.8      12.0      15.6
Acquisition of leasing equipment                                            (197.7)   (191.9)   (201.4)
Investment in direct financing leases                                       (109.3)    (64.1)   (126.8)
Net collections on direct finance leases                                      77.8      59.7      65.3
Net (payments) proceeds of issuance of long-term debt and capital lease
obligations in excess of payment of long-term debt and capital lease
obligations                                                                    7.6     203.8     (91.0)`

Contractual Obligations and Commercial
Commitments

We and our subsidiaries are
parties to various operating and capital leases and are obligated to make
payments related to our long term borrowings. (See Notes 4 and 9 to the
Consolidated Financial Statements.) We are also obligated under various
commercial commitments, including obligations to our equipment manufacturers. In
the past, our equipment manufacturer obligations have been in the form of
conventional accounts payable and have been satisfied within normal trade terms
which were satisfied from cash flow from operations and long-term financing. As
described above, during the latter part of 2003, we were not able to pay our
manufacturers and had a total of $120.5 million payable to them as of December
31, 2003, $54.6 million of which had been converted into promissory notes. As of
December 31, 2003, these obligations are included in accounts payable and
accrued expenses in the accompanying Consolidated Balance Sheets. All past due
obligations, including the promissory notes, to the manufacturers were paid in
March and April 2004.

The following tables
summarize our contractual obligations and commercial commitments at December 31,
2003.

`Amounts Due by Period
                                                                    (Dollars in millions)

                                                                       Less than 1
Contractual Obligations                                     Total          year         1-3 years       4-5 years     After 5 years
-----------------------                                     -----          ----         ---------       ---------     -------------
Long Term Debt                                             $910.8          $154.2         $422.4         $265.8           $68.4
Capital Lease Obligations                                   729.9            65.0          132.0          117.8           415.1
Operating Leases                                             77.3            20.2           33.9           16.8             6.4
Unconditional Purchase
Obligations                                                 105.3            42.3           42.0           21.0              --
Employment Agreements                                         8.8             2.0            2.1            2.3             2.4
Separation Agreements                                         4.2             1.6            2.2            0.4              --
Obligations Related to PCR
Liquidation                                                   5.5             5.5             --             --              --
                                                              ---             ---            ---            ---             ---
Total Contractual Cash
Obligations                                              $1,841.8          $290.8         $634.6         $424.1          $492.3
                                                         ========          ======         ======         ======          ======


                                                                         Amount of Commitment Expiration Per Period
                                                      Total              ------------------------------------------
                                                     Amounts     Less than 1
Other Commercial Commitments                        Committed        year           1-3 years       4-5 years      Over 5 years
----------------------------                        ---------        ----           ---------       ---------      ------------
Standby Letters of Credit                              $6.0          $ --              $6.0            $ --            $ --
Guarantees                                             16.8            --                --             8.0             8.8
                                                       ----            --                --             ---             ---
Total Commercial Commitments                          $22.8          $ --              $6.0            $8.0            $8.8
                                                      =====            ==              ====            ====            ====`

Debt and Capital Lease Obligations:

The following table
summarizes our debt and capital lease obligations as of December 31, 2003 and
2002:

`(Dollars in Millions)
                                                                          December 31, 2003      December 31, 2002
                                                                          -----------------      -----------------
Capital lease obligations payable in varying amounts through 2018                $325.2                $363.7
Chassis Securitization Facility, interest at 5.59% and 5.08% at
  December 31, 2003 and 2002, respectively
      Warehouse facility                                                           25.5                 ---
      Debt obligation                                                              86.4                 120.2
      Capital lease obligation                                                    404.7                 410.5
Revolving credit facility, interest rate at 3.09% and 2.64% at
  December 31, 2003 and 2002, respectively                                        193.5                 175.0
Revolving credit facility CAI, interest rate at 3.37% and 3.69% at
  December 31, 2003 and 2002, respectively                                         87.0                  74.0
Container securitization facility, interest at 6.5% and 5.85% at
  December 31, 2003 and 2002, respectively                                         76.6                  92.0
7.35% Notes due 2007 (unsecured)                                                  147.0                 147.0
7.20% Notes due 2007 (unsecured)                                                   62.8                  62.8
9.25% Convertible redeemable subordinated debentures, mandatory
  redemption 2022 (unsecured)                                                      37.2                  32.1
Notes and loans payable with various rates ranging from 1.89% to 7.90%
  and maturities from 2004 to 2010                                                194.8                 119.9
                                                                                  -----                 -----
Total Debt and Capital Lease Obligations                                        1,640.7               1,597.2
                                                                                -------               -------
   Less Current Maturities                                                        219.2                 161.4
Total Non-Current Debt and Capital Lease Obligations                           $1,421.5              $1,435.8
                                                                               ========              ========`

Our debt consists of notes
and loans and capital lease obligations with installments payable in varying
amounts through 2022, with a weighted average interest rate of 6.0% in 2003. The
principal amount of debt and capital lease obligations payable under fixed rate
contracts is $491.3 million. Remaining debt and capital lease obligations of
$1,149.4 million is payable under floating rate arrangements, of which $500.1
million has been converted to fixed rate debt through the use of interest rate
swap agreements. At December 31, 2003, most of our debt and capital lease
obligations are secured by a substantial portion of our leasing equipment,
direct finance leases, and accounts receivable, except for $247.0 million of
debt which is unsecured. For further information on the accounting treatment for
interest rate swap contracts see Note 5 to the Consolidated Financial
Statements.

Effective October 1, 2003,
a customer elected to return a portion of the equipment covered by a direct
financing lease which had been included in a qualified special purpose entity as
part of the lease securitization program. The equipment was subsequently leased
to another customer under the terms of an operating lease agreement. As such,
the lease could no longer be considered a financial asset and the Securitization
Trust entity could no longer be treated as an off-balance sheet qualified
special purpose entity for accounting purposes. Therefore, effective October 1,
2003, we consolidated the assets and liabilities of this special purpose entity
and recorded the remaining obligation of this special purpose entity amounting
to $17.8 million as debt and capital lease obligations on the Consolidated
Balance Sheets. At December 31, 2003, $13.3 million of this debt remains
outstanding. See Note 8 to the Consolidated Financial Statements for further
discussion regarding the change in accounting for this special purpose entity.

Debt
Modifications:Throughout 2003, in connection with obtaining necessary
waivers from lenders for late filing of our periodic reports with the SEC and
the restatement of our past financial statements, we agreed to certain
modifications to our existing debt agreements as follows:

| |  | Our container securitization facility was amended to relinquish our right
to request additional advances under the facility and we agreed that all lease
payments subsequently received under the facility would be used to reduce the
indebtedness. In addition, we agreed to comply with several new covenants,
consistent with those contained in the amendment to our revolving credit
agreement, as described below.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In May 2003, we established a $200.0 million revolving warehouse facility within
our chassis securitization facility and received funding from a $25.5 million
debt obligation issuance. In July 2003 and October 2003, we agreed, among other
things, to suspend our ability to incur additional funding under the warehouse
facility until such time as the loan and guarantee parties have each agreed in
their sole discretion to reinstate their funding commitments. The loan and
guarantee parties are under no obligation to reinstate any commitments to the
warehouse facility.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In July 2003 and October 2003, and January and February 2004, in connection with
obtaining necessary amendments under the revolving credit facility due to the
late filing of our periodic reports with the SEC and the restatement of our past
financial statements, we agreed, among other things, to reduce advance rates
under this revolving facility, to add several events of default, to increase the
interest rate margin, and to maintain specified levels of unrestricted cash and
cash equivalents until delinquent SEC filings are made. Specifically, we agreed
to maintain unrestricted cash and cash equivalents of at least $71.0 million at
all times and at least $80.0 million as of the last business day of each month,
until our 2002 Form 10-K was filed. Our 2002 Form 10-K was filed on January 9,
2004. Subsequent to January 9, 2004, we were obligated to maintain unrestricted
cash and cash equivalents of at least $60.0 million at all times and at least
$67.5 million as of the last business day of the month until completion and
filing of all delayed financial statements for 2003 and 2004. This minimum cash
requirement was also adopted in the waivers of the container securitization and
one other loan agreement. In conjunction with the waiver received during
February 2004, we replaced our annual amortization payment with monthly
amortization payments under our revolving credit facility beginning in March
2004. The related minimum cash requirement was subsequently reduced
dollar-for-dollar with the amortization payments and, at June 30, 2004, amounts
to $50.0 million. Beginning with the amortization payment due September 1, 2004,
the minimum cash requirement will again be reduced dollar-for-dollar as
amortization payments are made. The minimum cash balance requirement will be
eliminated once we are current with our delayed financial filings.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | We also agreed to restrictions on dispositions of collateral and on encumbrances
of assets as well as a limitation on concessions that could be made to our other
financial institutions in connection with obtaining waivers. The October 2003
amendment also requires us to provide additional financial information to the
lenders under the facility and to continue the engagement of a financial
advisor.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In addition to the debt specifically identified above, we had additional notes
and loans outstanding with various financial institutions. In the fourth quarter
of 2003, we agreed to certain modifications to the provisions of some of these
instruments. These modifications include, in certain instances, changes to the
amortization schedule resulting in a requirement for accelerated principal
payments of $16.6 million ($2.0 million of which were made during January and
February 2004 and the rest of which were eliminated when the facility in
question was paid in full during March 2004), an average interest rate increase
of 241 basis points on two debt facilities having a total of $67.7 million
outstanding as of December 31, 2003 and the pledging of $9.1 million in
additional collateral to four facilities having a total of $38.6 million
outstanding at the time the additional collateral was pledged.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In April 2003, in connection with a borrowing under the container
securitization, we entered into an interest rate swap agreement with an original
notional amount of $31.2 million. This swap contract (which qualifies as a cash
flow hedge) matures in 2009 and the swap is used to manage interest rate risks
on the floating rate borrowings in the securitization facility. In May 2003, in
connection with a borrowing under the chassis revolving warehouse securitization
facility, we entered into an interest rate swap with an original notional amount
of $25.5 million. This swap contract (which qualifies as a cash flow hedge)
matures in 2014 and the swap is used to manage interest rate risks on the
floating rate borrowings in the chassis revolving warehouse securitization
facility.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

New Financings: In July 2002, we commenced a
registered subscription rights offering of up to $31.5 million of our 9.25%
Convertible Redeemable Subordinated Debentures. The debentures were offered to
holders of our common stock pursuant to the exercise of non-transferable
subscription rights and were to be convertible into shares of our common stock.
We had the right in our discretion to accept offers from other parties to
purchase debentures not subscribed for by stockholders. On August 14, 2002, we
terminated the subscription rights offering due to a delay in filing our Form
10-Q for the quarter ended June 30, 2002. We re-commenced the offering during
November 2002 and accepted subscriptions for $32.1 million of debentures, which
were issued in December 2002. We also increased the size of the offering and
subsequently accepted $5.1 million of additional subscriptions in January and
February 2003, resulting in a total of $37.2 million of debentures being issued.
The debentures bear interest at an annual rate of 9.25%. They have a mandatory
redemption feature upon the earlier of the occurrence of a change of control or
on December 27, 2022. They have an optional redemption feature after the third
anniversary at a price of 100% of outstanding principal, plus accrued interest.
They have a special redemption feature between December 27, 2006 and December
27, 2007, during which period we may redeem the debentures by issuing common
stock at $25.50 per debenture plus accrued interest, if the average closing
price of our common stock for five consecutive trading days equals or exceeds
$25.50 per share. Lastly, at any time, the holder of the debentures may convert
the debentures into our common stock at a per share conversion price of $25 per
debenture.

During 2003, in addition to
additional financing under our container and chassis securitizations of $51.3
million and $25.5 million, respectively, the additional borrowing of $50.0
million under our revolving credit facility and $38.0 million borrowed by CAI
under its revolving credit facility, we entered into new financing arrangements
totaling $135.0 million. The new debt and capital leases entered into during
2003 consisted of the following:

`New Borrowings
Total New Debt and Capital Lease Obligations                                     2003
--------------------------------------------                               ----------------
Capital lease obligations payable through 2010 with interest
  imputed at rates from 4.4% to 6.4%                                             $14.3
9.25% Convertible redeemable subordinated debentures, mandatory
  redemption 2022                                                                  5.1
Notes and loans repayable with various rates ranging from 3.1%
  to 4.0% and maturities from 2006 to 2009                                       115.6
                                                                                 -----
Total New Debt and Capital Lease Obligations 2003                               $135.0
                                                                                ======`

Included in the notes and
loans are borrowings of $16.0 million and $7.0 million from Yardville National
Bank, a subsidiary of an entity in which Martin Tuchman owns approximately five
percent of the common stock and serves on the Executive Committee of the Board
of Directors. The term of the $16.0 million loan is three years with thirty four
fixed monthly principal payments of $0.25 million commencing May 25, 2003
and a final principal payment of $7.5 million due on March 25, 2006. Interest is
payable monthly, at an initial rate of 4.25%, and is adjusted monthly to the
prime rate as published in the Wall Street Journal subject to a 4% minimum and
5% maximum per annum rate. The term of the $7.0 million loan is five years with
fifty-nine fixed monthly principal payments of $.075 million commencing
September 7, 2003 and a final principal payment of $2.6 million due on
August 7, 2008. Interest is payable monthly, at an initial rate of 4%, and
is adjusted monthly to the prime rate as published in the Wall Street Journal
subject to a 4% minimum and 6% maximum per annum rate.

Covenants: Under our revolving credit facility and
most of our other debt instruments, we are required to maintain covenants (as
defined) for a tangible net worth of $125.0 million, a fixed charge coverage
ratio of 1.5 to 1 and a funded debt to net worth ratio (as defined in the
agreement, which is stockholders equity plus company-obligated mandatorily
redeemable preferred securities in subsidiary grantor trusts, less goodwill) of
4.0 to 1. A financing facility entered into in March 2004 contains more
stringent covenants, including a requirement that we maintain a tangible net
worth of at least $300.0 million. We will seek to eliminate these more stringent
covenants by refinancing this facility during the second half of 2004. At
December 31, 2003, under covenants in our loan agreement approximately
$94.7 million of retained earnings were available for dividends. In July 2003
and October 2003, in connection with obtaining necessary waivers under the
revolving credit facility due to the late filing of our periodic reports with
the SEC and the restatement of our past financial statements, we agreed, among
other things, to reduce advance rates under this facility, to define several
additional events as events of default, to increase the interest rate margin,
and to maintain specified levels of unrestricted cash and cash equivalents until
the delinquent SEC filings are made. We also agreed to restrictions on
dispositions of collateral and on encumbrances of assets as well as a limitation
on concessions that could be made to our other financial institutions in
connection with obtaining waivers. The October 2003 amendment also required us
to provide additional financial information to the lenders under the facility
and to continue the engagement of a financial advisor. At December 31, 2003
we were in compliance with these covenants as amended.

Other: As of December 31, 2003, our commitments
for future capital expenditures totaled approximately $105.3 million with
approximately $42.3 million committed for 2004. Our available liquidity,
including $17.0 million available under CAIs revolving credit facility, at
December 31, 2003 was $65.5 million after adjusting for $25.0 million of
cash held within the chassis securitization and $67.5 million required to be
maintained as a result of obtaining waivers. Required debt repayments and
capital lease payments for 2004 totaled $219.2 million as of December 31, 2003
which we anticipate making through our unrestricted cash balances and cash flow
from operations.

In the past, cash on hand, cash flow from operations, borrowings
under credit facilities and the net proceeds of the issuance of debt and equity
securities has been sufficient to meet our working capital needs, capital
expenditures and required debt repayments. Because the availability of financing
to us was limited in 2003, due to our financial restatement and the
investigations by our Audit Committees special counsel and the SEC, and
the delay in completing our audited financial statements and filing our Forms
10-K for 2002 and 2003, and because of the waiver-related requirement to
maintain significant minimum cash balances, we were not able to fund all of our
capital expenditure commitments, specifically our obligations to equipment
manufacturers, during the second half of 2003. At year end, we had deferred
payments due to our equipment manufacturers totaling $120.5 million. We
subsequently paid all past due amounts to the manufacturers in March and April
2004 with proceeds from a new financing. We also expect to continue to rely in
substantial part on long-term financing for the purchase of equipment or
strategic acquisitions to expand our business in the future. We cannot assure
that long-term financing will be available for these purposes on acceptable
terms or at all. In addition, from time to time, we may explore new sources of
capital both at the parent and subsidiary levels. We successfully completed
secured financings of approximately $111.2 million during March, May and July
2004 and are currently evaluating a number of secured financing proposals.

Settled Insurance Litigation

In February 2001, we demanded return of all our equipment on
lease to a significant customer based in South Korea. The lessee subsequently
commenced insolvency proceedings and did not return our equipment. At the time
of this insolvency, we maintained insurance coverage against such lessee
defaults, and we submitted a claim to our insurance carriers seeking to recover
the value of the receivables owed by the customer (to the extent covered by the
insurance policies). Our claim included per diem rental charges for up to one
hundred and eighty days after the default date for equipment not returned by the
lessee as well as loss, damage and recovery costs relating to the equipment on
lease that are also billable to the lessee in accordance with the lease. Our
claim was in excess of the policys maximum coverage of $35 million. On
December 26, 2002, the insurance carriers filed a lawsuit seeking among other
things rescission of the policies. We in turn filed an answer and counter-claim
for payment of our insurance claim. (See Item 3, Legal Proceedings, above.) On
June 17, 2004, in an attempt to avoid the time, expense and uncertainty inherent
in continued litigation, we signed an agreement settling this lawsuit and our
claim under the policies. Under the terms of the settlement agreement, the
insurance carriers paid us a total of $26.4 million in cash in June and July
2004. As of December 31, 2003, the outstanding receivable recorded from the
insurance carriers is $20.5 million. The difference between the receivable
recorded due from the insurance carriers and the claim submitted primarily
relates to per diem revenues, repairs and maintenance and other costs billable
to the lessee (and covered by the insurance contract) that are in excess of
costs incurred.

Other

CAI

In April 1998, we acquired a 50% common equity interest in CAI.
CAI owns and leases its own fleet of containers and manages, for a fee,
containers owned by third parties. We entered into an operating relationship
with CAI primarily to facilitate the rental in the short-term market of
containers coming off long-term lease, to gain access to new companies looking
to lease containers on a long term basis and to realize cost efficiencies from
the operation of a coordinated container lease marketing group. The marketing
group which is organized as our wholly-owned subsidiary, is responsible for
soliciting container lease business for both us and for CAI, including long-term
and direct finance lease business and short-term lease business on master lease
agreements. Our agreement with CAI provides that all long-term and direct
finance lease business will be purchased by us, subject to offering to CAI, at
cost, 10% of this long-term and direct finance lease business. By mutual
agreement, CAI has purchased for its own account long-term and direct finance
lease business generated by the marketing group in excess of such amount.

In connection with the acquisition of our equity interest in
CAI, we loaned CAI $33.7 million under a Subordinated Note Agreement (Note) that
is collateralized by all containers owned by CAI as of April 30, 1998 or
thereafter acquired, subject to the priority security interest lien of
CAIs senior credit facility, except for certain excluded collateral.
Interest on the Note was calculated at an annual fixed rate of 10.5% payable
quarterly. The original repayment terms required mandatory quarterly principal
payments of $1.7 million beginning July 30, 2003 through April 30, 2008. The
Note was subject to certain financial covenants and was cross-defaulted with
CAIs senior credit facility, subject to the terms of a subordination
agreement.

On June 27, 2002, CAI entered into an amended $110.0 million
senior revolving credit agreement with a group of financial institutions. To
facilitate the closing of this new credit facility, we agreed to extend the
repayment terms of our Note so as to require mandatory quarterly principal
payments of $1.7 million beginning July 30, 2006 through April 30, 2011 and
modified certain financial covenants in the Note. Interest on the Note continues
to accrue at an annual fixed rate of 10.5% and is payable quarterly. The Note
continues to be cross-defaulted with CAIs senior credit agreement, subject
to the terms of an amended and restated subordination agreement. At the same
time, we were provided a majority position on CAIs board of directors. As
a result of these transactions and gaining a majority position on CAIs
board, our financial statements include CAI as a consolidated subsidiary
commencing June 27, 2002. Previously, CAI was accounted for under the equity
method of accounting. Our share of the equity losses of CAI for the periods from
January 1, 2002 through June 26, 2002 have been recorded in losses for
investments accounted for under the equity method in the accompanying
Consolidated Statements of Income. For the period from June 27, 2002 through
December 31, 2003, CAIs results of operations have been included in the
appropriate captions on the accompanying Consolidated Statements of Income. The
assets and liabilities of CAI at December 31, 2003 and 2002 have been included
on the accompanying Consolidated Balance Sheets.

A total of $87.0 million was outstanding under CAIs senior
revolving credit facility at December 31, 2003. Borrowings under CAIs
senior credit facility are secured by substantially all of CAIs assets,
other than certain excluded assets, and are payable on June 27, 2005. The senior
credit facility contains various financial and other covenants. At December 31,
2003, CAI was in compliance with these covenants. The senior credit facility was
amended in May 2003 to increase the letter of credit commitment by the
lenders administrative agent.

In addition, CAI has entered into sale-leaseback transactions
with third parties pursuant to which CAI sells maritime shipping containers to
such third parties and then leases the shipping containers back from such third
parties. In connection with such transactions, CAI has entered into the
following lease agreements:

CAI entered into a master
lease agreement dated April 30, 1998, as amended, which amends and restates a
prior agreement dated July 17, 1996, pursuant to which CAI currently leases
shipping containers from a banking corporation. The master lease agreement has
an expiration date of July 31, 2008. CAI is required to make regular payments to
lessor and, as of December 31, 2003 and 2002, CAIs total outstanding
obligation under this lease agreement was approximately $13.8 million and
$23.2 million respectively. CAI has the option to purchase the leased equipment
on a date prior to the expiration of the initial term of the lease agreement or
at the time of such expiration. In addition, upon the expiration of the initial
term of the lease agreement, CAI has the right to extend the lease agreement for
one year or return the leased equipment to lessor under the terms and conditions
set forth in the lease agreement. This lease agreement was amended in 2002 to
include certain additional negative covenants and financial covenants of CAI.
The lease agreement was amended in May 2003 to provide for a rent prepayment
under the lease agreement in the approximate amount of $3.75 million to the
lessor.

CAI entered into a master lease agreement dated April 30, 1998,
as amended, which amends and restates a prior agreement dated November 21, 1996,
pursuant to which CAI currently leases shipping containers from a banking
corporation. The master lease agreement has a term of ten years. CAI is required
to make regular payments to lessor and, as of December 31, 2003, CAIs
total outstanding obligation under this lease agreement was approximately $4.7
million. CAI has the option to purchase the leased equipment on a date prior to
the expiration of the initial term of the lease agreement or at the time of such
expiration. In addition, upon the expiration of the initial term of the lease
agreement, CAI has the right to extend the lease agreement for one year or
return the leased equipment to lessor under the terms and conditions set forth
in the lease agreement. This lease agreement was amended in 2002 to include
certain additional negative covenants and financial covenants of CAI.

In April 2004, we reached an agreement with CAI resolving
differences in interpretation of certain provisions of the Operating and
Administration Agreement (the "CAI Agreement") governing payment of appropriate
remedial compensation when an age disparity develops between our containers
managed by CAI and the balance of CAIs managed fleet. Pursuant to our
agreement with CAI, we agreed to pay CAI $2.0 million for resolution of all
disputes through February 29, 2004. The impact of this agreement, which will be
recorded by us during the three months ended March 31, 2004, will be a
reduction in consolidated pre-tax income of $1.0 million ($0.6 million net of
tax). We and CAI are currently in discussions to simplify the terms of the
portion of the CAI Agreement governing age parity adjustments.

Chassis Holdings I, LLC

For many years, The Ivy Group, a New Jersey general partnership
composed directly or indirectly of certain of our current and former directors
and executive officers, together with certain of its principals, leased chassis
to our wholly owned subsidiary Trac Lease, Inc. ("Trac Lease") for use in Trac
Leases business. As of January 1, 2001, Trac Lease leased a total of 6,047
chassis from The Ivy Group and its principals for an aggregate annual lease
payment of approximately $2.6 million.On July 1, 2001, we restructured
our relationship with The Ivy Group and its principals to provide us with
managerial control over the 6,047 chassis previously leased by Trac Lease from
The Ivy Group and its principals. As a result of the restructuring, the partners
of The Ivy Group contributed these 6,047 chassis and certain other assets and
liabilities to a newly formed subsidiary, Chassis Holdings I LLC ("Chassis
Holdings"), in exchange for $26.0 million face value of preferred membership
units and 10% of the common membership units, and Trac Lease contributed 902
chassis and two thousand dollars in cash to Chassis Holdings in exchange for
$3.0 million face value of preferred membership units and 90% of the common
membership units. The preferred membership units are entitled to receive a
preferred return prior to the receipt of any distributions by the holders of the
common membership units. The value of the contributed chassis was determined by
taking the arithmetic average of the results of independent appraisals performed
by three nationally recognized appraisal firms in connection with our
establishment of a chassis securitization facility in July 2000. As the managing
member of Chassis Holdings, Trac Lease exercises sole managerial control over
the entitys operations. Chassis Holdings leases all of its chassis to Trac
Lease at a rental rate equal to the then current Trac Lease fleet average per
diem. Chassis Holdings and the holders of the preferred membership units are
party to a Put/Call Agreement providing that the holders of preferred units may
put such units to Chassis Holdings under certain circumstances and Chassis
Holdings has the right to redeem such units under certain circumstances. Chassis
Holdings will be required to make certain option payments to the holders of the
preferred membership units in order to preserve its right to redeem such units.
Dividends paid on the common units and distributions on the preferred units
totaling $2.9 million, $3.1 million and $1.7 million for the years ended
December 31, 2003, 2002 and 2001, respectively, are included in minority
interest (income)/expense, net in the accompanying Consolidated Statements of
Income.

Chassis Distribution Agreement

In April 2003, we agreed to become a 50% owner through an
initial investment of $0.5 million of a limited liability company (the "LLC")
formed with a foreign chassis manufacturer. The purpose of the LLC is to be the
exclusive worldwide distributor of chassis built by this manufacturer and for us
to share in the profits the LLC earns in selling these chassis to third parties.
Under the terms of the Distribution agreement for this equipment, we have agreed
to purchase approximately 15,000 chassis at preferred pricing over a ten-year
period, of which 1,100 chassis were ordered by us during 2003. We may elect to
purchase additional equipment during the ten-year period at identical terms. The
LLC began operations during the second quarter of 2003. We consolidate the
financial statements of the LLC.

Stock Repurchases

During 1999, we authorized the repurchase of up to 1,000,000
shares of our common stock from time to time through open market purchases or
privately negotiated transactions. No shares were repurchased during 2003.
During 2002, we purchased 9,300 shares for an aggregate price of $0.13 million.
During the fourth quarter of 2001, we purchased 58,100 shares for an aggregate
purchase price of $0.9 million.

United States Federal Income Tax

We are subject to federal and state income taxes as a Subchapter
"C" corporation under the Internal Revenue Code. Interpool, Trac Lease and other
United States subsidiaries file a consolidated United States federal income tax
return. This consolidated group is liable for federal income taxes on its
worldwide income.

Personal Holding Company Issues. The federal
income tax laws have two requirements for classifying a company as a personal
holding company. We and our subsidiaries currently satisfy the first
requirement, the ownership of more than 50% of the value of Interpools
stock by five or fewer individuals. Whether or not we or any of our subsidiaries
satisfy the second requirement (that at least 60% of such corporations
adjusted ordinary gross income constitutes personal holding company income) will
depend upon such corporations income mix.

Based upon the operating results for 2003, we will not be
considered a personal holding company for federal income tax purposes for 2003
(and possibly in subsequent years). If, we or any of our subsidiaries were
classified as a personal holding company for federal income tax purposes, in
addition to our regular federal income tax liability, our undistributed personal
holding company income (generally taxable income with certain adjustments,
including a deduction for federal income taxes and dividends paid) would be
subject to a personal holding company tax at the rate of 15%. Management
anticipates that for the immediate future, our current level of dividends will
be sufficient to avoid having any undistributed personal holding company income,
and thus does not anticipate that any personal holding company tax will be
imposed. There can be no assurance, however, that we will not at some point in
the future become liable for personal holding company tax. Furthermore, we may
at some point in the future elect to increase the dividend rate on our common
stock in order to avoid personal holding company tax.

We have incurred certain losses from leasing activities that are
characterized for tax purposes as "Suspended Passive Losses." These losses can
be carried forward indefinitely to offset income from future leasing activities.
As of December 31, 2003, such suspended passive losses totaled approximately
$220.7 million.

Trac Lease. Trac Lease has approximately $15.6
million of net operating loss carry-forwards for federal income tax purposes,
which may be used only to offset the income of Trac Lease and, if not utilized,
will expire between 2005 and 2006. A valuation allowance has been recorded for
the full amount of these NOLs because the utilization of these NOLs prior to
their expiration is considered unlikely. The use of substantially all these loss
carry-forwards is subject to a number of limitations under federal tax laws.

Interpool Limited. Under certain circumstances,
Interpool may be liable for United States federal income taxes on earnings of
Interpool Limited and any other foreign subsidiaries of ours, whether or not
such earnings are distributed to us. This would occur if Interpool Limited
realized "Subpart F income" as defined in the Code, if it were deemed to be
a foreign personal holding company, or if it were to have an increase in
earnings invested in United States property.

Subpart F income includes foreign personal holding company
income, such as dividends, interest and rents. Although a substantial portion of
Interpool Limiteds income consists of rents from container leasing
activities, we believe that such rents are not Subpart F income because they are
derived from the active conduct of a trade or business and received from
unrelated persons. However, Interpool Limited has received some dividend and
interest income in past years, which was taxed as Subpart F income.

If Interpool Limited were treated as a foreign personal holding
company for any year, we would be taxed on the amount we would have received if
Interpool Limited had distributed all its income to us as a dividend. One of the
conditions for treating a foreign subsidiary as a foreign personal holding
company is that a minimum of 60% of the foreign subsidiarys gross income
must be foreign personal holding company income. Foreign personal holding
company income does not include rental income that constitutes at least 50% of
the subsidiarys gross income. Because we expect that rental income will
constitute at least 50% of Interpool Limiteds gross income, we do not
anticipate that Interpool Limited will be deemed a foreign personal holding
company.

A parent company is also subject to taxation when a foreign
subsidiary increases the amount of its earnings invested in United States
property during any calendar year. We do not expect that Interpool Limited will
invest any earnings in United States property.

At December 31, 2003, unremitted earnings of this subsidiary
were approximately $333.9 million. The deferred U.S. Federal Income taxes
related to the unremitted earnings of this subsidiary would be approximately
$109.4 million, assuming these earnings are taxable at the U.S. statutory rate,
net of foreign tax credits.

United States/Barbados income tax convention.
Interpool Limiteds business is managed and controlled in Barbados; it also
has a permanent establishment in the United States. Under the income tax
convention between the United States and Barbados, including any protocols and
amendments (the "Tax Convention"), any profits of Interpool Limited from leasing
of containers used in international trade generally are taxable only in Barbados
and not in the United States. Interpool Limited is entitled to the benefits of
the Tax Convention for each year that more than 50% of the shares of Interpool
Limited are owned, directly or indirectly, by United States citizens or
residents and its income is not used in substantial part, directly or
indirectly, to meet liabilities to persons who are not residents or citizens of
the United States. We believe that Interpool Limited passes both of these tests
and should continue to be eligible for the benefits of the Tax Convention, but
there can be no assurance as to this continued eligibility. If Interpool Limited
ceased to be eligible for the benefits of the Tax Convention, a substantial
portion of its income would become subject to the 35% United States federal
income tax and the 30% branch profits tax.

The Tax Convention does not afford Interpool Limited any relief
from the personal holding company tax or any other tax that may be imposed on
the undistributed earnings of a Barbados corporation. To the extent that
Interpool Limited has United States source income that is personal holding
company income or is not needed in its business, Interpool Limited could be
taxed on this income unless it is distributed to Interpool as a dividend. We
expect that Interpool Limited would distribute this income to Interpool.

As a company resident in Barbados, Interpool Limited is required
to file tax returns in Barbados and pay any tax liability to Barbados. However,
no Barbados tax returns have been prepared or filed for Interpool Limited for
any period subsequent to its 1997 tax year, because such tax returns are
required to be accompanied by audited financial statements for Interpool
Limited, which are not available. We believe that the failure to file these
returns has not resulted in any underpayment of taxes, interest or penalties
(other than a nominal late filing penalty recently enacted in Barbados), because
we believe that no Barbados taxes would have been due for the years for which
returns have not been filed. We further believe that Interpool Limiteds
failure to file these returns would not present any other material risk to
Interpool. Nonetheless, we intend to have the necessary Interpool Limited
financial statements prepared and audited as promptly as practicable so that
Interpool Limiteds Barbados tax returns can be filed as required.

July 2004 Protocol to the United States and
Barbados Tax Treaty

Interpool Limited currently
claims treaty benefits under the United States and Barbados income tax treaty
("Treaty"). The Treaty contains a limitation on benefits provision
which denies treaty benefits under certain circumstances. However, Interpool
Limited currently does not fall within the Treatys limitation on benefits
provision.

On July 14, 2004, the United States and Barbados signed a
protocol to the Treaty ("Protocol") that contains a more restrictive limitation
on benefits provision than the current Treaty does. If ratified, the Protocol
might result in Interpool Limited losing its ability to rely on the Treaty to
eliminate current U.S. income tax on its container rental and container sales
income. This Protocol will not take effect until it is ratified by the United
States Senate and the government of Barbados. It is currently uncertain whether
the Senate will take action before it adjourns later in 2004. The Protocol is
generally effective for taxable years commencing on or after the first of
January in the year following the year the Protocol is ratified.

Under the Protocol, Interpool Limited would only be eligible for
Treaty benefits with respect to its container rental and sales income if, among
other things, Interpool, Inc. is listed on a "recognized stock exchange"
(generally, the NASDAQ system or an SEC registered exchange such as the New York
Stock Exchange), and Interpool, Inc.s stock is "primarily" and "regularly"
traded on such exchange.

As described elsewhere in this report, our common stock is
currently not listed on a "recognized stock exchange" within the meaning of the
Protocol. Management anticipates that Interpool, Inc. will examine all of its
options with regard to listing on a "recognized stock exchange" and anticipates
applying for a listing as soon as it is current with its SEC filings. However,
even if Interpool Inc. is listed on a "recognized stock exchange" as of the date
the Protocol comes into effect, it is not clear whether Interpool, Inc. would
satisfy the "primarily" and "regularly" traded requirement as defined within the
Protocol. If Interpool, Inc. does not believe that it can satisfy this
requirement, it will investigate alternatives to Interpool Limited being a
resident in Barbados that will still entitle Interpool Limited to treaty
benefits under another tax treaty with the U.S. Any such alternative would
likely result in Interpool Limited being subject to a higher non-U.S. tax than
the approximate 3% tax rate it currently enjoys in Barbados.

State and Local Taxes

Income taxes. Interpool and Trac Lease are liable
for state and local income taxes on their income, and Interpool Limited is
liable for state and local income taxes on its earnings attributable to
operations in the United States.

Sales tax. To date, Interpool Limited and Trac
Lease generally have not paid sales taxes on their leasing revenues to the
states in which they conduct business because management has believed such
revenues to be exempt from state sales taxes on several grounds, including a
long-standing interpretation of the Commerce Clause of the United States
Constitution that would prohibit the imposition of a tax on cargo containers and
chassis used primarily for transportation of goods in interstate commerce or
international trade. In the early 1990s, Itel Containers International
Corp. ("Itel"), a container leasing company, challenged an attempt by the State
of Tennessee to collect sales tax on Itels proceeds from the leasing of
containers delivered in Tennessee. In a ruling by the United States Supreme
Court in February 1993, Itels position was rejected and the Court upheld
the right of Tennessee to impose sales tax on leasing revenues from containers
delivered in Tennessee. We cannot predict the extent to which states other than
Tennessee will now attempt to collect sales tax on our equipment leasing
revenues based on this Supreme Court decision. Under the terms of our equipment
leases, we would generally be entitled to pass any such sales tax on to our
lessees.

Inflation

Management believes that inflation has not had a material
adverse effect on our results of operations. In the past, the effects of
inflation on administrative and operating expenses have been largely offset
through economies of scale achieved through expansion of the business.

Critical Accounting Policies and
Estimates

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to use judgment in making estimates and assumptions that
affect reported amounts of assets and liabilities, the reported amounts of
income and expense during the reporting period and the disclosure of contingent
assets and liabilities at the date of the financial statements. Management has
identified the policies and estimates below as critical to our business
operations and the understanding of our results of operations. For a detailed
discussion on these and other significant accounting policies See Note 1 to the
Consolidated Financial Statements. These policies and estimates are considered
critical due to the existence of uncertainty at the time the estimate is made,
the likelihood of changes in estimates from period to period and the potential
impact that these estimates can have on our financial statements. The following
accounting policies and estimates include inherent risks and uncertainties
related to judgments and assumptions made by management. Managements
estimates are based on the relevant information available at the end of each
period.

Allowance for Doubtful Accounts  The
allowance for doubtful accounts is set on a quarterly basis and is based on the
risk profile of the receivables, credit quality indicators such as the level of
past due amounts and non-performing accounts and economic conditions, as well as
the value of underlying collateral. Changes in economic conditions or other
events may necessitate additions or deductions to the allowance for doubtful
accounts. The allowance is intended to provide for losses inherent in the
accounts receivable, and requires the application of estimates and judgments as
to the outcome of collection efforts and the realization of collateral, among
other things.

Accounting for Leasing Equipment  Long lived
assets are depreciated on a straight-line basis over their estimated useful
lives to residual values that approximate fair value. Equipment useful lives are
based upon actual experience in our fleet as well as the useful lives assigned
to the equipment by independent appraisers. We continue to review our
depreciation policies on a regular basis to evaluate if changes have taken place
that would suggest that a change in the depreciation policies is warranted.
Periodically a determination is made as to whether the carrying amount of the
fleet exceeds its estimated future undiscounted cash flows. In addition, all
idle equipment is evaluated to determine whether the units will be repaired and
returned to service or sold based upon the best economic alternative. Assets to
be disposed are reported at the lower of the carrying amount or fair value.

Lease Residual Values  Operating lease
equipment is carried at cost less accumulated depreciation and is depreciated to
estimated residual values using the straight-line basis of depreciation over
their estimated useful lives. Direct financing leases are recorded at the
aggregated future minimum lease payments, including any bargain or economically
compelled purchase options granted to the customer, less unearned income. We
generally bear greater risk in operating lease transactions (versus finance
lease transactions) as the duration of an operating lease is shorter relative to
the equipment useful life than a finance lease. Management performs annual
reviews of the estimated residual values which can vary depending on a number of
factors.

Goodwill  Goodwill, in accordance with SFAS
No. 142, is reviewed for possible impairment at least annually during the fourth
quarter of each fiscal year. A review of goodwill may be initiated prior to
conducting the annual analysis if events or changes in circumstances indicate
that the carrying value of goodwill may be impaired. During this review,
management relies on a number of factors including operating results, business
plans, economic projections, anticipated future cash flows and market place
data.

Accounting for Customer Defaults  We have
sought to reduce credit risk by maintaining insurance against customer
insolvency and equipment related losses. We cease the recognition of lease
revenues for amounts billable to the lessee after the lease default date at the
time we determine that such amounts are not probable of collection from the
lessee. In connection with the accounting for the insurance policy, we record a
receivable which is limited to the actual costs incurred or losses recognized
that would have been billable to the lessee pursuant to the lease contract
(which are also covered by the insurance contract). Items that are covered under
the insurance contract, for amounts billable to the lessee in accordance with
the lease, that are in excess of costs incurred and losses recognized by us, are
considered a gain contingency.

Derivative Financial Instruments  We utilize
interest rate swaps to hedge against the effects of future interest rate
fluctuations. We do not enter into derivative financial instruments for trading
or speculative purposes.

On January 1, 2001, we adopted SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"). Derivative
instruments are recognized in the Consolidated Balance Sheet at their fair
values in accounts payable and accrued expense and changes in fair values are
recognized immediately in earnings, unless the derivatives qualify as hedges of
future cash flows. For derivatives qualifying as hedges of future cash flows,
the effective portion of changes in fair value is recorded temporarily in
accumulated other comprehensive loss as a separate component of equity, and
contractual cash flows, along with the related impact of the hedged items,
continue to be recognized in earnings. Any ineffective portion of a hedge is
reported in current earnings. Amounts accumulated in other comprehensive loss
are reclassified to earnings in the same period that the hedged transaction
impacts earnings.

The net interest differential, including premiums paid or
received, if any, on interest rate swaps, is recognized on an accrual basis as
an adjustment to interest expense to correspond with the hedged position. We
may, at our discretion, terminate or redesignate any interest rate swap
agreement prior to maturity. At that time, any gains or losses on termination
would continue to amortize into income to correspond to the recognition of
interest on the hedged debt. If such debt instrument was also terminated, the
gain or loss associated with the terminated derivative included in accumulated
other comprehensive loss at the time of termination of the debt would be
recognized in the Consolidated Income Statement at that time.

Income Taxes  Deferred tax liabilities and
assets are recognized for the expected future tax consequences of events that
have been reflected in the Consolidated Financial Statements. Deferred tax
liabilities and assets are determined based on the differences between the book
values and the tax basis of particular assets and liabilities, using tax rates
in effect for the years in which the differences are expected to reverse. A
valuation allowance is provided to offset any net deferred tax assets if, based
upon the available evidence which may be subject to management estimates, it is
more likely than not that some or all of the deferred tax assets will not be
realized.

We currently receive tax benefits under an income tax convention
between the United States and Barbados, the jurisdiction in which our
subsidiary, Interpool Limited, operates our container business, is incorporated.
Specifically, under that income tax convention, any profits of Interpool Limited
from leasing of containers used in international trade, generally are taxable
only in Barbados at an approximate 3% tax rate, and not in the United States.
Interpool Limited is entitled to the benefits of the tax convention for each
year that more than 50% of the shares of Interpool Limited are owned, directly
or indirectly, by United States citizens or residents and its income is not used
in substantial part, directly or indirectly, to meet liabilities to persons who
are not residents or citizens of the United States. We believe that Interpool
Limited passes both of these tests and should continue to be eligible for the
benefits of the tax convention, but there can be no assurance as to this
continued eligibility. Historically, no deferred U.S. Federal income taxes have
been provided on the unremitted earnings of the subsidiary since it is our past
practice and future intention to permanently reinvest such earnings. We have
documented our ability to reinvest earnings generated annually from our
international operations. This documentation contains certain management
judgments and estimates of economic conditions and the future demand for
containers. Any unremitted earnings that we would be unable to reinvest in our
international operations could be subject to taxation at United States tax
rates.

On July 14, 2004, the United States and Barbados signed a
protocol to the Treaty ("Protocol") that contains a more restrictive limitation
on benefits provision than the current Treaty does. If ratified, the Protocol
might result in Interpool Limited losing its ability to rely on the Treaty to
eliminate current U.S. income tax on its container rental and container sales
income. This Protocol will not take effect until it is ratified by the United
States Senate and the government of Barbados. It is currently uncertain whether
the Senate will take action before it adjourns later in 2004. The Protocol is
generally effective for taxable years commencing on or after the first of
January in the year following the year the Protocol is ratified.

Under the Protocol, Interpool Limited would only be eligible for
Treaty benefits with respect to its container rental and sales income if, among
other things, Interpool, Inc. is listed on a "recognized stock exchange"
(generally, the NASDAQ system or an SEC registered exchange such as the New York
Stock Exchange), and Interpool, Inc.s stock is "primarily" and "regularly"
traded on such exchange.

As described elsewhere in
this report, our common stock is currently not listed on a "recognized
stock exchange" within the meaning of the Protocol. Management anticipates
that Interpool, Inc. will examine all of its options with regard to listing on a
"recognized stock exchange" and anticipates applying for a listing as
soon as it is current with its SEC filings. However, even if Interpool Inc. is
listed on a "recognized stock exchange" as of the date the Protocol
comes into effect, it is not clear whether Interpool Inc. would satisfy the
"primarily" and "regularly" traded requirement as defined
within the Protocol. If Interpool, Inc. does not believe that it can satisfy
this requirement, it will investigate alternatives to Interpool Limited being a
resident in Barbados that will still entitle Interpool Limited to treaty
benefits under another tax treaty with the U.S. Any such alternative would
likely result in Interpool Limited being subject to a higher non-U.S. tax than
the approximate 3% tax rate it currently enjoys in Barbados.

Recent Accounting Pronouncements

In June 2002, the FASB issued SFAS No. 146, Accounting for
Costs Associated with Exit or Disposal Activities("SFAS 146"). SFAS 146
requires that a liability for costs associated with exit or disposal activities
be recognized when the liability is incurred. Existing U.S. GAAP provides for
the recognition of such costs at the date of managements commitment to an
exit plan. In addition, SFAS 146 requires that the liability be measured at fair
value and be adjusted for changes in estimated cash flows. The provisions of the
new standard are effective for exit or disposal activities initiated after
December 31, 2002. Adoption of SFAS 146 did not materially affect our
Consolidated Financial Statements.

In November 2002, the FASB issued FASB Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others("FIN 45"). FIN 45
elaborates on the disclosures to be made by a guarantor in interim and annual
financial statements about its obligations under certain guarantees it has
issued. A guarantor is required to disclose (a) the nature of the guarantee,
including the approximate term, how the guarantee arose, and the events and
circumstances that would require the guarantor to perform under the guarantee;
(b) the maximum potential amount of future payments under the guarantee; (c) the
carrying amount of the liability, if any, for the guarantors obligation
under the guarantee; and (d) the nature and extent of any recourse provisions or
available collateral that would enable the guarantor to recover the amounts paid
under the guarantee. FIN 45 also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. Disclosure requirements are
effective for financial statements with periods ending after December 15, 2002
while the initial recognition and initial measurement provisions shall be
applied on a prospective basis to guarantees issued or modified after December
31, 2002. We have adopted the provisions of FIN 45 as required. (See Note 9 to
the Consolidated Financial Statements for disclosures regarding our guarantees.)
The adoption of FIN 45 did not have a material impact on our Consolidated
Financial Statements.

In December 2003, the FASB issued FASB Interpretation No. 46
(revised December 2003), Consolidation of Variable Interest Entities
("FIN 46R") which addresses how a business should evaluate whether it has a
controlling financial interest in an entity through means other than voting
rights and accordingly should consolidate the entity. FIN 46R revised FASB
Interpretation No. 46 which was issued in January 2003. We adopted FIN 46R as of
December 31, 2003. There was no impact on our financial condition or results of
operations.

In May 2003, the FASB issued SFAS No. 150, Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity ("SFAS 150"). This statement establishes standards for the
classification and measurement of certain financial instruments with
characteristics of both liabilities and equity. The statement also includes
required disclosures for financial instruments within its scope. This
pronouncement required the Company to display the Company-Obligated Mandatorily
Redeemable Preferred Securities in Subsidiary Grantor Trusts within the
liability section on the face of the Consolidated Balance Sheets. Most of the
guidance in SFAS 150 is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. On November 7, 2003, the
provisions of SFAS 150, relating to mandatorily redeemable non-controlling
interest, were deferred indefinitely. The adoption of SFAS 150 did not affect
our financial conditions or results of operations.

In November 2003, the Emerging Issues Task Force ("EITF") issued
EITF Issue No. 03-1. The Meaning of Other-Than-Temporary Impairment and its
Application to Certain Investments. Issue 03-1 requires new tabular and
narrative disclosure items effective for fiscal years ending after December 15,
2003. Companies are required to provide expanded information about their debt
and marketable equity securities with market values below carrying values. The
narrative information must include positive and negative information management
considered in concluding the unrealized loss was not other-than-temporary and
therefore was not recognized in earnings. For further discussion regarding
unrealized holding losses, See Note 1 to the Consolidated Financial Statements.

|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------

Index to Consolidated Financial Statements

|INTERPOOL, INC.                                                                                                    | Page No.
|------------------------------------------------------------------------------------------------------------------ | --------
|                                                                                                                   |         
|Report of Independent Registered Public Accounting Firm                                                            | 40      
|                                                                                                                   |         
|Consolidated Balance Sheets--At December 31, 2003 and 2002                                                         | 41      
|                                                                                                                   |         
|Consolidated Statements of Income For the Years Ended December 31, 2003,
   2002 and 2001                          | 42      
|                                                                                                                   |         
|Consolidated Statements of Changes in Stockholders' Equity For the Years Ended
   December 31, 2003, 2002 and 2001 | 43      
|                                                                                                                   |         
|Consolidated Statements of Cash Flows For the Years Ended December 31, 2003,
   2002 and 2001                      | 44      
|                                                                                                                   |         
|Notes to Consolidated Financial Statements                                                                         | 45      

Report of Independent Registered
Public Accounting Firm

The Board of Directors
Interpool, Inc.:

We have audited the
accompanying consolidated balance sheets of Interpool, Inc. (a Delaware
corporation) and subsidiaries as of December 31, 2003 and 2002 and the related
consolidated statements of income, changes in stockholders equity and cash
flows for each of the years in the three year period ended December 31, 2003.
These consolidated financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit 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, the
consolidated financial statements referred to above presents fairly, in all
material respects, the financial position of Interpool, Inc. and subsidiaries as
of December 31, 2003 and 2002, and the results of their operations and their
cash flows for each of the years in the three year period ended December 31,
2003 in conformity with U.S. generally accepted accounting principles.

As discussed in Notes 1 and
5 to the consolidated financial statements, in 2002 the Company changed its
method of accounting for (i) goodwill and (ii) the impairment or disposal of
long-lived assets and in 2001 the Company changed its method of accounting for
derivative instruments.

(signed) KPMG LLP

Short Hills, N.J.
August 16, 2004, except for Note 1(v) and Note 1(w) which are as of
June 6, 2005

INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2003 AND 2002
(dollars in thousands, except share and per share amounts)

`ASSETS                                                                                               2003            2002
                                                                                                     ----            ----
CASH AND CASH EQUIVALENTS                                                                           $141,019       $170,613
MARKETABLE SECURITIES, available for sale at fair value                                                   24          1,467
ACCOUNTS RECEIVABLE, less allowance of $16,358 and $14,033, respectively                              69,055         63,950
NET INVESTMENT IN DIRECT FINANCING LEASES                                                            426,815        334,129
OTHER RECEIVABLES, net                                                                                25,485         26,691
LEASING EQUIPMENT, net of accumulated depreciation and amortization of $522,431 and $464,366,
     respectively                                                                                  1,636,716      1,557,639
OTHER INVESTMENT SECURITIES, available for sale at fair value                                         --             10,319
OTHER ASSETS                                                                                          73,922         75,234
ASSETS OF BUSINESS TRANSFERRED UNDER CONTRACTUAL AGREEMENT                                            --              1,902
TOTAL ASSETS                                                                                      $2,373,036     $2,241,944
LIABILITIES
ACCOUNTS PAYABLE AND ACCRUED EXPENSES                                                               $198,062       $160,013
INCOME TAXES:
     Current                                                                                             367           (196)
     Deferred                                                                                         37,392         31,869
TOTAL TAXES                                                                                           37,759         31,673

DEFERRED INCOME                                                                                        2,704          3,688
DEBT AND CAPITAL LEASE OBLIGATIONS
     Due within one year                                                                             219,192        161,407
     Due after one year                                                                            1,421,495      1,435,804
         TOTAL DEBT AND CAPITAL LEASE OBLIGATIONS                                                  1,640,687      1,597,211

LIABILITIES OF BUSINESS TRANSFERRED UNDER CONTRACTUAL
     AGREEMENT                                                                                        --              1,902
COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES IN SUBSIDIARY GRANTOR TRUSTS
     (holding solely Junior Subordinated Deferrable Interest Debentures of the Company)
     (75,000 shares 9-7/8% Capital Securities outstanding, liquidation preference $75,000)            75,000         75,000
TOTAL LIABILITIES                                                                                 $1,954,212     $1,869,487

MINORITY INTEREST IN EQUITY OF SUBSIDIARIES                                                           35,184         35,461

STOCKHOLDERS' EQUITY
     Preferred stock, par value $.001 per share; 1,000,000 authorized, none issued                       ---            ---
     Common stock, par value $.001 per share; 100,000,000 shares authorized, 27,602,452
       and 27,579,952 issued at December 31, 2003 and 2002, respectively                                  28             28
     Additional paid-in capital                                                                      128,538        126,165
     Unamortized deferred compensation                                                                (1,184)           ---
     Treasury stock, at cost, 225,900 shares at December 31, 2003 and 2002                            (2,229)        (2,229)
     Retained earnings                                                                               272,815        238,030
     Accumulated other comprehensive loss                                                            (14,328)       (24,998)
TOTAL STOCKHOLDERS' EQUITY                                                                           383,640        336,996
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                        $2,373,036     $2,241,944
          The accompanying notes to consolidated financial statements are an integral part of these balance sheets.`

INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001(dollars in thousands, except share and per share amounts)

`2003          2002           2001
                                                                                         ----          ----           ----

REVENUES:
Equipment leasing revenue, including income recognized on direct financing leases
   of $46,362, $36,246 and $26,499, respectively                                       $374,287     $325,080       $338,718
Other revenue                                                                            27,825       19,855         14,673
                                                                                         ------       ------         ------
TOTAL REVENUES                                                                          402,112      344,935        353,391
                                                                                        -------      -------        -------
COSTS AND EXPENSES:
  Lease operating expenses                                                              111,686       93,797        101,817
  Administrative expenses                                                                49,734       27,945         41,745
  Provision for doubtful accounts                                                         4,248        7,843          9,001
  Fair value adjustment for derivative instruments                                         (837)       5,530          8,248
  Depreciation and amortization of leasing equipment                                     91,553       93,538         79,678
  Losses for investments accounted for under the equity method                            1,698        6,603            804
  Other (income)/expense, net                                                            (5,079)       1,131         (9,798)
  Interest expense                                                                      106,688      108,344         98,270
  Interest income                                                                        (3,960)      (4,638)        (9,439)
                                                                                         ------       ------         ------
                                                                                        355,731      340,093        320,326
                                                                                        -------      -------        -------
Income before minority interest (expense)/income and provision/(benefit) for
  income taxes                                                                           46,381        4,842         33,065
MINORITY INTEREST (EXPENSE)/ INCOME, NET                                                 (1,910)      (1,846)           439
                                                                                         ------       ------            ---
Income before provision/(benefit) for income taxes                                       44,471        2,996         33,504
PROVISION/(BENEFIT) FOR INCOME TAXES                                                      3,281       (1,393)         5,400
                                                                                          -----       ------          -----
NET INCOME                                                                              $41,190       $4,389        $28,104
                                                                                        =======       ======        =======
INCOME PER SHARE
NET INCOME PER SHARE:
     Basic                                                                                $1.51        $0.16          $1.03
                                                                                          =====        =====          =====
     Diluted                                                                              $1.42        $0.15          $0.97
                                                                                          =====        =====          =====
WEIGHTED AVERAGE SHARES OUTSTANDING (in thousands):
     Basic                                                                               27,365       27,360         27,417
                                                                                         ======       ======         ======
     Diluted                                                                             30,396       29,202         28,973
                                                                                         ======       ======         ======`

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

INTERPOOL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001(dollars and shares in thousands)

`Acum.
                                Common Stock                                                    Other
                              ----------------  Additional  Unamortized                          Comp.                Total Share-
                                         Par     Paid-in    Deferred    Treasury   Retained     Income   Comp-Income     holder's
                               Shares   Value    Capital   Compensation  Stock     Earnings     (Loss)      (Loss)        Equity
                               ------   -----    -------   ------------  -----     --------     ------      ------        ------
BALANCE, December 31, 2000,
as previously reported         27,580    $28     $124,182      $ --     $(1,170)    $216,245     $1,234                  $340,519

Adjustment (See Note 1)            --     --           --        --          --          803         --           --          803

BALANCE, December 31, 2000,
as adjusted                    27,580    $28     $124,182      $ --     $(1,170)    $217,048     $1,234                  $341,322

Net income                         --     --           --        --          --       28,104         --       28,104       28,104

Other comprehensive loss           --     --           --        --          --           --    (11,141)     (11,141)     (11,141)
                                                                                                             -------
Comprehensive income                                                                                         $16.963
                                                                                                             =======
Purchase of 58,100 shares
  of treasury stock                --     --           --        --        (929)          --         --                      (929)

Cash dividends declared:

  Common stock, $.1925  per
  share                            --     --           --        --          --       (5,284)        --                    (5,284)
                                  ---    ---          ---       ---         ---       ------        ---                    ------

BALANCE, December 31, 2001     27,580     28      124,182        --      (2,099)     239,868     (9,907)                  352,072

Net income                         --     --           --        --          --        4,389         --        4,389        4,389

Other comprehensive loss           --     --           --        --          --           --    (15,091)     (15,091)     (15,091)
                                                                                                             -------
Comprehensive loss                                                                                          $(10,702)
                                                                                                            ========
Purchase of 9,300 shares of
  treasury stock                   --     --           --        --        (130)          --         --                      (130)

Capital contribution by
  officers and directors           --     --        1,983        --          --           --         --                     1,983


Cash dividends declared:

  Common stock, $.2275  per
  share                            --     --           --        --          --       (6,227)        --                    (6,227)
                                  ---    ---          ---       ---         ---       ------        ---                    ------

BALANCE, December 31, 2002     27,580     28      126,165        --      (2,229)     238,030    (24,998)                  336,996

Net income                         --     --           --        --          --       41,190         --      $41,190       41,190

Other comprehensive income         --     --           --        --          --           --     10,670       10,670       10,670
                                                                                                              ------
Comprehensive income                                                                                         $51,860
                                                                                                             =======
Capital contribution by
  officers and directors           --     --          698        --          --           --         --                       698

Options exercised                  22     --          351        --          --           --         --                       351

Restricted stock award             --     --        1,324    (1,324)         --           --         --                        --

Amortization of restricted
stock award                        --     --           --       140          --           --         --                       140

Cash dividends declared:

  Common stock, $.25 per
  share                            --     --           --        --          --       (6,405)        --                    (6,405)
                                  ---    ---          ---       ---         ---       ------        ---                    ------
BALANCE, December 31, 2003     27,602    $28     $128,538   $(1,184)    $(2,229)    $272,815   $(14,328)                 $383,640
                               ======    ===     ========   =======     =======     ========   ========                  ========`

The
accompanying notes to the Consolidated Financial Statements are an integral part
of these statements.

(dollars
   in thousands)

`2003             2002            2001
CASH FLOWS FROM OPERATING ACTIVITIES:                                                -----           ------           -----

Net income                                                                            $41,190       $  4,389        $  28,104
Adjustments to reconcile net income to net cash provided by operating activities --
   Depreciation and amortization                                                       97,289        101,007           88,565
   Accrued losses on business transferred under contractual agreement                       -         13,780                -
   Provision/(benefit) for deferred income taxes                                        1,808         (3,118)           3,502
   (Gain)/loss on sale of leasing equipment                                            (1,213)         4,257            1,223
   Loss on sale of marketable securities                                                   50             30                -
   Gain on sale of assets held for sale                                                     -              -           (1,774)
   Gain on sale of land held for sale                                                       -         (4,766)               -
   Provision for uncollectible accounts                                                 4,248          7,843            9,001
   Gain on retirement of debt                                                               -         (1,118)            (930)
   Restricted stock grant expense                                                         140              -                -
   Fair value adjustment for derivative instruments                                      (837)         5,530            8,248
   Losses for investments accounted for under the equity method                         1,698          6,603              804
   Sale of assets held for sale                                                             -              -          291,587
   Other, net                                                                             670        (14,290)         (17,538)
                                                                                     --------       ---------        ---------
         Net cash provided by operating activities                                    145,043        120,147          410,792
                                                                                     --------       ---------        ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of leasing equipment                                                     (197,713)      (191,938)        (201,370)
Proceeds from dispositions of leasing equipment                                        16,828         12,041           15,635
Purchase of leasing equipment for resale                                              (34,814)             -                -
Proceeds from disposal of leasing equipment for resale                                 37,558              -                -
Proceeds from sale of land                                                                  -          7,955                -
Investment in direct financing leases                                                (109,254)       (64,088)        (126,792)
Cash collections on direct financing leases                                            77,793         59,749           65,298
Purchase of marketable securities                                                         (10)        (1,494)            (498)
Sales and matured marketable securities and other investing activities                  1,445            574                -
Investment in and advances to subsidiary                                                    -            765                -
Proceeds from minority interest partner in chassis distributor                            500              -                -
                                                                                          ---             --               --
         Net cash used for investing activities                                      (207,667)      (176,436)        (247,727)
                                                                                     --------       ---------        ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt                                                        211,813      1,227,406          146,315
Payment of long-term debt and capital lease obligations                              (204,229)    (1,023,645)        (237,292)
Borrowings of revolving credit lines                                                   88,000         47,000          238,992
Repayment of revolving credit lines                                                   (56,505)      (121,846)        (358,816)
Purchase of treasury stock                                                                  -           (130)            (929)
Dividends paid                                                                         (6,049)        (5,643)          (4,799)
                                                                                     --------       ---------        ---------
Net cash provided by (used for) financing activities                                   33,030        123,142         (216,529)
                                                                                     --------       ---------        ---------
Net (decrease)/increase in cash and short-term investments                            (29,594)        66,853          (53,464)
CASH AND CASH EQUIVALENTS, beginning of period                                        170,613        103,760          157,224
                                                                                     --------       ---------        ---------
CASH AND CASH EQUIVALENTS, end of period                                             $141,019       $170,613         $103,760
                                                                                     ========       =========        =========
Supplemental schedule of non-cash financing activities:
Direct finance lease financed through capital lease obligation                         $4,397        $10,284               $-
Assumption of debt in connection with sale of assets held for sale                         $-             $-          $58,037
Transfers from leasing equipment to direct finance leases                             $22,124        $40,227               $-
Increase in minority interest in consolidated subsidiary from contribution of
equipment                                                                                  $-             $-          $26,326

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

INTERPOOL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1)     Nature of
operations and significant accounting policies:

The nature of operations and the significant accounting policies
used by Interpool, Inc. and subsidiaries (the "Company" or "Interpool") in the
preparation of the accompanying consolidated financial statements are summarized
below. The Company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
("U.S. GAAP").

(a)     Nature of operations--

The Company and its subsidiaries conduct business principally in
a single industry segment, the leasing of intermodal dry freight standard
containers, chassis and other transportation related equipment. Within this
single industry segment, the majority of the Companies operations come from two
reportable segments: container leasing and domestic intermodal equipment
leasing. The container leasing segment specializes primarily in the leasing of
intermodal dry freight standard containers, while the domestic intermodal
equipment segment specializes primarily in the leasing of intermodal container
chassis. The Company leases its containers principally to international
container shipping lines located throughout the world. The customers for the
Companys chassis are a large number of domestic companies, many of which
are domestic subsidiaries or branches of international shipping lines, as well
as major U.S. railroads. Equipment is purchased directly or acquired through
conditional sales contracts and lease agreements, many of which qualify as
capital leases.

The Companys container leasing operations are conducted
through our wholly-owned subsidiary, Interpool Limited, a Barbados corporation.
Profits of Interpool Limited from international container leasing operations are
exempt from federal taxation in the United States. These profits are subject to
Barbados tax at rates that are substantially lower than the applicable rates in
the United States.

The Company also had limited operations in a third reportable
segment that specialized in leasing microcomputers and related equipment. The
computer leasing segment consisted of two majority owned subsidiaries, Microtech
Leasing Corporation ("Microtech") and Personal Computer Rental Corporation
("PCR"). During the third quarter of 2001, the Company adopted a plan to exit
this segment that included i) acquiring the remaining ownership interest in
Microtech and terminating its operations, and ii) selling the
Companys ownership interest in PCR. As of December 31, 2003, the
Company was continuing to liquidate the assets of Microtech. PCRs
financial results deteriorated throughout 2002 and PCR ceased active operations
and liquidated in 2003. Notwithstanding its plan to discontinue the operations
of Microtech, such operations are reported on a continuing basis. See Note 7 to
the Consolidated Financial Statements.

Beginning June 27, 2002, the Companys consolidated
financial statements include Container Applications International, Inc. ("CAI"),
which was previously accounted for under the equity method of accounting. The
Company owns a 50% common equity interest in CAI. (See Note 12 for further
information regarding CAI.)

(b)     Basis of consolidation--

The Companys consolidated financial statements are
prepared in accordance with U.S. GAAP. The consolidated financial statements
include the accounts of the Company and subsidiaries more than 50% owned or
otherwise controlled by the Company. All significant intercompany transactions
have been eliminated. Minority interest in equity of subsidiaries represents the
minority stockholders proportionate share of the equity in the
income/(losses) of the subsidiaries.

In connection with certain investments in which the Company does
not own a majority interest or otherwise control, or have the ability to assert
significant influence over the investee, these investments are accounted for
using the equity method of accounting. The Companys investment in its
equity method investees is included in other assets on the accompanying
Consolidated Balance Sheet.

(c)     Goodwill--

On June 29, 2001, the FASB approved its proposed SFAS No. 142,
Goodwill and Other Intangible Assets("SFAS 142").SFAS 142 requires that goodwill and
intangible assets with indefinite useful lives no longer be amortized, but
instead be tested for impairment at least annually in accordance with the
provisions of SFAS 142. SFAS 142 also requires that intangible assets with
definite useful lives be amortized over their respective estimated useful lives
to their estimated residual value, and reviewed for impairment in accordance
with SFAS No. 144, Accounting for the Impairment of Long-Lived Assets to Be
Disposed Of ("SFAS 144"). Goodwill acquired in business
combinations completed before July 1, 2001 was amortized through the end of
2001.

Goodwill represents the excess of costs over the fair value of
net assets acquired and was amortized through December 31, 2001 using the
straight-line method over twenty years. Goodwill amortization for the year ended
December 31, 2001 totaled $727 which is included in other (income)/expense, net
in the accompanying consolidated statements of income. Commencing
January 1, 2002, as a result of adopting SFAS 142, goodwill is no longer
amortized but is reviewed for impairment. During December 2002, the Company
conducted its annual goodwill impairment test. The test disclosed that at
December 31, 2002 the fair value of an investment accounted for using the
equity method included in the domestic intermodal leasing segment was below its
carrying value. As a result, the Companys basis for this equity method
investment was written down by $1,095 to its estimated fair market value. During
December 2003, the Company conducted its annual goodwill impairment test. The
test disclosed that at December 31, 2003, the fair value of the goodwill was in
excess of its carrying value, therefore additional impairment charges were not
required. Total goodwill recorded at December 31, 2003 and 2002 was $5,495
for both years and is included in other assets on the accompanying Consolidated
Balance Sheet. This goodwill is included in total assets within the Domestic
Intermodal Leasing segment. If SFAS 142 had been in effect for the year ended
December 31, 2001, net income would have increased by $437, (net of tax).
The basic and diluted net income per share would have been increased by $.02 in
2001.

(d)     
Translation of foreign currencies--

The Company has determined that the U. S. dollar is its functional currency for
each of its overseas operations therefore, all gains and losses resulting from
translating foreign currency transactions into the functional currency are
included in income.

(e)     Revenues--

Equipment leasing revenues include revenue from operating leases
and income on direct financing leases, which is recognized over the term of the
lease using the effective interest method. Rental income on operating leases is
recognized on the accrual basis based on the contractual agreement with the
lease customer.

Other revenue consists primarily of fees charged to
the lessee for handling, delivery and repairs which is recognized as earned
based on the terms of the contractual agreements with the lease
customer.

(f)     
Maintenance and repair expense--

Maintenance and repair expenses are accounted for under the
direct expense method; thus these amounts are charged to operating expenses when
incurred.

(g)     Cash and cash equivalents--

The Company considers investments with original maturities of
three months or less to be cash equivalents. The Companys policy is to
invest cash in excess of short-term operating and debt service requirements in
cash equivalents. These instruments are stated at cost, which approximates
market value because of the short term nature of the instruments.

(h)     
Allowance for doubtful accounts--

The Companys allowance for doubtful accounts is provided
based upon a quarterly review of the collectibility of its receivables. This
review is based on the risk profile of the receivables, credit quality
indicators such as the level of past-due amounts and economic conditions, as
well as the value of underlying collateral. An account is considered past due
when a payment has not been received in accordance with the contractual terms.
Accounts are generally charged off after an analysis is completed which
indicates that collection of the full principal balance is in doubt. Changes in
economic conditions or other events may necessitate additions or deductions to
the allowance for doubtful accounts. The allowance for doubtful accounts is
intended to provide for losses inherent in the accounts receivable, and requires
the application of estimates and judgments as to the outcome of collection
efforts and the realization of collateral, among other things. The Company
believes its allowance for doubtful accounts is adequate to provide for credit
losses inherent on its accounts receivable. See Note 3 to the Consolidated
Financial Statements for further discussion regarding the allowance for doubtful
accounts.

(i)     Non-performing receivables--

Non performing receivables reflect both operating lease
receivables and finance lease receivables which the Company considers impaired.
When evaluating its operating and finance lease receivables for impairment, the
Company considers, among other things, the level of past-due amounts of the
respective receivable, the borrowers financial condition, credit quality
indicators of the borrower, and the value of underlying collateral.

(j)     Direct financing leases--

Direct financing leases are recorded at the aggregate future
minimum lease payments, including any purchase options granted to the customer,
less unearned income. Income from these leases is recognized over the term of
the lease using the effective interest method.

(k)     Stock-based compensation--

Stock option plans areaccounted for in accordance with SFAS No. 148, Accounting for Stock-Based
Compensation("SFAS 148").This Statement amends SFAS No.
123, Accounting for Stock-Based Compensation("SFAS 123"),
which allows for the retention of principles within Accounting Principles Board
Opinion 25, Accounting for Stock Issued to Employees. As permitted by the
Statement, the Company has chosen to continue to account for stock-based
compensation using the intrinsic value method. To date, all options were granted
with an exercise price equal to the market price of the Companys Stock at
grant date.

The following table illustrates the effect on net income and
earnings per share had the fair value method of accounting been applied to the
Companys stock compensation plans.

`Year Ended December 31,
                                                                --------------------------------------------------------
                                                                       2003              2002               2001
                                                                       -----             -----              -----
Net income, as reported                                               $41,190              $4,389          $28,104
Add:  Stock based employee compensation expense
included in net income, net of related tax effects                        383                 ---              ---
Deduct: Total stock-based employee compensation
expense determined under fair value based method
for all awards, net of related tax effects                               (452)               (112)             (72)
                                                                         -----               -----             ----
Pro forma net income                                                  $41,121              $4,277          $28,032
                                                                      =======              ======          =======

Earnings per share:
Basic-as reported                                                       $1.51               $0.16            $1.03
                                                                         ====                ====             ====
Basic-pro forma                                                         $1.50               $0.16            $1.02
                                                                         ====                ====             ====
Diluted-as reported                                                     $1.42               $0.15            $0.97
                                                                         ====                ====             ====
Diluted-pro forma                                                       $1.42               $0.15            $0.97
                                                                         ====                ====             ====`

This pro forma impact only takes into account options granted
since January 1, 1995. The average fair value of options granted during 2002 was
$6.66. The fair value was estimated using the Black-Scholes Option pricing model
based on the market price at Grant Date of $13.73 and the following assumptions:
risk-free interest rate of 3.5%, expected life of 7 years, volatility of 50% and
dividend yield of 1.31%. No Options were granted by the Company in 2003 or 2001.

(l)     Insurance receivables--

The Company has maintained insurance coverage in the event of a
lessees insolvency, bankruptcy or default. Amounts recorded as an
insurance claim receivable are included in other receivables, net in the
Consolidated Balance Sheets and are limited to those amounts that are probable
of collection and include only incurred costs and losses related to the
insurable event. Amounts recorded as insurance claim receivable are recorded in
other (income)/expense, net in the Consolidated Statements of Income. Upon
collection of the receivable from the insurance carriers, any amounts in excess
of or less than the receivable recorded would be recorded as other
(income)/expense, net in the Consolidated Statements of Income.

(m)     Property and equipment--

The Company states property and equipment at cost, except for
property and equipment that has been impaired, for which the Company reduces the
carrying amount to the estimated fair value at the impairment date. Property and
equipment is included in other assets on the accompanying Consolidated Balance
Sheet. The Company capitalizes significant improvements; the Company charges
repairs and maintenance costs that do not extend the lives of the assets to
expense as incurred. The Company removes the cost and accumulated depreciation
of assets sold or otherwise disposed of from the accounts and recognizes any
resulting gain or loss upon the disposition of the assets.

The Company depreciates the cost of property and equipment over
their estimated useful lives on a straight-line basis as follows: buildings
 40 years; furniture and fixtures  3 to 7 years; computers and
office equipment  3 to 5 years; and other property and equipment  3
to 10 years.

(n)     Leasing equipment--

The Company records equipment at cost, except for equipment that
it considers impaired. When equipment is considered impaired, the Company
reduces the carrying amount to the equipments estimated fair value at the
impairment date. The Company capitalizes significant improvements if such
improvements extend the life of the equipment. The Company charges repair and
maintenance costs that do not extend the lives of the assets to expense as
incurred. Upon disposition of equipment, the Company removes the cost and
accumulated depreciation of assets disposed of from the accounts and recognizes
any resulting gain or loss.

Depreciation and amortization of leasing equipment (both
equipment on-lease to customers and available for hire) is provided under the
straight-line method based upon the following estimated useful lives:

`Dry freight standard containers                    12.5 years
                 Chassis                                            17.5 to 22.5 years
                 Other                                              3 to 15 years`

In March 2002, the Company completed a $500,000 chassis
securitization facility. At that time, independent appraisals indicated a
chassis useful life of between 20 and 25 years. As a result, effective April 1,
2002, the Company revised its estimate of the useful life of certain of its
chassis from 17.5 years to 22.5 years. The effect of this change was to decrease
depreciation expense by $6,866 ($4,120 net of tax) for the year ended December
31, 2002 which resulted in a $0.15 and $0.14 increase in the basic and diluted
net income per share, respectively. The valuations and in-depth review concluded
that no change was required to the residual value of the Companys chassis.

CAI, the Companys 50% owned subsidiary, had an independent
valuation performed on its container fleet to determine the useful life of the
containers as well as the estimated market value at the end of their useful
life. As a result, effective April 1, 2002, the Company adjusted the useful life
for all of its containers to 12.5 years (previously 12.5 to 15 years) and
changed its residual values to the estimated market value of the containers as
determined by the appraisal. The effect of these changes for the year ended
December 31, 2002 was to decrease depreciation expense of the Company by $489.
In addition, the Company recognized additional depreciation recorded by CAI
prior to June 27, 2002 of $626 that was recorded by the Company in loss for
investments accounted for under the equity method. The net effect of all these
changes increased net income by $51 for the year ended December 31, 2002
considering the Companys 50% common equity interest in CAI.

Gains or losses resulting from the disposition of leasing
equipment are recorded in the year of disposition. These amounts are recorded in
other (income)/expense, net on the Consolidated Statement of Income.

In August 2001, the FASB approved its proposed SFAS No. 144,
Accounting for the Impairment or Disposal of Long Lived Assets("SFAS
144"). SFAS 144 addresses financial accounting and reporting for the impairment
or disposal of long-lived assets. SFAS 144 requires that long-lived assets be
reviewed for impairment whenever events or changes in circumstances occur
measured by a comparison of the carrying amount of an asset to undiscounted
future net cash flows expected to be generated by the asset. If the carrying
amount of an asset exceeds it estimated future undiscounted cash flows, an
impairment charge is recognized for the amount by which the carrying amount of
the asset exceeds the fair value of the asset. SFAS 144 requires companies to
separately report discontinued operations and extends that reporting to a
component of an entity that either has been disposed of (by sales, abandonment,
or in a distribution to owners) or is classified as held for sale. Assets to be
disposed are reported at the lower of the carrying amount or fair value less
costs to sell. The Company adopted SFAS 144 on January 1, 2002. During the first
quarter of 2002, the Company evaluated the carrying value of its long-lived
assets as prescribed by SFAS 144. The adoption of this statement in the first
quarter of 2002 did not result in an adjustment to our Consolidated Financial
Statements.

At December 31, 2003 and 2002, the Company performed a review of
its container and chassis fleet in order to determine whether these assets are
impaired in accordance with SFAS 144. The container fleet is reported within the
container leasing segment, while the chassis are reported within the domestic
intermodal equipment segment. This review indicated that there was no impairment
to the fleet with the exception of specific units that were idle, some of which
were badly damaged, and other specific units with design flaws. The Company
performed a review of this equipment to determine whether the units would be
repaired and returned to service or sold based upon the best economic
alternative for the Company. This determination was based on the condition of
the unit, its location and the resale market within that location. All units
identified for sale were then written down, if required, to estimated net
realizable value. For the years ended December 31, 2003 and 2002, the impairment
loss on equipment was $3,065 and $4,065. These amounts are recorded in
depreciation expense on the accompanying Consolidated Statement of Income for
2003 and 2002, respectively. In addition, the Company recorded impairment losses
related to damaged chassis equipment that was subsequently remanufactured of
$4,994 and $4,719 for the years ended December 31, 2003 and 2002, respectively.
These amounts are recorded in lease operating expenses on the accompanying
Consolidated Statements of Income for 2003 and 2002, respectively.

During the years ended December 31, 2003 and 2002, CAI
performed a review of its container fleet in order to determine whether these
assets were impaired in accordance with SFAS 144. The container fleet is
reported in the container leasing segment. The loss was calculated by comparing
the equipments net book value to the estimated realizable value of the
equipment. The total impairment loss recorded by CAI at December 31, 2003
was $990 which reduced income before taxes by $495 after taking into account the
Companys 50% minority interest adjustment. The total impairment loss
recorded by CAI at December 31, 2002 was $4,231. The Companys 50%
share of this loss is $2,115 of which $1,732 was recognized by CAI before
June 27, 2002 and was recorded by the Company in loss for investments
accounted for under the equity method. In addition $766 of additional
depreciation was recognized by CAI after June 27, 2002 which reduced income
before taxes by $383 after taking into account the Companys 50% minority
interest adjustment.

(o)     
Marketable and other investment securities--

Management has determined that all securities are to be held for
an indefinite period of time and classified as securities available-for-sale
carried at market value. Unrealized holding gains and losses for
available-for-sale securities are credited (charged) to a component of
stockholders equity net of related income taxes. Management determines the
appropriate classifications of securities at the time of purchase.

Premium and discount on securities are included in interest
income over the period from acquisition to maturity using the level-yield
method. The specific identification method is used to record gains and losses on
security transactions.

Through September 30, 2003, the Company classified its retained
interest in the off-balance sheet direct finance lease securitization completed
in March 1999 as an available-for-sale security in the Consolidated Balance
Sheets. Effective October 1, 2003, a customer elected to return a portion of the
equipment covered by a direct financing lease which had been included in the
lease securitization program. This equipment was subsequently leased to another
customer under the terms of an operating lease agreement. As such, the lease
could no longer be considered a financial asset and the Securitization Trust
special purpose entity could no longer be treated as an off-balance sheet
qualified special purpose entity for accounting purposes. Therefore, effective
October 1, 2003, the Company consolidated the assets and liabilities of
this special purpose entity. For further information regarding the lease
securitization program and the consolidation of this special purpose entity, see
Note 8 to the Consolidated Financial Statements. Impairment losses of $134 for
the year ended December 31, 2002, were recorded and included in the
accompanying Consolidated Income Statements based upon managements
analysis of projected cash flows of the underlying direct finance lease
receivables in the Securitization Trust.

During the year ended December 31, 2003, sale of
available-for-sale securities resulted in proceeds of $1,445, and gross losses
of $50. During the year ended December 31, 2002, sales of available-for-sale
securities resulted in proceeds of $574, gross gains of $5, and gross losses
of $35. During the year ended December 31, 2001, no sales of
available-for-sale securities took place.

The amortized cost and estimated fair value of available for
sale securities as of December 31, 2003 and 2002 are as follows:

`Gross Unrealized
                                                         Amortized        Holding        Holding        Estimated
                                                           Cost            Gains          Losses       Fair Value
                                                           ----            ------         -------      -----------
           2003
           -----
           Marketable Securities                              $24            ---           ---               $24
                                                              ---            ---           ---               ---
                                                              $24           $---          $---               $24
                                                              ===            ===           ===               ===
           2002
           -----
           Other Investment Securities                    $10,319           $---          $---           $10,319
           Marketable Securities                            1,553            ---           (86)            1,467
                                                            -----            ---           ----            -----
                                                          $11,872           $---          $(86)          $11,786
                                                           =======           ===           ====           ======`

(p)     Comprehensive income/(loss)--

Comprehensive income/(loss) consists of net income for the
current period and gains and losses that have been previously excluded from the
income statement and were only reported as a component of equity.

The tax effect of other comprehensive income/(loss) is as
follows:

`Before Tax         Tax          Net of
                                                                                  Amount         Effect       Tax Amount
                                                                                ------------   ----------    ------------
Year Ended December 31, 2003
Unrealized holding gains arising during the period:
Marketable securities (1)(2)                                                            $83         $(29)          $54
Cumulative foreign currency translation adjustment                                       71          (25)           46
Swap agreements                                                                      15,270       (4,700)       10,570
                                                                                    --------     --------      --------
                                                                                    $15,424      $(4,754)      $10,670
                                                                                    ========     =========     ========`

|(1) | Amounts are net of losses on sales of marketable securities of $50 (before
income tax effect of $2) recognized in the income statement.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

|(2) | Amounts are net of a realized loss of $44 (before income tax
effect of $18) considered permanent and recognized in the income statement.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

`Year Ended December 31, 2002
Unrealized holding losses arising during the period:
Marketable securities (3)                                                              $(40)         $14          $(26)
Other investment securities (4)                                                        (304)          15          (289)
Cumulative foreign currency translation adjustment                                      (66)          23           (43)
Swap agreements                                                                     (23,436)       8,703       (14,733)
                                                                                    --------       -----       --------
                                                                                   $(23,846)      $8,755      $(15,091)
                                                                                   =========      ======      ========`

|(3) | Amounts are net of losses on sales of marketable securities of $30
(before income tax effect of $12) recognized in the income statement.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(4) | Amounts are net of impairments of $134 (before income tax effect
of $5) recognized in the income statement.
|--- | -----------------------------------------------------------------------------------------------------------

`Year Ended December 31, 2001
Unrealized holding losses arising during the period:
Marketable securities                                         $(29)         $11          $(18)
Other investment securities                                 (1,005)          50          (955)
Swap agreements (5)                                        (12,363)       2,195       (10,168)
                                                           --------       -----       --------
                                                          $(13,397)      $2,256      $(11,141)
                                                          =========      =======     =========`

|(5) | Includes $9,012 (before income tax effect of $2,434) relating to the cumulative
effect of adopting SFAS 133.
|--- | ------------------------------------------------------------------------------------------------------------

The components of accumulated other comprehensive income/(loss),
net of taxes, are as follows:

`December 31,
                                                          ----------------------------
                                                              2003            2002
                                                          ------------    ------------
Marketable securities                                          $---           $(54)
Cumulative foreign currency translation adjustment                3            (43)
Swap agreements                                            (14,331)        (24,901)
                                                           --------        --------
                                                          $(14,328)       $(24,998)
                                                          =========       =========`

(q)     
Fair value of financial instruments

Statement of Financial Accounting Standards No. 107,
Disclosures about Fair Value of Financial Instruments ("SFAS 107")
requires disclosure of the estimated fair value of the Companys financial
instruments, excluding leasing transactions accounted for under SFAS 13. The
fair value of a financial instrument is the amount at which the instrument could
be exchanged in a current transaction between willing parties, other than a
forced or liquidation sale. Estimated fair values have been determined using the
best available data and estimation methodology suitable for each category of
financial instrument. The estimation methodologies used to estimate the fair
values and recorded book balances of the Companys financial instruments at
December 31, 2003 and 2002 are as follows:

Cash and cash equivalents

For such short-tem investments, the carrying value is considered
to be a reasonable estimate of fair value.

Marketable securities

For marketable securities and investment securities in the
Companys portfolio, fair value was determined by reference to quoted
market prices, when available.

Accounts receivable

The carrying value of accounts receivable is considered to be a
reasonable estimate of fair value based on their short-term nature.

Accounts payable and accrued expenses

The carrying value of accounts payable and accrued expenses is
considered to be a reasonable estimate of fair value based on their short-term
nature.

Interest rate swaps

Interest rate swap contracts are included in accounts payable
and accrued expenses in the Consolidated Balance Sheets. The estimated fair
value (which is also the recorded book value) is calculated externally using
market data taking into account current market rates.

Debt and capital securities

The fair value of the Companys debt and capital securities
was based on quoted market prices where available. For those borrowings with
floating interest rates, it is presumed their estimated fair value generally
approximates their carrying value. The fixed-rate debt instruments, where quoted
market prices were not available, were valued using a present value discounted
cash flow analysis with a discount rate approximating current market rates of
similar term debt at the end of the year. The discount rates used in the present
value calculation ranged from 4.75% to 5.02% at December 31, 2003.

`December 31, 2003                 December 31, 2002
                                                    --------------------------------- -------------------------------
                                                     Estimated     Recorded Book     Estimated Fair    Recorded Book
                                                     Fair Value       Balance            Value            Balance
                                                    ------------- ------------------- --------------- ---------------
Financial Assets:
Cash and cash equivalents                               $141,019      $141,019          $170,613          $170,613
Marketable and investment securities                          24            24             1,467             1,467
Accounts receivable                                       69,055        69,055            63,950            63,950

Financial Liabilities:
Accounts payable and accrued expenses (excluding
  interest rate swap contracts)                          164,036       164,036           110,436           110,436
Interest rate swap contracts                              34,026        34,026            49,577            49,577
Debt                                                     904,273       910,755           802,490           823,037
Capital securities                                        68,813        75,000            60,570            75,000`

(r)     Concentration of risk--

Credit risk--

At December 31, 2003 approximately 47% of accounts receivable
and 71% of the net investment in direct financing leases were from customers
outside of the United States. At December 31, 2002, approximately 48% of
accounts receivable and 72% of the net investment in direct financing leases
were from customers outside of the United States.

In 2003, 2002 and 2001 the Companys top 25 customers
represented approximately 74%, 71% and 69%, respectively, of its consolidated
billings, with no single customer accounting for more than 8.2% in any year.

Procurement risk--

The Company purchases substantially all of its containers from
manufacturers in China, therefore any changes in the political, economic or
financial condition of China could temporarily impact our ability to meet our
customers equipment requirements.

(s)     Net income per share--

Basic net income per share is computed by dividing net income by
the weighted average number of shares outstanding during the period (which is
net of treasury shares). Diluted income per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted into common stock. The dilutive effect of stock
options and the unvested portion of restricted stock grants is computed using
the treasury stock method, which assumes the repurchase of common shares at the
average market price for the period. Stock options that do not have a dilutive
effect (because the exercise price is above the market price) are not included
in the diluted income per share. For the years ended December 31, 2003,
2002, and 2001, all stock options to acquire common shares are dilutive.
Unvested restricted stock grants were dilutive for the year ended
December 31, 2003. See Note 16 to the Consolidated Financial Statements.
There were no unvested restricted stock grants outstanding during the years
ended December 31, 2002 and 2001. The convertible redeemable subordinated
debentures issued by the Company in December 2002, January 2003 and February
2003 were dilutive for the year ended December 31, 2003 and antidilutive
for the year ended December 31, 2002. For further discussion of the debt
characteristics of the convertible redeemable subordinated debentures, see Note
4 to the Consolidated Financial Statements.

A reconciliation of the numerator and denominator of basic EPS
with that of diluted EPS is presented below:

`Year Ended December 31,
                                                                                ------------------------
                                                                             2003         2002         2001
                                                                             -----       ------        -----
        Numerator
             Net Income - Basic EPS                                         $41,190       $4,389     $28,104
             Interest Expense on convertible debentures,
             net of tax of $1,334                                             2,001           --          --
                                                                              -----           --          --
             Net Income-Diluted EPS                                         $43,191       $4,389     $28,104
                                                                            =======       ======     =======

        Denominator
             Weighted average common shares
             outstanding-Basic                                               27,365       27,360      27,417
             Dilutive stock options                                           1,569        1,842       1,556
             Dilutive convertible debentures                                  1,461           --          --
             Dilutive restricted stock grants                                     1           --          --
                                                                                  -           --          --
             Weighted average common shares
             outstanding-Diluted                                             30,396       29,202      28,973
                                                                             ======       ======      ======
        Earnings per common share
             Basic                                                            $1.51        $0.16       $1.03
                                                                              =====        =====       =====
             Diluted                                                          $1.42        $0.15       $0.97
                                                                              =====        =====       =====`

(t)     
Adoption of New Accounting Standard--

In June 2002, the FASB issued SFAS No. 146, Accounting for
Costs Associated with Exit or Disposal Activities("SFAS 146"). SFAS 146
requires that a liability for costs associated with exit or disposal activities
be recognized when the liability is incurred. Existing U.S. GAAP provides for
the recognition of such costs at the date of managements commitment to an
exit plan. In addition, SFAS 146 requires that the liability be measured at fair
value and be adjusted for changes in estimated cash flows. The provisions of the
new standard are effective for exit or disposal activities initiated after
December 31, 2002. Adoption of SFAS 146 did not materially affect the
Companys Consolidated Financial Statements.

In November 2002, the FASB issued FASB Interpretation No. 45,
Guarantors Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others("FIN 45"). FIN 45
elaborates on the disclosures to be made by a guarantor in interim and annual
financial statements about its obligations under certain guarantees it has
issued. A guarantor is required to disclose (a) the nature of the guarantee,
including the approximate term, how the guarantee arose, and the events and
circumstances that would require the guarantor to perform under the guarantee;
(b) the maximum potential amount of future payments under the guarantee; (c) the
carrying amount of the liability, if any, for the guarantors obligation
under the guarantee; and (d) the nature and extent of any recourse provisions or
available collateral that would enable the guarantor to recover the amounts paid
under the guarantee. FIN 45 also clarifies that a guarantor is required to
recognize, at the inception of a guarantee, a liability for the fair value of
the obligation undertaken in issuing the guarantee. Disclosure requirements are
effective for financial statements with periods ending after December 15, 2002
while the initial recognition and initial measurement provisions shall be
applied on a prospective basis to guarantees issued or modified after December
31, 2002. The Company has adopted the provisions of FIN 45 as required.
(See Note 9 to the Consolidated Financial Statements for disclosures regarding
the Companys guarantees.) The adoption of FIN 45 did not have a material
impact on the Companys Consolidated Financial Statements.

In December 2003, the FASB issued FASB Interpretation No. 46
(revised December 2003), Consolidation of Variable Interest Entities
("FIN 46R") which addresses how a business should evaluate whether it has a
controlling financial interest in an entity through means other than voting
rights and accordingly should consolidate the entity. FIN 46R replaces FASB
Interpretation No. 46 which was issued in January 2003. The Company adopted
FIN 46R as of December 31, 2003. There was no impact on the Companys
financial condition or results of operations.

In May 2003, the FASB issued SFAS No. 150, Accounting for
Certain Financial Instruments with Characteristics of Both Liabilities and
Equity ("SFAS 150"). This statement establishes standards for the
classification and measurement of certain financial instruments with
characteristics of both liabilities and equity. The statement also includes
required disclosures for financial instruments within its scope. This
pronouncement required the Company to display the Company-Obligated Mandatorily
Redeemable Preferred Securities in Subsidiary Grantor Trusts within the
liability section on the face of the Consolidated Balance Sheets. Most of the
guidance in SFAS 150 is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective at the beginning of the
first interim period beginning after June 15, 2003. On November 7, 2003, the
provisions of SFAS 150, relating to mandatorily redeemable non-controlling
interest, were deferred indefinitely. The adoption of SFAS 150 did not affect
the Companys financial condition or results of operations.

In November 2003, the Emerging Issues Task Force ("EITF") issued
EITF Issue No. 03-1. The Meaning of Other-Than-Temporary Impairment and its
Application to Certain Investments. Issue 03-1 requires new tabular and
narrative disclosure items effective for fiscal years ending after December 15,
2003. Companies are required to provide expanded information about their debt
and marketable equity securities with market values below carrying values. The
narrative information must include positive and negative information management
considered in concluding the unrealized loss was not other-than-temporary and
therefore was not recognized in earnings. For further discussion regarding
unrealized holding losses, see Marketable and other investment securities above.

(u)     Use of estimates--

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the reported amounts of revenues and expenses
during the reporting period and disclosure of contingent assets and liabilities
at the date of the financial statements. Actual results could differ from those
estimates.

(v)     Reclassifications--

Subsequent to the initial filing of our Form 10-K for the year
ended December 31, 2003, certain reclassifications have been made to the 2003,
2002 and 2001 amounts. More specifically, the Company determined it was necessary to
reclassify certain types of revenue which had been previously
reported as a reduction to lease operating expenses. This revenue consists
primarily of fees charged to lessees for handling, repositioning and repairs
which had previously reduced the related costs for these services. This revenue
will be reported separately as other revenue on the face of the Companys
Consolidated Statements of Income. These reclassifications have no impact on net
income.

(w)     
Adjustments to Opening Retained Earnings--

During the fourth quarter of 2004, the Company sold certain
assets (with a book value of approximately $1,865) of CTC Container Trading
(U.K.) Limited ("CTC"), a wholly-owned subsidiary which leased specialized cargo
carrying units and other equipment for use by companies operating in the North
Sea. While quantifying the approximate impact related to this sale, the Company
noted that there was an elimination entry of approximately $803, net of tax, in
the Interpool Limited consolidation related to CTC. This entry reduced retained
earnings with a comparable reduction to leasing equipment. The entry originated
when Interpool Limited sold container equipment to CTC at a profit prior to
1994. The elimination entry was recorded to eliminate the inter-company profits
generated from the sale of the equipment. The inter-company profit included in
the elimination entry should have been amortized over the period the equipment
was being depreciated by CTC using the higher book values. No such amortization
ever took place. The depreciation would have ended prior to any period being
reported on by the Company in the December 31, 2003 Form 10-K. The effect of
this error was to understate earnings during the period that the equipment was
being depreciated. The Company determined the impact of this error should be
reported as an adjustment to opening retained earnings.

(2)     Income taxes:

Significant components of deferred tax assets and liabilities as
of December 31, 2003 and 2002 were as follows:

`2003         2002
             Deferred tax assets:                                                        ----         -----
                 Loss carry forwards                                                     $123,607     $112,925
                 Other                                                                     28,187       30,327
                                                                                           ------       ------
                    Total deferred tax assets                                             151,794      143,252
                      Valuation allowances                                               (16,009)     (14,806)
                                                                                         --------     --------
                    Net deferred tax assets                                               135,785      128,446
                                                                                          -------     --------
             Deferred tax liabilities:
                 Operating property, net                                                  170,167      154,878
                 Other                                                                      3,010        5,437
                                                                                            -----        -----
                    Total deferred tax liabilities                                        173,177      160,315
                                                                                          -------      -------
                    Net deferred tax liability                                            $37,392      $31,869
                                                                                          -------      -------`

One of the Companys subsidiaries has tax net operating
loss carryforwards ("NOLs") for Federal income tax purposes totaling
approximately $15,602, which may be used only to offset that subsidiarys
income. These NOLs, if not utilized, will expire between 2005 and 2006. A
valuation allowance has been recorded for the full amount of these NOLs because
the utilization of these NOLs prior to their expiration is considered unlikely.
In 2003 and 2002, the Company recorded additional valuation allowances
aggregating $1,203 and $6,253 primarily for future tax deductions related to an
equity investment, the Chassis Holdings I, LLC and for losses incurred with
respect to PCR.

Through December 31, 2003, the Company has incurred passive
activity loss carryovers of approximately $220,659 for U.S. federal income tax
purposes. These losses can be carried forward indefinitely to offset income from
future leasing activities. Additionally, the Company and its subsidiaries have
net operating loss carryovers aggregating approximately $211,446 which (after
2003 for New Jersey) can be used to offset fully or partially future taxable
income for state purposes. For New Jersey state tax purposes these losses are
scheduled to expire after 2009 if not utilized.

A significant subsidiary of the Company is a Barbados
corporation. Under the terms of a protocol between the United States and
Barbados, the subsidiarys leasing income is fully taxable by Barbados, but
exempt from U.S. Federal taxation. The Barbados tax rate is a maximum of
21⁄2% of income earned in Barbados. No deferred U.S. Federal income taxes
have been provided on the unremitted earnings of the subsidiary since it is the
Companys intention to indefinitely reinvest such earnings. At December 31,
2003 unremitted earnings of this subsidiary were approximately $333,925. The
deferred U.S. Federal income taxes related to the unremitted earnings of this
subsidiary would be approximately $109,375, assuming these earnings were taxable
at the U.S. statutory rate, net of foreign tax credits.

As a company resident in Barbados, Interpool Limited is required
to file tax returns in Barbados and pay any tax liability to Barbados. However,
no Barbados tax returns have been prepared or filed for Interpool Limited for
any period subsequent to its 1997 tax year, because such tax returns are
required to be accompanied by audited financial statements for Interpool
Limited, which are not available. The Company believes that the failure to file
these returns has not resulted in any underpayment of taxes, interest or
penalties (other than a nominal late filing penalty recently enacted in
Barbados), because no Barbados taxes would have been due for the years for which
returns have not been filed. The Company further believes that Interpool
Limiteds failure to file these returns would not present any other
material risk to Interpool. The Company intends to have the necessary Interpool
Limited financial statements prepared and audited as promptly as practicable so
that Interpool Limiteds Barbados tax returns can be filed as required. For
further information regarding the July 2004 Protocol between the United States
and Barbados, see Note 18 to the Consolidated Financial Statements.

A reconciliation of the U. S. statutory tax rate to
the actual tax rate follows:

`2003        2002       2001
                                                                                    ----        ----       ----

           U.S. statutory rate                                                      35.0%         35.0%      35.0%
           Difference due to operation of subsidiary in Barbados                   (32.9)       (285.5)     (26.7)
           State taxes                                                               1.3         (52.0)       1.5
           Other                                                                     1.4           4.3        1.4
           PCR losses                                                                --           39.3        2.1
           Valuation allowances                                                      2.6         212.4        2.8
                                                                                     ---         ------       ----

           Actual tax rate                                                           7.4%        (46.5)%     16.1%
                                                                                     ====        =======     =====`

The provision (benefit) for income taxes, including the tax
effect for the cumulative effect of change in accounting principle, reflected in
the accompanying consolidated statements of income is as follows:

`2003            2002           2001
                                                       ----            ----           ----
             U.S.                                      $1,724        $(1,883)         $5,107
             Other                                      1,557            490             293
                                                        -----            ---             ---
                                                       $3,281        $(1,393)         $5,400
                                                       ======        ========         ======

             Current                                   $1,473         $1,725          $1,898
             Deferred                                   1,808         (3,118)          3,502
                                                        -----         -------          -----
                                                       $3,281        $(1,393)         $5,400
                                                       ======        ========         ======`

(3)     Leasing activities:

As lessor--

The Company has entered into various leases of equipment that
qualify as direct financing leases. At the inception of a direct finance lease,
the Company records a net investment based on the total investment (representing
the total future minimum lease payments plus unguaranteed residual value), net
of unearned lease income. The unguaranteed residual value is generally equal to
the purchase option of the lessee, and is included in total lease receivables
(approximately $63,927 and $60,012 at December 31, 2003 and 2002, respectively).
Unearned income represents the excess of total future minimum lease payments
plus residual value over equipment cost. Receivables under these direct
financing leases, net of unearned income, are collectible through 2015 as
follows:

`December 31, 2003
                                                 -----------------------------------------------------
                                                   Total Lease          Unearned            Net Lease
                                                   Receivable         Lease Income         Receivable
                                                 ------------------ -------------------- -------------
         2004                                        $129,287              $41,206            $88,081
         2005                                         107,455               32,823             74,632
         2006                                          93,261               24,103             69,158
         2007                                          86,804               16,492             70,312
         2008                                          51,997               10,492             41,505
         Thereafter                                   104,152               21,025             83,127
                                                      -------               ------             ------
                                                     $572,956             $146,141           $426,815
                                                     ========             ========           ========`

As of December 31, 2002, the Company had total lease receivable,
unearned lease income and net lease receivables of $455,263, $121,134 and
$334,129 respectively.

As of December 31, 2003 the Company also had noncancellable
operating leases, under which it will receive future minimum rental payments as
follows:

`2004                                     $   89,733
                                2005                                         57,762
                                2006                                         46,006
                                2007                                         31,910
                                2008                                         14,731
                                Thereafter                                    5,578
                                                                              -----
                                                                         $  245,720
                                                                          =========`

The Company capitalizes lease commissions and amortizes this
cost over the average life of the related lease contract. At December 31, 2003
and 2002, $3,902 and $3,987 of these commissions were included in other assets
on the accompanying Consolidated Balance Sheet.

In February 2001, we demanded return of all our equipment on
lease to a significant customer based in South Korea. The lessee subsequently
commenced insolvency proceedings and did not return our equipment. At the time
of this insolvency, we maintained insurance coverage against such lessee
defaults, and we submitted a claim to our insurance carriers seeking to recover
the value of the receivables owed by the customer (to the extent covered by the
insurance policies). Our claim included per diem rental charges for up to one
hundred and eighty days after the default date for equipment not returned by the
lessee as well as loss, damage and recovery costs relating to the equipment on
lease that are also billable to the lessee in accordance with the lease. Our
claim was in excess of the policys maximum coverage of $35,000. On
December 26, 2002, the insurance carriers filed a lawsuit against us seeking
among other things rescission of the policies. We in turn filed an answer and
counter-claim for payment of our insurance claim. For further information
regarding the settlement of this lawsuit; see Note 18 to the Consolidated
Financial Statements. As of December 31, 2003 and 2002 the outstanding
receivable recorded from the insurance carriers is $20,481 and $19,605,
respectively and is recorded in other receivables, net in the Consolidated
Balance Sheet. The difference between the receivable recorded due from the
insurance carriers and the claim submitted primarily relates to per diem
revenues, repairs and maintenance and other costs billable to the lessee (and
covered by the insurance contract) that are in excess of costs incurred.

Allowance for doubtful accounts--

The following summarizes the activity in the allowance for
doubtful accounts:

`2003               2002                2001
                                                ---------------- ----------------  ---------------------
      Balance, beginning of year                   $14,033            $6,674                 $16,372
           Provision charged to expense              4,248             7,843                   9,001
           Increase for allowance due to
           consolidation of CAI as of June
           27, 2002                                     --             1,898                     ---
           Reclassification of Liabilities of
           Business Transferred Under
           Contractual Agreement                       ---               ---                    (538)
           Write-offs                               (2,140)           (2,504)                (18,327)
           Recoveries                                  226               132                     170
           Other                                        (9)              (10)                     (4)
                                                   --------          --------                 -------
      Balance, end of year                         $16,358           $14,033                  $6,674
                                                   ========          ========                 =======`

The allowance for doubtful accounts includes the Companys
estimate of allowances necessary for receivables on both operating and finance
lease receivables. The allowance for doubtful accounts is developed based on two
key components (1) specific reserves for receivables which are impaired for
which management believes full collection is doubtful and (2) reserves for
estimated losses inherent in the receivables based upon historical trends. The
Company believes its allowance for doubtful accounts is adequate to provide for
credit losses inherent on its accounts receivable. The allowance for doubtful
accounts is intended to provide for losses inherent in the accounts receivable,
and requires the application of estimates and judgments as to the outcome of
collection efforts and the realization of collateral, among other things. In
addition, changes in economic conditions or other events may necessitate
additions or deductions to the allowance for doubtful accounts. Finance leases
are evaluated on a case by case basis. When evaluating its operating and finance
lease receivables for impairment, the Company considers, among other things, the
level of past-due amounts of the respective receivable, the borrowers
financial condition, credit quality indicators of the borrower, the value of
underlying collateral and third party credit enhancements such as guarantees and
insurance policies. Once a finance lease is determined to be non-performing,
Company procedures provide for the following events to take place in order to
evaluate collectibility:

| |  | The past due amounts are reclassified to accounts receivable,
| | - | -------------------------------------------------------------

| |  | The equipment value supporting such finance lease is reclassified
to leasing equipment, and
| | - | -------------------------------------------------------------------------------------------

| |  | Collectibility is evaluated, taking into consideration equipment
book value, and the total outstanding receivable, as well as the likelihood of
collection through the recovery of equipment.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As of December 31, 2003 and 2002, included in accounts
receivable are non-performing receivables of $12,795 and $11,127, respectively.
The Companys average non-performing receivables are $11,669 and $9,150 for
the years ended December 31, 2003 and 2002, respectively. As of December 31,
2003 and 2002, included in the allowance for doubtful accounts are reserves for
the non-performing receivables of $11,918 and $9,505, respectively. As of
December 31, 2003 and 2002, our non-performing receivables, net of applicable
reserves, were 1.27% and 2.54%, respectively, of accounts receivable, net.

All outstanding amounts due for non-performing finance lease
accounts are reclassified to accounts receivable, therefore an allowance for
doubtful accounts for the net investment in direct financing leases is not
required.

The Company seeks to reduce credit risk by maintaining insurance
coverage against customer insolvency and related equipment losses. Through
January 31, 2002, the Company maintained contingent physical damage,
recovery/repatriation and loss of revenue insurance, which provided coverage in
the event of a customers insolvency, bankruptcy or default giving rise to
its demand for return of all of its equipment. The policy covered the cost of
recovering the Companys equipment from the customer, including
repositioning cost, damage to the equipment and the value of equipment that
could not be located or was uneconomical to recover. It also covered a portion
of the lease revenues that the Company might lose as a result of the
customers default (i.e., up to 180 days of lease payments following an
occurrence under the policy). The premium rates and deductibles for this type of
insurance have increased as a result of higher claim experience by the Company
and also within the industry. As a result, effective March 1, 2003, the Company
has obtained a new policy covering similar occurrences for a twelve-month period
but with revised terms. The new coverage decreases the recoverable amount per
occurrence to $9,000 as compared to $35,000 in our previous policy and increases
the deductible per occurrence from $400 to $3,000. This coverage has since been
extended to March 31, 2005. There can be no assurance that this or similar
coverage will be available in the future or that such insurance coverage will
cover the entirety of any loss.

(4)     Debt:

The following table summarizes our debt and capital lease
obligations as of December 31, 2003 and 2002.

`Total Debt and Capital Lease Obligations                                  December 31, 2003      December 31, 2002
-----------------------------------------                                 ------------------     ------------------

Capital lease obligations payable in varying amounts through 2018               $325,258              $363,676
Chassis Securitization Facility, interest at 5.59% and 5.08% at
  December 31, 2003 and 2002, respectively
      Warehouse facility                                                          25,490                   ---
      Debt obligation                                                             86,413               120,246
      Capital lease obligation                                                   404,674               410,497
Revolving credit facility, interest rate at 3.09% and 2.64% at
  December 31, 2003 and 2002, respectively                                       193,495               175,000
Revolving credit facility CAI, interest at 3.37% and 3.69% at December
  31, 2003 and 2002, respectively                                                 87,000                74,000
Container securitization facility, interest at 6.5% and 5.85% at
  December 31, 2003 and 2002, respectively                                        76,565                91,991
7.35% Notes due 2007 (unsecured)                                                 147,000               147,000
7.20% Notes due 2007 (unsecured)                                                  62,825                62,825
9.25% Convertible redeemable subordinated debentures, mandatory
  redemption 2022 (unsecured)                                                     37,182                32,118
Notes and loans repayable with various rates ranging from 1.89% to
  7.90% and maturities from 2004 to 2010                                         194,785               119,858
                                                                                 -------               -------
Total Debt and Capital Lease Obligations                                       1,640,687             1,597,211
                                                                               ---------             ---------
   Less Current Maturities                                                       219,192               161,407
Total Non-Current Debt and Capital Lease Obligations                          $1,421,495            $1,435,804
                                                                              ==========            ==========`

At December 31, 2003, the Company had fully utilized its
revolving credit facility while CAI had approximately $17,000 available under
its facility.

As of December 31, 2003, the annual maturities of capital leases
and related interest were as follows:

`Payment               Interest               Principal
                                          ------------         ---------------       ---------------
                 2004                       $ 82,028              $16,991                $ 65,037
                 2005                         92,507               13,900                  78,607
                 2006                         63,059                9,678                  53,381
                 2007                         70,861                6,968                  63,893
                 2008                         58,576                4,713                  53,863
                 Thereafter                  419,756                4,605                  415,151
                                             -------                ------                 -------
                                            $786,787              $56,855                $729,932
                                            ========              =======                ========`

As of December 31, 2003, the annual maturities of debt, net of
interest thereon, were as follows:

`2004                                          $154,155
                 2005                                           267,518
                 2006                                           154,872
                 2007                                           238,659
                 2008                                            27,117
                 Thereafter                                      68,434
                                                                -------
                                                               $910,755
                                                               ========`

The Companys debt consists of notes and loans and capital
lease obligations with installments payable in varying amounts through 2022,
with a weighted average interest rate of 6.0% and 6.6% in 2003 and 2002,
respectively. The principal amount of debt and capital lease obligations payable
under fixed rate contracts is $491,335. Remaining debt and capital lease
obligations of $1,149,352 is payable under floating rate arrangements, of which
$500,115 has been converted to fixed rate debt through the use of interest rate
swap agreements. At December 31, 2003, most of the debt and capital lease
obligations of the Company are secured by a substantial portion of the
Companys leasing equipment and direct finance leases, except for $247,007
of debt which is unsecured. For further information on the accounting treatment
for interest rate swap contracts see Note 5 to the Consolidated Financial
Statements.

Effective October 1, 2003, a customer elected to return a
portion of the equipment covered by a direct financing lease which had been
included in a qualified special purpose entity as part of the lease
securitization program. The equipment was subsequently leased to another
customer under the terms of an operating lease agreement. As such, the lease
could no longer be considered a financial asset and the entity could no longer
be treated as an off-balance sheet qualified special purpose entity for
accounting purposes. Therefore, effective October 1, 2003, the Company
consolidated the assets and liabilities of this special purpose entity and
recorded the remaining obligation of this special purpose entity amounting to
$17.3 million as debt and capital lease obligations on the Consolidated Balance
Sheets. For further information regarding the change in accounting for this
special purpose entity, see Note 8 to the Consolidated Financial Statements.

Because the Companys financial restatement and re-audits,
as well as the completion of the internal investigations by special counsel to
its Audit Committee, prevented the timely completion of its financial statements
and Form 10-K for the year ended December 31, 2003 and its financial
statements and SEC filings for 2004, the Company requested and received
necessary waivers under its debt agreements. For additional information
regarding this restatement, see Note 2 in the Companys 2002 Form 10-K.
During February 2004, the Company provided its lenders with a revised schedule
for completing and filing its financial statements and periodic SEC filings for
2003 and 2004, and requested that the lenders waive any default resulting from
the late preparation and filing of its financial statements and required
periodic reports contained in the loan documents and debt instruments until the
respective dates set forth in the revised schedule. The revised dates provided
to, and accepted by the Companys lenders are:

`Statement                                        Revised Completion Date
2003 - 10-K                                      On or before August 31, 2004
2004 - First Quarter 10-Q                        On or before December 31, 2004
2004 - Second Quarter 10-Q                       On or before December 31, 2004
2004 - Third Quarter 10-Q                        On or before December 31, 2004`

The Company has received waivers from all of its lenders
agreeing to the dates above. Although the Company hopes to be able to complete
and file all reports earlier than the applicable dates, it cannot provide
assurance that it will meet these deadlines. If the Company were unable to meet
these deadlines, it would need to request additional waivers from certain of its
financial institutions. In the event that any additional waiver is required and
cannot be obtained before the applicable deadline, the Company might be in
violation of the terms of the applicable indebtedness, and the lender could
exercise its right to declare the Company in default, accelerate the
indebtedness owed to such lender, and take other action against the Company.
Moreover, the taking of any such action, or the possibility that such action
could be taken, could cause one or more of the Companys other financial
institutions to take action.

Several of the waivers received from the Companys
financial institutions during 2003 and 2004 provide by their terms that the
waiver is void if certain events occur, such as a declaration of default by one
or more of its other lenders, or the commencement of civil or criminal
proceedings against the Company or any adverse action by the SEC or the New York
Stock Exchange, if such action has a material adverse effect upon the
Companys ability to perform its contractual obligations. Although the
Company does not believe that any of these actions has occurred to date, there
can be no assurance that they will not occur in the future. In addition, several
of the waivers the Company obtained are contingent upon a determination by the
applicable lender that the changes resulting from the financial restatement to
its historical financial statements for 2001 and 2000 and the first nine months
of 2002 did not represent a material change to the Companys financial
condition for these periods as originally reported. For additional information
regarding this restatement, see Note 2 in the Companys 2002 Form 10-K.
While the restatement was necessary, the Company believes that its revised
financial statements did not represent such a material change. In the event any
of the existing waivers ceased to be effective by its terms, the Company could
be deemed to be in violation of the terms of the indebtedness to which the
waiver relates. In this event, one or more of its lenders could exercise their
right to declare the Company in default, accelerate the indebtedness owed to
such lender, and take other actions against the Company, such as attempting to
exercise rights as a secured creditor with respect to any collateral. If any of
these circumstances were to occur, the Company might not be able to meet its
obligations to its lenders and other creditors and might not be able to prevent
such parties from taking actions that could jeopardize the Companys
ability to continue to operate its business.

Debt Modifications: Throughout 2003, in connection
with obtaining necessary waivers from lenders for late filing of its periodic
reports with the SEC and the restatement of its past financial statements, the
Company agreed to certain modifications to its existing debt agreements as
follows:

| |  | The container securitization facility was amended to relinquish
the Company's right to request additional advances under the facility and the
Company agreed that all lease payments subsequently received under the facility
would be used to reduce the indebtedness. In addition, the Company agreed to
comply with several new covenants, consistent with those contained in the
amendment to its revolving credit agreement, as described below.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In May 2003, the Company established a $200,000 revolving
warehouse facility within its chassis securitization facility and received
funding from a $25,500 debt obligation issuance. In July 2003 and October 2003,
the Company agreed, among other things, to suspend its ability to incur
additional funding under the warehouse facility until such time as the loan and
guarantee parties have each agreed in their sole discretion to reinstate their
funding commitments. The loan and guarantee parties are under no obligation to
reinstate any commitments to the warehouse facility.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In July 2003 and October 2003, and January and February 2004, in
connection with obtaining necessary amendments under the Company's revolving
credit facility due to the late filing of its periodic reports with the SEC and
the restatement of its past financial statements, the Company agreed, among
other things, to reduce advance rates under this revolving facility, to add
several events of default, to increase the interest rate margin, and to maintain
specified levels of unrestricted cash and cash equivalents until the delinquent
SEC filings are made. Specifically, the Company agreed to maintain unrestricted
cash and cash equivalents of at least $71,000 at all times and at least $80,000
as of the last business day of each month, until its 2002 Form 10-K was filed.
The Company's 2002 Form 10-K was filed on January 9, 2004. Subsequent to January
9, 2004, the Company was obligated to maintain unrestricted cash and cash
equivalents of at least $60,000 at all times and at least $67,500 as of the last
business day of the month until completion and filing of all delayed financial
statements for 2003 and 2004. This minimum cash requirement was also adopted in
the waivers of the container securitization and one other loan agreement. In
conjunction with the waiver received during February 2004, the Company replaced
its annual amortization payment with monthly amortization payments under its
revolving credit facility beginning in March 2004. The related minimum cash
requirement was subsequently reduced dollar-for-dollar with the amortization
payments and, as of June 30, 2004, amounts to $50,000. Beginning with the
amortization payment due September 1, 2004, the minimum cash requirement will
again be reduced dollar-for-dollar as amortization payments are made. The
minimum cash balance requirement will be eliminated once the Company is current
with its delayed financial filings.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | The Company also agreed to restrictions on dispositions of
collateral and on encumbrances of assets as well as a limitation on concessions
that could be made to its other financial institutions in connection with
obtaining waivers. The October 2003 amendment also required the Company to
provide additional financial information to the lenders under the facility and
to continue the engagement of a financial advisor.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In addition to the debt specifically identified above, the Company
had additional notes and loans outstanding with various financial institutions.
In the fourth quarter of 2003, the Company agreed to certain modifications to
the provisions of some of these instruments. These modifications include, in
certain instances, changes to the amortization schedule resulting in a
requirement for accelerated principal payments of $16,634 ($2,000 of which were
made during January and February, 2004 and the rest of which were eliminated
when the facility in question was paid in full during March 2004), an average
interest rate increase of 241 basis points on two debt facilities having a total
of $67,672 outstanding as of December 31, 2003 and the pledging of $9,135 in
additional collateral to four facilities having a total of $38,616 outstanding
at the time the additional collateral was pledged.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | In April 2003, in connection with a borrowing under the container
securitization, the Company entered into an interest rate swap agreement with an
original notional amount of $31,240. This swap contract (which qualifies as a
cash flow hedge) matures in 2009 and the swap is used to manage interest rate
risks on the floating rate borrowings in the securitization facility. In May
2003, in connection with a borrowing under the chassis revolving warehouse
securitization facility, the Company entered into an interest rate swap with an
original notional amount of $25,490. This swap contract (which qualifies as a
cash flow hedge) matures in 2014 and the swap is used to manage interest rate
risks on the floating rate borrowings in the chassis revolving warehouse
securitization facility.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

New Financings: In July 2002, the Company
commenced a registered subscription rights offering of up to $31,465 of its
9.25% Convertible Redeemable Subordinated Debentures. The debentures were
offered to holders of its common stock pursuant to the exercise of
non-transferable subscription rights and were to be convertible into shares of
its common stock. The Company had the right in its discretion to accept offers
from other parties to purchase debentures not subscribed for by stockholders. On
August 14, 2002, the Company terminated the subscription rights offering due to
a delay in filing its Form 10-Q for the quarter ended June 30, 2002. The Company
re-commenced the offering during November 2002 and accepted subscriptions for
$32,118 of debentures, which were issued in December 2002. The Company also
increased the size of the offering and subsequently accepted $5,064 of
additional subscriptions in January and February 2003, resulting in a total of
$37,182 million of debentures being issued. The debentures bear interest at an
annual rate of 9.25%. They have a mandatory redemption feature upon the earlier
of the occurrence of a change of control or on December 27, 2022. They have an
optional redemption feature after the third anniversary at a price of 100% of
outstanding principal, plus accrued interest. They have a special redemption
feature between December 27, 2006 and December 27, 2007, during which period the
Company may redeem the debentures by issuing common stock at $25.50 per
debenture plus accrued interest, if the average closing price of its common
stock for five consecutive trading days equals or exceeds $25.50 per share.
Lastly, at any time, the holder of the debentures may convert the debentures
into the Companys common stock at a per share conversion price of $25 per
debenture.

During 2003, in addition to additional financing under its
container and chassis securitizations of $51,343 and $25,490, respectively the
additional borrowing of $50,000 under its revolving credit facility, and $38,000
borrowed by CAI under its revolving credit facility, the Company entered into
new financing arrangements totaling $134,980. The new debt and capital leases
entered into during 2003 consisted of the following:

`New Borrowings
Total New Debt and Capital Lease Obligations                                                    2003
---------------------------------------------                                              ---------------
Capital lease obligations payable through 2010 with interest
  imputed at rates from 4.4% to 6.4%                                                            $14,356
9.25% Convertible redeemable subordinated debentures, mandatory
  redemption 2022                                                                                 5,064
Notes and loans repayable with various rates ranging from 3.1%
  to 4.0% and maturities from 2006 to 2009                                                      115,560
                                                                                                --------
Total New Debt and Capital Lease Obligations 2003                                              $134,980
                                                                                               =========`

Included in the notes and loans are borrowings of $16,000 and
$7,000 from Yardville National Bank, a subsidiary of an entity in which the
Companys Chief Executive Officer owns approximately five percent of the
common stock and serves on the Executive Committee of the Board of Directors.
The term of the $16,000 loan is three years with thirty-four fixed monthly
principal payments of $250 commencing May 25, 2003 and a final principal
payment of $7,500 due on March 25, 2006. Interest is payable monthly, at an
initial rate of 4.25%, and is adjusted monthly to the prime rate as published in
the Wall Street Journal subject to a 4% minimum and 5% maximum per annum rate.
The term of the $7,000 loan is five years with fifty-nine fixed monthly
principal payments of $75 commencing September 7, 2003 and a final
principal payment of $2,575 due on August 7, 2008. Interest is payable
monthly, at an initial rate of 4%, and is adjusted monthly to the prime rate as
published in the Wall Street Journal subject to a 4% minimum and 6% maximum per
annum rate.

Covenants: Under its revolving credit facility and
most of its other debt instruments, the Company is required to maintain
covenants (as defined) for a tangible net worth of $125,000, a fixed charge
coverage ratio of 1.5 to 1 and a funded debt to net worth ratio (as defined in
the agreement, which is stockholders equity plus company-obligated
mandatorily redeemable preferred securities in subsidiary grantor trusts, less
goodwill) of 4.0 to 1. A financing facility entered into in March 2004 contains
more stringent covenants, including a requirement that the Company maintains a
tangible net worth of at least $300,000. The Company will seek to eliminate
these more stringent covenants by refinancing this facility during the second
half of 2004. At December 31, 2003, under covenants in the Companys loan
agreement approximately $94,708 of retained earnings were available for
dividends. In July 2003 and October 2003, in connection with obtaining necessary
waivers under the revolving credit facility due to the late filing of the
Companys periodic reports with the SEC and the restatement of its past
financial statements, the Company agreed, among other things, to reduce advance
rates under this facility, to define several additional events as events of
default, to increase the interest rate margin and to maintain specified levels
of unrestricted cash and cash equivalents until the delinquent SEC filings are
made. The Company also agreed to restrictions on dispositions of collateral and
on encumbrances of assets as well as a limitation on concessions that could be
made to its other financial institutions in connection with obtaining waivers.
The October 2003 amendment also required the Company to provide additional
financial information to the lenders under the facility and to continue the
engagement of a financial advisor. At December 31, 2003 the Company is in
compliance with these covenants as amended.

(5)     Derivative instruments:

The Companys assets are primarily fixed rate in nature
while its debt instruments are primarily floating rate. The Company employs
derivative financial instruments (interest rate swap agreements) to effectively
convert certain floating rate debt instruments into fixed rate instruments and
thereby manage its exposure to fluctuations in interest rates.

In June 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"). In June 1999,
the FASB issued Statement No. 137, Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement No.
133. In June 2000, the FASB issued SFAS No. 138, Accounting for Certain
Derivative Instruments and Certain Hedging Activities, an amendment of SFAS
133. Statement 133, collectively referred to hereafter as SFAS 133, as
amended, establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value. The Statement requires that changes in the
derivative instruments fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. Special accounting for
qualifying hedges allows a derivative instruments gains and losses to
offset related results on the hedged item in the income statement, to the extent
effective, and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting. For
derivatives qualifying as hedges of future cash flows, the effective portion of
changes in fair value is recorded temporarily in accumulated other comprehensive
loss as a separate component of equity, and contractual cash flows, along with
the related impact of the hedged items, continue to be recognized in earnings.
On January 1, 2001, the Company adopted SFAS 133. SFAS 133, in part, allows
special hedge accounting for fair value and cash flow hedges. SFAS 133 provides
that the gain or loss on a derivative instrument designated and qualifying as a
fair valuehedging instrument as well as the offsetting loss or gain on the hedged item
attributable to the hedged risk be recognized currently in earnings in the same
accounting period. SFAS 133 provides that the effective portion of the gain or
loss on a derivative instrument designated and qualifying as a cash flow hedging
instrument be reported as a component of other comprehensive income and be
reclassified into earnings in the same period or periods during which the hedged
forecasted transaction affects earnings. (The remaining gain or loss on the
derivative instrument, if any, must be recognized currently in earnings.)

During 2003, the Company modified its procedures for assessing
hedge effectiveness, changing from a reliance on a dollar offset ratio
calculation to the use of regression analysis. In following SFAS 133, the
Company was required to discontinue the original hedging relationships and to
redefine replacement hedging relationships with new documentation that reflected
the use of regression analysis for the testing of hedge effectiveness.

As of December 31, 2003 and December 31, 2002, included in
accounts payable and accrued expenses in the accompanying Consolidated Balance
Sheets is a liability of $34,026 and $49,577, respectively, representing the
market value of the Companys interest rate swap contracts.

The unrealized pre-tax income on cash flow hedges for the year
ended December 31, 2003 of $15,270 and the related income tax provision of
$4,700 have been recorded by the Company as a component of other comprehensive
income (loss).

The unrealized pre-tax losses on cash flow hedges for the year
ended December 31, 2002 of $23,436 and the related income tax benefit of $8,703
have been recorded by the Company as a component of other comprehensive income
(loss). See Note 1 to the Consolidated Financial Statements for additional
disclosures regarding swap agreements and their impact on other comprehensive
income.

Amounts recorded in accumulated other comprehensive loss would
be reclassified into earnings upon termination of these interest rate swap
agreements and related debt instruments prior to their contractual maturity. The
Company may at its discretion terminate or redesignate any such interest rate
swap agreements prior to maturity. At that time, any gains or losses on
termination would continue to amortize into income to correspond to the
recognition of interest on the hedged debt. If such debt instrument was also
terminated the gain or loss associated with the terminated derivative included
in accumulated other comprehensive loss at the time of termination of the debt
would be recognized in the Consolidated Income Statement at that time.

Pre-tax income for the year ended December 31, 2003 resulting
from the change in fair value of interest rate swap agreements held which do not
qualify as cash flow hedges under Statement 133 of $834 has been recorded on the
Consolidated Statements of Income as fair value adjustment for derivative
instruments. This compares to $5,621 of pre-tax losses for year ended December
31, 2002. Pre-tax income of $3 for the year ended December 31, 2003 resulting
from interest rate swap agreements which qualify as cash flow hedges but are not
perfectly correlated have associated ineffectiveness and have been recorded in
the Consolidated Statements of Income as fair value adjustment for derivative
instruments. This compares to $91 of pre-tax income for the year ended December
31, 2002. Future ineffectiveness related to these interest rate swap agreements
will continue to be recorded in the Consolidated Statements of Income.

As of December 31, 2003, the annual maturities of the notional
principal amounts, with installments payable in varying amounts through 2014,
and the weighted average interest rates expected to be received or paid for
interest rate swap contracts were as follows:

`Notional        Receive           Pay
                                      Amount          Rate            Rate
                                     ----------    ----------     ------------
2004                                  $91,295           1.14%          4.89%
2005                                   95,091           1.14%          4.93%
2006                                   59,836           1.14%          4.98%
2007                                  166,906           1.15%          5.71%
2008                                   31,793           1.15%          5.33%
Thereafter                             95,605           1.15%          5.49%
                                     ---------          -----          -----
Total                                $540,526           1.15%          5.29%
                                     =========          =====          =====`

The weighted average receive rate is based on the floating rate
option specified by the interest rate swap contract and are either one-month or
three-month USD-LIBOR.

(6)     Assets Sold to
Transport Intermodal Pool ("TIP"):

In March 2001, the Company sold 50,000 rail trailers and
domestic containers, including all 41,000 rail trailers and domestic containers
the Company acquired from the North American Intermodal Division of Transamerica
Leasing, Inc. ("TA") in October 2000, to TIP. The asset value as of March 31,
2001 includes $281,354 related to the units acquired from TA, $4,716 of accounts
receivable and $62,009 of assets previously owned by the Company. The Company
recorded a gain of $1,774 upon the consummation of this sale, which represents
the premium paid for the units previously owned by the Company over their net
book value.

(7)     Sale of PCR and
Discontinuation of Microtech's Operations

During the three months ended September 30, 2001, the Company
adopted a formal plan to dispose of PCR, a 51%-owned subsidiary, and to
discontinue the operations of Microtech, (after acquiring the remaining 24.5%
ownership interest of this 75.5%-owned subsidiary) and liquidate its lease
portfolio. Within the historical financial statements of the Company, PCR and
Microtech comprised the computer-leasing segment and specialized in the leasing
of microcomputers and related equipment.

On December 31, 2001, the Company acquired from the management
of Microtech (who are the same individuals who managed PCR) the remaining 24.5%
ownership interest in Microtech for $792 in cash, thereby increasing the
Companys ownership in Microtech to 100%.

In addition, on December 31, 2001, the Company completed the
contractual sale of its 51% ownership stake of PCR to an investment group
comprised of the management of PCR. Under the agreement, the Company sold its
share of PCR for $3,200. The purchase price was satisfied through the issuance
of a non-recourse note in the amount of $2,560 and a cash payment of $640
received by the Company on January 2, 2002. This transaction was not accounted
for as a sale by the Company because of the level of the Companys
continued involvement in PCR subsequent to the transaction which included:

| |  | A $3,500 loan due from PCR under a long-term revolving credit facility;
| | - | -----------------------------------------------------------------------

| |  | A $1,400 finance lease and other receivables due from PCR
primarily for its lease of computer equipment from Microtech;
| | - | -----------------------------------------------------------------------------------------------------------------------

| |  | A $5,000 guarantee provided by the Company for PCR borrowings from
an unrelated financial institution. For information regarding the satisfaction
of this guarantee in July 2004, see Note 18 (Subsequent Events - Financing
Activities) to the Consolidated Financial Statements;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | A $3,000 guarantee provided by certain directors and officers of
the Company for a line of credit obtained by PCR from a financial institution
related to the Company - (See Note 11 to the Consolidated Financial Statements);
and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Bonus and consulting contracts entered into between the Company
and the key executives of PCR.
| | - | ----------------------------------------------------------------------------------------------

Effective December 31, 2001, all of the assets of PCR were
aggregated under the caption, assets of business transferred under contractual
agreement, and all of the liabilities and minority interest of PCR were
aggregated under the caption liabilities of business transferred under
contractual agreement on the Companys Consolidated Balance Sheet. The
receivables due from PCR on the Companys Consolidated Balance Sheet at
December 31, 2001 were eliminated against the related liabilities included
in liabilities of business transferred under contractual agreement.

During 2002, the Company included in other (income)/expense, net
in the Companys Consolidated Income Statement losses resulting from
PCRs operations with a corresponding reduction to assets of business
transferred under contractual agreement in the Companys Consolidated
Balance Sheet. During the first three quarters of 2002, $4,002 of such
PCRs losses were recorded by the Company.

During the fourth quarter of 2002, the Company determined that
it was unlikely that PCR would be able to continue as a going concern, and, in
the first quarter of 2003, PCR entered bankruptcy proceedings and began the
voluntary liquidation of its business. As a result, during the fourth quarter of
2002, the Company accrued for its obligations related to the liquidation of PCR.
The amounts accrued by the Company in 2002 included $4,429 related to its
guarantee of PCRs debt, $2,681 in payments made by The Ivy Group (which
had assumed the $3,000 guarantee made by certain officers and directors of the
Company) to pay off PCRs bank debt and provide short term liquidity (see
further discussion below), the write-off of $1,400 in computer equipment related
receivables due to Microtech, and $1,168 related to consulting and bonus
agreements provided to key officers of PCR. These amounts have been included in
other (income)/expense, net in the Companys Consolidated Statements of
Income. For further information regarding the satisfaction of the guarantee of
PCRs debts in July 2004, see Note 18 (Subsequent Events  Financing
Activities) to the Consolidated Financial Statements.

At the time of closing of the sale of the Companys
interest in PCR, the Company provided a guarantee of an additional line of
credit from a financial institution of up to $3,000 on PCRs behalf. The
financial institution subsequently agreed, at the Companys request, to
rescind this guarantee, retroactive to December 31, 2001. In lieu of the
Companys guarantee, effective December 31, 2001, certain directors and
officers of the Company guaranteed an additional line of credit of up to $3,000
on behalf of PCR. Advances amounting to $698 and $1,983 in 2003 and 2002,
respectively, were made to PCR by The Ivy Group to pay off borrowings under the
line of credit and to provide PCR with working capital. The Ivy Group is a
partnership controlled by certain current and former officers and directors of
the Company. The advances made by The Ivy Group to PCR are considered capital
contributions to the Company and payments by the Company to PCR. The payments to
PCR have been determined to be uncollectible and, accordingly, were written off
by the Company as described above. Payments made in 2002 amounting to $1,983
have been included in additional paid in capital. The remaining payments made in
2003 of $698 were included in accounts payable and accrued expenses at December
31, 2002 and were reclassified to additional paid in capital during 2003 when
the payments were made.

(8)     Lease securitization
program:

On March 30, 1999, the Company entered into an asset backed note
program (the "ABN Program"). The ABN Program involved the sale by the Company of
direct finance leases collateralized by intermodal containers. The assets were
sold to a qualified special purpose entity whose sole business activity is
issuing asset backed notes ("ABNs"), supported by the future cash flows of the
assets and the underlying residuals.

Prior to October 1, 2003 the Company classified the retained
interest as an available for sale security, which was included in other
investment securities in the accompanying Consolidated Balance Sheets.
Accordingly, the retained interest was accounted for at fair value, with any
changes in fair value over its allocated historical book value recorded as a
component of accumulated other comprehensive income/(loss), net of tax, in the
Consolidated Statement of Changes in Stockholders Equity. As of September
30, 2003 and December 31, 2002, the Companys estimated fair market value
of its retained interest was $3,801 and $10,319, respectively, using a
discounted cash flow model assuming expected credit losses of 1.5% and a
discount rate of 12.6%, in both periods. Prior to October 1, 2003 and for the
years ended December 31, 2002 and 2001, the Company recorded interest income on
the retained interest totaling $976, $1,777, and $3,558, respectively, which is
included in revenues in the accompanying Consolidated Statements of Income.
Impairment losses of $571, $134 and $0 for the nine months ended September 30,
2003 and for the years ended December 31, 2002 and 2001, respectively, were
recorded and included in the accompanying Consolidated Statements of Income
based upon changes in managements projected cash flows of the underlying
direct finance lease receivables in the securitization trust. The impairment
charge recorded in 2003 resulted primarily from an amendment and waiver dated
September 19, 2003, wherein the Company agreed that all future cash flows
generated by the securitization facility that would have otherwise been remitted
to the Company in satisfaction of its retained interest would be used to reduce
the remaining obligations of its container securitization facility until such
obligations were fully repaid. In addition, the Company agreed to defer its
receipt of servicing fees. Once all obligations are repaid, the Company would
then receive the future lease payments in satisfaction of its net investment in
direct financing leases and deferred servicing fees. For the nine months ended
September 30, 2003 and for the years ended December 31, 2002 and 2001 cash flows
received on the retained interest were $6,923, $6,435 and $15,585, respectively.

During the fourth quarter of 2003, a customer elected to return
a portion of the equipment covered by a direct financing lease which had been
included in the lease securitization program. This equipment was subsequently
leased to another customer under the terms of an operating lease agreement. As
such, the lease could no longer be considered a financial asset and since the
special purpose entity continued to own this non-financial asset, the entity
could no longer be treated as an off-balance sheet qualified special purpose
entity for accounting purposes.

Effective October 1, 2003, a customer elected to return a
portion of the equipment covered by a direct financing lease which had been
included in a qualified special purpose entity as part of the lease
securitization program. The equipment was subsequently leased to another
customer under the terms of an operating lease agreement. As such, the lease
could no longer be considered a financial asset and the Securitization Trust
special purpose entity could no longer be treated as an off-balance sheet
qualified special purpose entity for accounting purposes. Therefore, effective
October 1, 2003, the Company consolidated the assets and liabilities of this
special purpose entity. As a result, the Company recorded the net investment in
direct financing leases of $19,742 on the accompanying Consolidated Balance
Sheets which represents the remaining lease payments for the direct financing
leases in the securitization, net of the interest implicit in the leases. In
addition, the Company recorded leasing equipment of $1,326 related to the
equipment subsequently leased under the terms of the operating lease agreement.
The remaining obligations under the ABNs amounting to $17,793 were
recorded as debt and capital lease obligations on the Consolidated Balance
Sheets at October 1, 2003. After consolidating these and other assets and
liabilities of the special purpose entity, net of the book value of the
Companys retained interest in the securitization of $3,801 on October 1,
2003, the Company recognized income of $2,870 in other (income)/expense, net in
the Consolidated Statements of Income at October 1, 2003. This income resulted
from the favorable credit loss experience through September 30, 2003 on the
underlying direct financing leases as compared to the assumed credit losses of
1.5%.

During the three months ended December 31, 2003, the
amortization of the net investment in direct financing leases and the revenue
earned on these direct financing leases amounted to $4,355 and $608,
respectively.

Interpool Limited, a subsidiary of the Company (the "Servicer"),
acts as servicer for the assets. Pursuant to the terms of the servicing
agreement as amended on October 18, 2002, the Servicer is paid a fee of 0.75% of
the assets under management. Prior to the amendment to the servicing agreement,
the Servicer was paid a fee of 0.40%. As a result of this amendment, the Company
recorded a permanent impairment loss of $240 for the year ended December 31,
2002 in the accompanying Consolidated Statements of Income. The Companys
management has determined that the servicing fee paid approximates the fair
value for services provided, as such, no servicing asset or liability has been
recorded. For the nine months ended September 30, 2003 and for the years ended
December 31, 2002 and 2001, the Company received servicing fees totaling $706,
$591 and $486 which are included in revenues in the accompanying Consolidated
Statement of Income.

At December 31, 2002, key economic assumptions and the
sensitivity of the current fair value of residual cash flows to immediate 10
percent and 20 percent adverse changes in those assumptions are as follows:

`December 31, 2002
                                                                  ------------------
Carrying amount/fair value of retained interests                           $10,319
Weighted-average life (in years)                                              1.8
Expected credit losses (annual rate)                                          1.5%
Impact on fair value of 10% adverse change                                     $83
Impact on fair value of 20% adverse change                                    $167
Residual cash flows discount rate (annual)                                    12.6%
Impact on fair value of 10% adverse change                                    $182
Impact on fair value of 20% adverse change                                    $354`

(9)     Other
contingencies and commitments:

Lease Commitments:The Company and its subsidiaries are
parties to various operating leases relating to office facilities,
transportation vehicles, and certain other equipment with various expiration
dates through 2012. All leasing arrangements contain normal leasing terms
without unusual purchase options or escalation clauses. Rental expense under
operating leases aggregated $21,470, $17,074 and $14,856 for the years ended
December 31, 2003, 2002 and 2001, respectively.

As of December 31, 2003, the aggregate minimum rental
commitment under operating leases having initial or remaining noncancellable
lease terms in excess of one year was as follows:

`2004                                $20,167
                        2005                                 15,412
                        2006                                 18,496
                        2007                                 10,919
                        2008                                  5,864
                        Thereafter                            6,483
                                                            --------
                                                            $77,341
                                                            ========`

The Company and its subsidiaries are parties to various capital
leases and obligated to make payments related to its long-term borrowings. (See
Note 4 to the Consolidated Financial Statements).

Employment Agreements:The Company has entered into
employment agreements with certain executive officers and employees which
provide for minimum salary, bonus arrangements and benefits for periods from 1
to 7 years. As of December 31, 2003, the minimum obligation related to these
agreements approximated $8,800.

Separation Agreements: The Company has entered into
separation agreements with its former President and Chief Operating Officer and
its former Executive Vice President and Chief Financial Officer that provide for
payments and benefits for periods of 2 to 4 years. As of December 31, 2003, the
minimum obligation related to these agreements approximated $4,172. The expense
related to these separation agreements was recorded during 2003.

Guarantees:In November 2002, the FASB issued FASB
Interpretation No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others("FIN 45"). FIN 45 elaborates on the disclosures to be made by a
guarantor in interim and annual financial statements about its obligations under
certain guarantees it has issued. A guarantor is required to disclose (a) the
nature of the guarantee, including the approximate term, how the guarantee
arose, and the events and circumstances that would require the guarantor to
perform under the guarantee; (b) the maximum potential amount of future payments
under the guarantee; (c) the carrying amount of the liability, if any, for the
guarantors obligation under the guarantee; and (d) the nature and extent
of any recourse provisions or available collateral that would enable the
guarantor to recover the amounts paid under the guarantee. FIN 45 also clarifies
that a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. Disclosure requirements are effective for financial statements with
periods ending after December 15, 2002 while the initial recognition and initial
measurement provisions shall be applied on prospective basis to guarantees
issued or modified after December 31, 2002. The adoption of FIN 45 did not have
a material effect on the Companys Consolidated Financial Statements.

At December 31, 2003, the following guarantees were issued and
outstanding:

Indemnifications: In the ordinary course of
business, the Company executes contracts involving indemnifications standard in
the industry and indemnifications specific to a transaction such as an
assignment and assumption agreement. These indemnifications might include claims
related to any of the following: tax matters and governmental regulations, and
contractual relationships. Performance under these indemnities would generally
be triggered by a breach of terms of the contract or by a third party claim. The
Company regularly evaluates the probability of having to incur costs associated
with these indemnifications and have accrued for any expected losses that are
probable. The types of indemnifications for which payment are possible are as
follows:

| | Taxes:In the ordinary course of business, the Company provides
various tax-related indemnifications as part of transactions. The indemnified
party typically is protected from certain events that result in a tax treatment
different from that originally anticipated. The Companys liability
typically is fixed when a final determination of the indemnified partys
tax liability is made. In some cases, a payment under a tax indemnification may
be offset in whole or in part by refunds from the applicable governmental taxing
authority. The Company is party to numerous tax indemnifications and many of
these indemnities do not limit potential payment; therefore, it is unable to
estimate a maximum amount of potential future payments that could result from
claims made under these indemnities.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Contractual relationships:The Company entered into a number of
operating leases during 2000 and 2002 in which it guaranteed a portion of the
residual value of the leased equipment. These leases have terms that expire
between 7 and 10 years. If at the end of the lease term the fair market value of
the equipment is below the guaranteed residual value in the agreement, the
Company is liable for a percentage of the deficiency. The total of these
guarantees is $12,405 of which $8,011 could be due in 4 to 5 years, with the
remaining $4,394 potentially due in greater than 5 years. As of December 31,
2003 and 2002, included in accounts payable and accrued expenses in the
accompanying Consolidated Balance Sheets is a liability of $144 and $99,
respectively, representing the accrual for these guarantees.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During the second quarter of 2003, the Company arranged a leasing transaction
between one of its major customers and a financial institution for up to 3,000
containers. As part of this transaction, the Company agreed to provide certain
guarantees related to the fair value of the equipment if the lessee terminated
the lease or if the lessee was unable to meet its obligations under the terms of
the lease. In addition, if the lessee agreed to extend the lease, the Company
agreed to purchase the equipment from the financial institution at a stated
value and lease it to the lessee for this additional period at a stated lease
rate. The Company further agreed to provide the lessee with a purchase option at
the end of the extended lease period that would be less than the fair market
value of the equipment at the date the lessee could exercise its option (the
"Bargain Purchase Option").
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In return for the arrangement of the transaction on behalf of the financial
institution and the guarantees discussed above, the Company was paid an
arrangement fee and a portion of the initial rent for each container included in
the lease. During the year ended December 31, 2003, 2,076 containers were
delivered to the lessee and the Company received payments amounting to $1,240.
The remaining 924 containers were purchased by the Company and leased to the
customer under the terms of a direct finance lease.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The estimated fair value at the end of the lease term guaranteed by the Company
for these containers amounts to approximately $4,360. The Company has estimated
that its potential liability related to these guarantees is less than the
estimated potential liability related to the Bargain Purchase Option granted to
the lessee. As such, the Company has accrued for the estimated value of its
liability for this Bargain Purchase Option amounting to $1,017 that could be due
in greater than 5 years. All fees collected from the lessor have been deferred
by the Company and included in accounts payable and accrued liabilities on the
accompanying Consolidated Balance Sheets. The fees received from the lessor, net
of the estimated liability for the Bargain Purchase Option, are being recognized
by the Company over the term of the residual guarantee.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Standby Letters of Credit: As of December 31, 2003, CAI, a
consolidated subsidiary of the Company, has two outstanding letters of credit
totaling $6,000 which guarantee its obligations under certain operating lease
agreements. These letters of credit expire in May, 2005.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Guarantee of Unconsolidated Affiliate Debt: Since 2000, the
Company has guaranteed PCR debts due to third parties totaling $5,000. At
December 31, 2002, with PCR in liquidation, a determination was made that it was
probable that the Company would incur costs related to this guarantee. As a
result, the Company has recorded a liability for $4,429 representing its
guarantee of PCR debts net of amounts collected related to PCRs
liquidation. This is included in accounts payable and accrued expenses in the
2003 and 2002 Consolidated Balance Sheets. Although there is a recourse
provision that allows the Company to recover payments under the guarantee,
recovery is unlikely. This guarantee was subsequently paid off through a secured
financing arrangement completed by the Company in July 2004. For information
regarding the satisfaction of this guarantee in July 2004, see Note 18
(Subsequent Events  Financing Activities) to the Consolidated Financial
Statements. (See Note 7 to the Consolidated Financial Statements for additional
discussion of guarantees for PCR debt provided by The Ivy Group).
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Other:

At December 31, 2003, commitments for capital expenditures for
leasing equipment totaled approximately $105,275, with approximately $42,266
committed for 2004. Approximately $21,001 per year is committed for years 2005,
2006, and 2007, respectively.

The Company is engaged in various legal proceedings from time to
time incidental to the conduct of its business. Such proceedings may relate to
claims arising out of chassis accidents that occur from time to time which
involve death and injury to persons and damage to property. Accordingly, the
Company requires all of its lessees to indemnify the Company against any losses
arising out of such accidents while the chassis are on-hire to the lessees. In
addition, lessees are generally required to maintain a minimum of $2,000 in
general liability insurance coverage which is standard in the industry. In
addition, the Company maintains a back-up general liability policy of $200,000
in the event that the above lessee coverage is insufficient. While the Company
believes that such coverage should be adequate to cover current claims, there
can be no guarantee that future claims will never exceed such amounts.
Nevertheless, the Company believes that no current or potential claims of which
it is aware will have a material adverse effect on its financial condition or
results of operations and that the Company is adequately insured against such
claims.

For further discussion regarding the Stockholder litigation, see
"Stockholder Litigation" in Note 18 to the Consolidated Financial Statements.

(10)     Cash flow
information:

For purposes of the Consolidated Statements of Cash Flows, the
Company includes all highly liquid short-term investments with an original
maturity of three months or less in cash and cash equivalents.

For the years ended December 31, 2003, 2002 and 2001, cash paid
for interest was approximately $105,272, $108,886 and $102,881, respectively.
Cash paid for income taxes was approximately $2,175, $3,249 and $2,719,
respectively.

(11)     Related party
transactions:

During 2001, the Company leased approximately 28,500 square feet
of commercial space for its corporate offices in Princeton, New Jersey from 211
College Road Associates, a New Jersey general partnership in which Martin
Tuchman, a director and Chief Executive Officer and Warren L. Serenbetz, a
director, held a significant equity interest. The 2001 annual base rental for
this property was approximately $557 under a triple net lease expiring in 2010.
In the opinion of the Companys management, rent paid under this lease did
not exceed rent that the Company would have paid in an arms length
transaction with an unrelated third party. On January 28, 2002, the Company
executed a Purchase and Sale Agreement, pursuant to which on May 1, 2002 the
Company acquired the building which houses its corporate offices. The fair
market value purchase price of the approximately 39,000 square feet building was
$6,250, based upon a determination of the fair market value of the property by
an independent property appraisal firm. The purchase price and other terms of
the purchase were unanimously approved by the Companys Board of Directors.

In January 1992 the Company executed a Consultation Services
Agreement with Radcliff Group, Inc. pursuant to which Radcliff designated Warren
L. Serenbetz, a stockholder and director, as an executive consultant. The
Consultation Services Agreement was terminated in January 1995. Under the terms
of the agreement compensation continued through December 2002 and payment of
health related costs will continue through December 31, 2007. The final payment
under the terms of the Consultation Services Agreement was made in January 2003.
Compensation under this agreement was $492 in both 2002 and 2001.

Eurochassis L.P., a New Jersey limited partnership in which
Raoul J. Witteveen, our former President and Chief Operating Officer, is one of
the limited partners and the general partner, leases 100 chassis to Trac Lease,
a subsidiary of Interpool. Annual lease expense amounted to approximately $91
for each of the years ended December 31, 2003, 2002 and 2001. The annual lease
term renews automatically unless canceled or renewed under renegotiated lease
rate terms by either party prior to the first day of the renewal period. The
members of the Board of Directors have unanimously determined that the terms of
all arrangements between Eurochassis L.P. and Trac Lease are beneficial and fair
to the Company.

In January 1998, the Company entered into a non-exclusive
Consulting Agreement with Atlas Capital Partners, LLC ("Atlas") pursuant to
which Mitchell I. Gordon, a Director of Interpool from 1998 to October 2003 and
Chief Financial Officer and Executive Vice President from October 2000 to
July 2003, provided investment banking consultation services. Under the
terms of the Consulting Agreement, Atlas was to have been paid $240 (plus
reimbursement of reasonable expenses), additional compensation of $560 and a
twenty percent carried interest in investments made with funds provided by
Interpool. In addition, Atlas was contractually entitled to an annual bonus in
an amount that is usual and customary in the investment banking business for
investment opportunities actually completed by the Company subject to set-off of
the $560 additional compensation. In 2000, other compensation in the amount of
$1,650 to be paid over three years, was earned by Atlas in connection with the
acquisition by the Company of the North American Intermodal Division of
Transamerica. As of October 2000, the Consulting Agreement was terminated with
the exception of the deferred compensation related to the acquisition of
Transamerica. Mr. Gordon resigned as an officer and director of the Company in
2003.

Chassis Holdings I, LLC

The Ivy Group, which is a
New Jersey general partnership composed directly or indirectly of Martin
Tuchman, Radcliff Group, Inc., Raoul J. Witteveen, Thomas P. Birnie and Graham
K. Owen, has previously leased chassis to Trac Lease, Inc. ("Trac
Lease"). As of December 31, 2000, pursuant to various equipment lease
agreements, Trac Lease leased 6,047 chassis from The Ivy Group and its
principals for an aggregate annual lease payment of approximately $2,900. On
January 1, 2001, the various leases for the 6,047 units were combined into a
single lease pursuant to which The Ivy Group and its principals were paid an
aggregate lease payment of $2,691 through June 30, 2001. On July 1, 2001, the
Company restructured its relationship with The Ivy Group and its principals to
provide the Company with managerial control over 6,047 chassis previously leased
by Trac Lease, a wholly owned subsidiary of the Company, from The Ivy Group. As
a result of the restructuring, the partners of The Ivy Group contributed these
6,047 chassis and certain other assets and liabilities to a newly formed
subsidiary, Chassis Holdings I LLC ("Chassis Holdings"), in exchange
for $26,000 face value of preferred membership units and 10% of the common
membership units, and Trac Lease contributed 902 chassis and $2 in cash to
Chassis Holdings in exchange for $3,000 face value of preferred membership units
and 90% of the common membership units. The preferred membership units are
entitled to receive a preferred return prior to the receipt of any distributions
by the holders of the common membership units. The value of the contributed
chassis was determined by taking the arithmetic average of the results of
independent appraisals performed by three nationally recognized appraisal firms
in connection with the Companys establishment of a chassis securitization
facility in July 2000. As the managing member of Chassis Holdings, Trac Lease
exercises sole managerial control over the entitys operations. Chassis
Holdings leases all of its chassis to Trac Lease at a rental rate equal to the
then current Trac Lease fleet average per diem. Chassis Holdings and the holders
of the preferred membership units are party to a Put/Call Agreement which
provides that the holders of preferred units may put such units to Chassis
Holdings under certain circumstances and Chassis Holdings may redeem such units
under certain circumstances. Chassis Holdings will be required to make certain
option payments to the holders of the preferred membership units in order to
preserve its right to redeem such units.

Based on 90% common unit
ownership held by Trac Lease, the Companys Consolidated Financial
Statements include the accounts of Chassis Holdings. The Ivy Groups
interest in the common and preferred units of Chassis Holdings of approximately
$26,326 is classified as minority interest in equity of subsidiaries in the
accompanying Consolidated Balance Sheets. Dividends paid on the common units and
distributions on the preferred units totaling $2,906, $3,120 and $1,651 for the
years ended December 31, 2003, 2002 and 2001, are included in minority
interest (income)/expense, net in the accompanying Consolidated Statements of
Income.

The members of the Board of
Directors have unanimously determined that the terms of all arrangements between
The Ivy Group and Trac Lease, including the formation of Chassis Holdings, are
beneficial and fair to the Company.

PCR Transactions

In July 2000, Yardville National Bank (a subsidiary of an entity
in which the Companys Chief Executive Officer owns approximately five
percent of the common stock and serves on the Executive Committee of the Board
of Directors) extended a revolving credit facility of $2,500 to PCR, secured by
substantially all of PCRs assets. On August 31, 2000 this facility was
increased to $5,000.

In connection with the sale of PCR in December 2001, Martin
Tuchman and Raoul Witteveen agreed in March 2002 to guarantee this line of
credit between PCR and Yardville National Bank which had been reduced to $3,000
and the Company was released from a guarantee it had previously executed. This
guarantee was subsequently paid off through advances made to PCR by The Ivy
Group. PCRs line of credit with Yardville National Bank was reduced to
$1,656 in March 2002 and later increased to $2,000 in September 2002. Advances
amounting to $698 and $1,983 in 2003 and 2002, respectively, were made to PCR by
The Ivy Group to pay off borrowings under the line of credit and to provide
working capital. The Ivy Group is a partnership controlled by certain current
and former officers and directors of the Company. The advances made by The Ivy
Group to PCR are considered capital contributions to the Company and payments by
the Company to PCR. The payments to PCR have been determined to be uncollectible
and have been expensed by the Company and included in other (income)/expense,
net. Payments made in 2002 amounting to $1,983 were included in additional paid
in capital. The remaining payments made in 2003 of $698 were included in
accounts payable and accrued expenses at December 31, 2002 and were reclassified
to additional paid in capital during 2003 when the payments were made.

Bank Loans

In September 2000, Yardville National Bank (a subsidiary of an
entity in which the Companys Chief Executive Officer owns approximately
five percent of the common stock and serves on the Executive Committee of the
Board of Directors) provided a revolving line of credit to the Company. The line
of credit was initially $9,750 and was secured by equipment and the related
leases. The interest rate was Yardville National Banks base interest rate
minus 0.5%. The Company utilized a portion of this facility from inception
through April 2002 when the loan balance was paid and the facility ended.

In April 2003 and August 2003 the Company borrowed $16,000 and
$7,000, respectively, from Yardville National Bank. The term of the $16,000 loan
is three years with thirty-four fixed monthly principal payments of $250
commencing May 25, 2003 and a final principal payment of $7,500 due on March 25,
2006. Interest is payable monthly, at an initial rate of 4.25%, and is adjusted
monthly to the prime rate as published in the Wall Street Journal subject to a
4% minimum and 5% maximum per annum rate.

The term of the $7,000 loan is five years with fifty-nine
monthly principal payments of $75 commencing September 7, 2003 and a final
principal payment of $2,575 due on August 7, 2008. Interest is payable monthly,
at an initial rate of 4%, and is adjusted monthly to the prime rate as published
in the Wall Street Journal subject to a 4% minimum and 6% maximum per annum
rate.

In connection with our
borrowings from Yardville National Bank, our Board of Directors unanimously
determined that the interest rate and other terms of such borrowings were at
least as favorable to us as could have been obtained in an arms-length
transaction with an unrelated third party.

Fathom Co., LTD Agency Fees

The Company paid Fathom
Co., LTD ("Fathom"), its local representative in Taiwan, $116 for each
of the years ended December 31, 2003, 2002 and 2001 to represent the Company
with the Taiwan depots that store and repair damaged containers and to provide
customer support. Fathom is owned by a Regional Vice President of Interpool
Limited (who is not an executive officer of the Company) and members of his
family. Management has determined that the fee for these services between Fathom
and Interpool Limited are beneficial and fair to the Company.

Summary of Related Party Transactions

The effect of the above
related party transactions included in the accompanying Consolidated Statement
of Income are as follows:

`2003       2002        2001
                                              ----       ----        ----
      Revenue                                  $---       $---        $496
      Lease operating expense                $2,997     $3,234      $4,343
      Administrative expense                   $157       $857      $1,495
      Other (income)/expense, net              $---     $2,763        $---
      Interest expense                         $540        $40        $452`

(12)     Relationship with
CAI:

The Company holds a 50%
common equity interest in CAI, which it acquired in April 1998. CAI owns and
leases its own fleet of containers and manages, for a fee, containers owned by
the Company and third parties. The Company entered into its operating
relationship with CAI primarily to facilitate the rental in the short-term
market of containers coming off long-term lease, to gain access to new companies
looking to lease containers on a long term basis and to realize cost
efficiencies from the operation of a coordinated container lease marketing
group. The marketing group, which is organized as a wholly-owned subsidiary of
the Company, is responsible for soliciting container lease business for both the
Company and CAI, including long-term and direct finance lease business and
short-term lease business on master lease agreements. The Companys
agreement with CAI provides that all long-term and direct finance lease business
will be purchased by the Company, subject to the Company offering to CAI, at
cost, 10% of this long-term and direct finance lease business. By mutual
agreement, CAI has purchased for its own account long-term and direct finance
lease business in excess of such amounts. During 2003, CAI sold containers to
Interpool in the amount of $5,890 and recorded a gain on these sales of $557.
During 2002, CAI sold containers to Interpool in the amount of $38,705 and
recorded a gain on these sales of $5,102. These gains have been eliminated from
the accompanying Consolidated Financial Statements.

The 50% equity interest in
CAI not held by the Company is owned by CAIs chief executive officer.
Under the terms of a Shareholder Agreement entered into in 1998 between the
Company and CAIs chief executive officer, since an initial public offering
for the registration and sale of CAIs common stock has not been initiated
before April 2003, CAIs chief executive officer has the right to have an
independent valuation of CAI completed on an annual basis to determine the fair
value of CAI. An independent valuation of CAI has not been initiated. However,
following the completion of such an appraisal, the Company has the right to make
a written offer to acquire the chief executive officers equity for an
amount equal to 50% of the fair value of CAI as indicated in the appraisal. If
an offer is not made by the Company, CAIs chief executive officer has a
right to require CAI to take the necessary steps to effect an initial public
offering to sell his equity. All costs associated with an initial public
offering of CAI would be borne by CAI.

In connection with the
acquisition of its equity interest in CAI, the Company loaned CAI $33,650 under
a Subordinated Note Agreement (Note), which is collateralized by all containers
owned by CAI as of April 30, 1998 or thereafter acquired, subject to the
priority security interest lien of CAIs senior credit facility, except for
certain excluded collateral. Interest on the Note is calculated at an annual
fixed rate of 10.5% payable quarterly. The original repayment terms required
mandatory quarterly principal payments of $1,683 beginning July 30, 2003 through
April 30, 2008. The Note was subject to certain financial covenants and was
cross-defaulted with CAIs senior credit facility, subject to the terms of
a subordination agreement.

On June 27, 2002, CAI
entered into an amended $110,000 senior revolving credit agreement with a group
of financial institutions. To facilitate the closing of this new credit
facility, the Company agreed to extend the repayment terms of its Note so as to
require mandatory quarterly principal payments of $1,683 beginning July 30, 2006
through April 30, 2011 and modified certain financial covenants in the Note.
Interest on the Note continues to accrue at an annual fixed rate of 10.5% and is
payable quarterly. The Note continues to be cross-defaulted with CAIs
senior credit agreement, subject to the terms of an amended and restated
subordination agreement. At the same time, the Company was granted the right to
appoint a majority of CAIs board of directors. As a result of these
transactions and gaining a majority position on CAIs board, the
Companys financial statements include CAI as a consolidated subsidiary
commencing June 27, 2002. Previously, CAI was accounted for under the equity
method of accounting. The Companys share of the equity losses of CAI for
the periods from January 1, 2001 through June 26, 2002 have been recorded in
losses for investments accounted for under the equity method in the accompanying
Consolidated Statements of Income. For the period from June 27, 2002 through
December 31, 2003, CAIs results of operations have been included in the
appropriate captions on the accompanying Consolidated Statements of Income. The
assets and liabilities of CAI at December 31, 2003 and 2002, after elimination
of intercompany transactions, have been included on the accompanying
Consolidated Balance Sheets.

A total of $87,000 and
$74,000 was outstanding under CAIs senior revolving credit facility at
December 31, 2003 and 2002, respectively. Borrowings under CAIs senior
credit facility are secured by substantially all of CAIs assets, other
than certain excluded assets, and are payable on June 27, 2005. The senior
credit facility contains various financial and other covenants. At December 31,
2003 CAI was in compliance with these covenants.

The senior credit facility
was amended in May 2003 to increase the letter of credit commitment by the
lenders administrative agent.

In addition, CAI has
entered into sale-leaseback transactions with third parties pursuant to which
CAI sells maritime shipping containers to such third parties and then leases the
shipping containers back from such third parties. In connection with such
transactions, CAI has entered into the following lease agreements:

CAI entered into a master
lease agreement dated April 30, 1998, as amended, which amends and restates a
prior agreement dated July 17, 1996, pursuant to which CAI currently leases
shipping containers from a banking corporation. The master lease agreement has
an expiration date of July 31, 2008. CAI is required to make regular payments to
lessor and, as of December 31, 2003 and 2002, CAIs total outstanding
obligation under this lease agreement was approximately $13,808 and $23,200,
respectively. CAI has the option to purchase the leased equipment on a date
prior to the expiration of the initial term of the lease agreement or at the
time of such expiration. In addition, upon the expiration of the initial term of
the lease agreement, CAI has the right to extend the lease agreement for one
year or return the leased equipment to the lessor under the terms and conditions
set forth in the lease agreement. This lease agreement was amended in 2002 to
include certain additional negative covenants and financial covenants of CAI.
The lease agreement was amended in May 2003 to provide for a rent prepayment
under the lease agreement in the approximate amount of $3,750 to the lessor.

CAI entered into a master
lease agreement dated April 30, 1998, as amended, which amends and restates a
prior agreement dated November 21, 1996, pursuant to which CAI currently leases
shipping containers from a banking corporation. The master lease agreement has a
term of ten years. CAI is required to make regular payments to lessor and, as of
December 31, 2003 and 2002, CAIs total outstanding obligation under this
lease agreement was approximately $4,652 and $5,600, respectively. CAI has the
option to purchase the leased equipment on a date prior to the expiration of the
initial term of the lease agreement or at the time of such expiration. In
addition, upon the expiration of the initial term of the lease agreement, CAI
has the right to extend the lease agreement for one year or return the leased
equipment to the lessor under the terms and conditions set forth in the lease
agreement. This lease agreement was amended in 2002 to include certain
additional negative covenants and financial covenants of CAI.

During the period from 1998
to December 2003, there were several inter-company transactions wherein
Interpool acquired equipment, and the related leases from CAI, at terms that
resulted in a profit for CAI. These transactions were negotiated on an
arms-length basis and management believes that the terms are similar to those
that a third party would have negotiated with CAI under the circumstances.

During 2003, 2002, and
2001, Interpool paid CAI $1,774, $2,189 and $1,692 respectively for the
management of its equipment.

Subsequent to June 27,
2002, revenues and expenses for transactions between the Company and CAI are
eliminated in consolidation. Minority interest income recorded by the Company
for the year ended December 31, 2003 and the period from June 27, 2002 to
December 31, 2002 was $1,151 and $1,306, respectively.

In April 2004, the Company
reached an agreement with CAI resolving differences in interpretation of the
Operating and Administration Agreement (the "CAI Agreement")
provisions governing payment of appropriate remedial compensation when an age
disparity develops between the Companys containers managed by CAI and the
balance of CAIs managed fleet. For further information regarding the CAI
Agreement, see Note 18 to the Consolidated Financial Statements.

(13)     Retirement plans:

Certain subsidiaries have
defined contribution plans covering substantially all full-time employees.
Participating employees may make contributions to the plan, through payroll
deductions. Matching contributions are made by the Company equal to 75% of the
employees contribution to the extent such employee contribution did not
exceed 6% of their compensation. During the years ended December 31, 2003, 2002
and 2001, the Company expensed approximately $454, $423 and $461, respectively,
related to this plan.

(14)     Segment and geographic
data:

The Company and its
subsidiaries conduct business principally in a single industry segment, the
leasing of intermodal dry freight standard containers, chassis and other
transportation related equipment. Within this single industry segment, the
majority of the Companies operations come from two reportable segments:
container leasing, and domestic intermodal equipment leasing. The container
leasing segment specializes primarily in the leasing of dry freight standard
containers, while the domestic intermodal equipment segment specializes
primarily in the leasing of intermodal container chassis. The Company also has
limited operations in a third reportable segment that specializes in leasing
microcomputers and related equipment.

The computer leasing segment consisted of two subsidiaries,
Microtech Leasing Corporation ("Microtech") and Personal Computer Rentals
("PCR"). During the third quarter of 2001, the Company adopted a plan to exit
this segment. As of December 31, 2002 the assets of Microtech continued to be
liquidated and PCRs financial condition had deteriorated. PCR ceased
active operations and liquidated in 2003. (See Note 7 to the Consolidated
Financial Statements.) As of December 31, 2003, the Company was continuing to
liquidate the assets of Microtech. For the year ended December 31, 2002,
expenses related to the liquidation of PCR are included in the Domestic
Intermodal Equipment segment.

Beginning June 27, 2002 the container leasing segment includes
revenues and expenses and related balance sheet accounts for CAI, previously
accounted for under the equity method of accounting.

The accounting policies of the segments are the same as those
described in Note 1. The Company evaluates performance based on profit or loss
before income taxes. The Companys reportable segments are strategic
business units that offer different products and services.

Segment Information:

`Domestic      Computer
                                                         Container       Intermodal       Leasing
                        2003                              Leasing         Equipment      Equipment          Totals
                        ----                             ---------       ----------      ---------        ---------

Equipment leasing revenue                                 $175,131         $198,552           $604         $374,287
Other revenue                                               11,838           15,987            ---           27,825
Lease operating, administrative and other expenses          55,566          109,550           (285)         164,831
Depreciation and amortization                               59,365           32,188            ---           91,553
Other (income)/expense, net and minority interest           (5,085)           1,745            171           (3,169)
Losses for investment under equity method                      ---            1,698            ---            1,698
Interest income                                             (2,636)          (1,318)            (6)          (3,960)
Interest expense                                            33,202           73,485              1          106,688
Income/(loss) before income taxes                           46,557           (2,809)           723           44,471
Net investment in DFL's                                    330,090           96,716              9          426,815
Leasing equipment, net                                     747,377          889,339            ---        1,636,716
Equipment purchases and investment in DFL's                250,404           56,563            ---          306,967
Total segment assets                                    $1,210,635       $1,162,357            $44       $2,373,036`

`Domestic        Computer
                                                         Container       Intermodal       Leasing
                        2002                               Leasing        Equipment       Equipment        Totals
                        ----                             ---------       ----------       ---------        -------

Equipment leasing revenue                                  $138,276       $185,283         $1,521        $325,080
Other revenue                                                 8,094         11,761            ---          19,855
Lease operating, administrative and other expenses           40,633         92,395          2,087         135,115
Depreciation and amortization                                55,757         37,703             78          93,538
Other (income)/expense, net and minority interest            (3,052)         4,579          1,450           2,977
Losses for investment under equity method                       ---          6,603            ---           6,603
Interest income                                              (2,243)        (2,395)           ---          (4,638)
Interest expense                                             27,182         81,016            146         108,344
Income/(loss) before income taxes                            28,093        (22,857)        (2,240)          2,996
Net investment in DFL's                                     245,414         89,254           (539)        334,129
Leasing equipment, net                                      676,914        880,725            ---       1,557,639
Equipment purchases and investment in DFL's                  85,585        170,342             99         256,026
Total segment assets                                     $1,075,145     $1,163,404         $3,395      $2,241,944`

`Domestic       Computer
                                                         Container       Intermodal        Leasing
                         2001                             Leasing         Equipment       Equipment         Totals
                         ----                            ---------       ----------      ----------       --------

Equipment leasing revenue                                 $111,362         $191,987        $35,369        $338,718
Other revenue                                                4,914            9,759            ---          14,673
Lease operating, administrative and other expenses          32,931           95,797         32,083         160,811
Depreciation and amortization                               34,999           37,997          6,682          79,678
Other (income)/expense, net and minority interest           (5,351)          (4,501)          (385)        (10,237)
Losses for investment under the equity method                   --              804             --             804
Interest income                                             (3,789)          (5,650)            --          (9,439)
Interest expense                                            28,025           68,465          1,780          98,270
Income/(loss) before income taxes                           29,461            8,834         (4,791)         33,504`

The Companys shipping
line customers utilize international containers in world trade over many varied
and changing trade routes. In addition, most large shipping lines have many
offices in various countries involved in container operations. The
Companys revenue from international containers is earned while the
containers are used in service carrying cargo around the world, while certain
other equipment is utilized in the United States. Accordingly, the international
information presented below represents our international container leasing
operation conducted through Interpool Limited, a Barbados corporation, while the
United States information presented below represents our domestic intermodal
equipment leasing segment, as well as those revenues and assets relative to CAI
which is headquartered in the United States of America. Such presentation is
consistent with industry practice.

Geographic Information:

`EQUIPMENT LEASING REVENUE:                                 2003              2002               2001
                                                              ----              ----               ----
   United States (a)                                         $236,126           $205,923           $227,419
   International                                              138,161            119,157            111,299
                                                             $374,287           $325,080           $338,718

   ASSETS:
   United States                                           $1,354,921         $1,341,507
   International                                            1,018,115            900,437
                                                           $2,373,036         $2,241,944

   (a) Includes revenues from related parties of $0, $0, and $496 in 2003, 2002 and 2001, respectively.`

(15)     Company-obligated mandatorily redeemable preferred
securities in subsidiary grantor trusts:

On January 27, 1997,
Interpool Capital Trust, a Delaware business trust and special purpose entity
(the "Trust"), issued to outside investors 75,000 shares of 9-7/8%
Capital Securities with an aggregate liquidation preference of $75,000 (the
"Capital Securities") for proceeds of $75,000. Interpool owns all the
common securities of the Trust. The proceeds received by the Trust from the sale
of the Capital Securities were used by the Trust to acquire $75,000 of 9-7/8%
Junior Subordinated Deferrable Interest Debentures due February 15, 2027 of the
Company (the "Debentures"). The sole asset of the Trust is $77,320
aggregate principal amount of the Debentures. The Capital Securities represent
preferred beneficial interests in the Trusts assets. Distributions on the
Capital Securities are cumulative and payable at the annual rate of 9-7/8% of
the liquidation amount, semi-annually in arrears and commenced February 15,
1997. The Company has the option to defer payment of distributions for an
extension period of up to five years if it is in compliance with the terms of
the Capital Securities. Interest at 9-7/8% will accrue on such deferred
distributions throughout the extension period. The Capital Securities will be
subject to mandatory redemption upon repayment of the Debentures to the Trust.
The redemption price decreases from 104.9375% of the liquidation preference in
2007 to 100% in 2017 and thereafter. Under certain limited circumstances, the
Company may, at its option, prepay the Debentures and redeem the Capital
Securities prior to 2007 at a prepayment price specified in the governing
instruments. The obligations of the Company under the Debentures, under the
Indenture pursuant to which the Debentures were issued, under certain guarantees
and under certain back-up obligations, in the aggregate, constitute a full and
unconditional guarantee by the Company of the obligations of the Trust under the
Capital Securities.

In May 2003, the FASB
issued SFAS No. 150, Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity ("SFAS 150"). The
adoption of SFAS 150 required the Company to display the Company-obligated
mandatorily redeemable preferred securities in subsidiary grantor trusts within
the liability section of the Consolidated Balance Sheet.

(16)     Capital
stock:

The Companys 1993
Stock Option Plan for Executive Officers and Directors (the "Stock Option
Plan") was adopted by the Companys Board of Directors and approved by
the stockholders in March 1993. A total of 6 million shares of common stock have
been reserved for issuance under the Stock Option Plan. Options may be granted
under the Stock Option Plan to executive officers and directors of the Company
or a subsidiary (including any executive consultant of the Company and its
subsidiaries), whether or not they are employees. These options vest six months
from date of grant and expire ten years from date of grant.

The Companys Nonqualified Stock Option Plan for
Non-employee, Non-consultant Directors (the "Directors Plan") was adopted
by the Board of Directors and approved by the stockholders in March 1993. The
Directors Plan is administered by the Stock Option Committee of the Board
of Directors. Under the Directors Plan a nonqualified stock option to
purchase 15,000 shares of common stock is automatically granted to each
non-employee, non-consultant director of the Company, in a single grant at the
time the director first joins the Board of Directors. The Directors Plan
authorizes grants of options up to an aggregate of 150,000 shares of common
stock. The exercise price per share is the fair market value of the
Companys common stock on the date on which the option is granted (the
"Grant Date"). The options granted pursuant to the Directors Plan may be
exercised at the rate of 1/3 of the shares on the first anniversary of the
directors Grant Date and 1/3 of the shares on the second anniversary of
the directors Grant Date and 1/3 of the shares on the third anniversary of
the directors Grant Date, subject to certain holding periods required
under rules of the Securities and Exchange Commission. Options granted pursuant
to the Directors Plan expire ten years from their Grant Date.

Through September 16, 1998,
options to purchase 4,408,501 shares under the Companys 1993 Stock Option
Plan for Executive Officers and Directors had been granted, 22,500 of which have
expired due to failure to exercise and 22,500 of which have been exercised.
Options to purchase 90,000 shares have been granted under the Companys
Nonqualified Stock Option Plan for Non-employee, Non-consultant Directors,
45,000 of which have expired due to failure to exercise and 15,000 of which have
been exercised.

On September 16, 1998 the
Company canceled all but 22,500 of the 4,393,501 options then outstanding under
its 1993 Stock Option Plan for Executive Officers and Directors and the
Companys Nonqualified Stock Option Plan for Non-employee, Non-consultant
Directors and issued 4,371,001 new options in their place. The newly issued
options were granted with an exercise price equal to the closing market price of
the Companys stock as of September 16, 1998 (the "date of
grant"). This resulted in a new measurement date whereby the newly issued
options vest six months from date of grant and expire ten years from date of
grant. All other terms and conditions of the newly issued options are similar to
the canceled options.

In connection with the
resignation of Raoul Witteveen, the Company entered into a separation agreement
that allows for Mr. Witteveens outstanding stock options, all of which
were fully vested as of the date of his resignation, to be exercisable until
October 9, 2005. Mr. Witteveens future sale of common stock will be
subject to certain volume restrictions and a right of first refusal on the part
of the Company and its affiliates.

On September 5, 2002,
options to purchase 50,000 shares of the Companys common stock were
granted to Mitchell I. Gordon. The newly issued options were granted under the
1993 Stock Option Plan for Executive Officers and Directors with an exercise
price equal to the closing market price of the Companys stock as of the
grant date. The options were to vest 20% per year beginning January 1, 2003
and expire ten years from the grant date. In connection with the resignation of
Mitchell I. Gordon, the Company entered into a separation agreement that
provided for the immediate vesting of the options. The compensation cost
recognized by the Company in July 2003, as a result of the immediate vesting of
these options was $496 ($298 net of tax) and is included in administrative
expenses in the accompanying Consolidated Statement of Income.

As of December 31, 2003,
there were 1,559,999 shares of common stock reserved for issuance under the
stock option plans. No options may be granted under the Capital Stock Option
Plan more than ten years after the adoption of the Stock Option Plan, which
expired in March 2003.

Changes during 2003, 2002
and 2001 in options outstanding for the combined plans were as follows:

`2003                        2002                        2001
                                  --------------------------  ---------------------------- --------------------------
                                                 Weighted                    Weighted                     Weighted
                                                 average                     average                      average
                                    Shares    exercise price    Shares    exercise price    Shares     exercise price
                                  ----------  --------------   ---------  --------------   ---------   ---------------
Outstanding at January 1,          4,539,001         $10.30    4,489,001        $10.30     4,489,001          $10.30

Granted                                  ---         ---          50,000         13.73           ---          ---
Exercised                             22,500          15.58          ---        ---              ---          ---

                                  ------------------------------------------------------------------------------------
Outstanding at December 31,        4,516,501         $10.31    4,539,001        $10.34     4,489,001          $10.30

Exercisable at December 31,        4,466,501         $10.29    4,384,001        $10.27     4,379,001          $10.27`

The following table summarizes information regarding stock
options outstanding at December 31, 2003.

`Options Outstanding                                           Options Exercisable
                         ------------------------------------                          ------------------------------------
                                             Weighted Average
                             Number             Remaining                                  Number
                           Outstanding         Contractual       Weighted Average        Outstanding       Weighted Average
   Exercise Prices        December 31,         Life (Years)       Exercise Price        December 31,        Exercise Price
-------------------      -------------       -----------------   ----------------      --------------     -----------------

     $6.375                    15,000               6.2                $6.375                15,000              $6.375

     10.25                  4,351,501               4.2                10.25              4,351,501              10.25

     11.9375                  100,000               6.8                11.9375               50,000              11.9375

     13.73                     50,000               8.7                13.73                 50,000              13.73
---------------------- -------------------- ------------------- -------------------- -------------------- -------------------
     $6.375-13.73           4,516,501               4.3               $10.31              4,466,501             $10.29`

Common  stock  dividends  declared  and  unpaid at  December  31,  2003 and 2002  amounted  to $2,516  and  $2,101,
respectively,  and are included in accounts payable and accrued expenses in the accompanying  Consolidated  Balance
Sheet.

Deferred Bonus Plan

In November  2002,  the  Company's  Board of  Directors  approved a Deferred  Bonus Plan (the  "Plan")  under which
employees of Interpool and its  affiliates  who receive  discretionary  year-end  bonuses of greater than $50 would
receive such bonuses partly in cash and partly in the form of an award of Interpool  common stock.  Under the Plan,
the first $50 of a  participant's  bonus amount is paid in cash. Any amount  exceeding $50 but less than $150 shall
be 50% in cash and 50% in stock.  Any bonus  amount which  exceeds $150 shall be 100% in stock.  Bonus stock awards
under this Plan would cliff vest in equal  installments  over a five-year  period,  unless the recipient elected to
have the award vest over a  ten-year  period or the Board of  Directors  specified  another  period.  The  unvested
portion  of any bonus  stock  award  will vest  immediately  if a change in control  of  Interpool  occurs,  if the
employee is terminated  without cause, if the employee  resigns for a good reason,  if the employee dies or becomes
permanently  disabled,  or in any other circumstance  deemed appropriate by the Board of Directors.  If a recipient
resigns  voluntarily  without a good reason or is  terminated  for cause the  employee  would  forfeit any unvested
portion of any bonus stock award.

The number of shares of stock to be awarded is  calculated  by dividing  the dollar  value of the stock  portion of
the bonus by the average stock price for the last ten trading days ending on December 31 of the grant year.

Additional  stock is awarded based on the vesting period selected by the employee.  If the five year vesting period
is selected,  the shares  awarded  will be increased by 10%. If the ten year vesting  period is selected the shares
awarded will be increased by 30%. Under the Plan,  each employee  granted a bonus stock award has a right from time
to time to require  the  Company to  purchase  a total  number of shares of stock  equal to the number of shares of
stock  underlying  the  Participant's  Bonus  Stock  Award.  The shares may be vested  shares or shares  which were
otherwise  acquired by the participant  providing that all shares were beneficially owned by the participant for at
least 6 months.  The purchase  price shall be equal to the fair market value of a share of stock on the trading day
preceding  the date of such  purchase.  On January  2, 2003,  under this  Plan,  the  Company  granted to  eligible
employees  139,067  shares of restricted  stock that had a fair value of $16.83 per share at the grant date. At the
date of grant,  $2,342 of  deferred  compensation  was  credited to paid in capital  with an offset to  unamortized
deferred  compensation-stock  grant in the equity section of the Consolidated Balance Sheet.  Compensation costs is
recognized  ratably over the vesting  periods  during which the related  employee  service is rendered.  During the
fourth  quarter 2003,  in  accordance  with the  terms of the  separation  agreement  with the  Company's  previous
President  and Chief  Operating  Officer,  60,407  unvested  shares  with a value of $1,018  were  forfeited.  This
forfeiture resulted in the reversal of $1,018 of previously recorded  unamortized  deferred  compensation,  as well
as the  reversal  of  previously  recorded  compensation  expense of $102.  For the year ended  December  31,  2003
compensation  expense  was $140  and  60,407  shares  with a value  of  $1,018  lapsed.  The  unamortized  deferred
compensation remaining in stockholders equity was $1,184 at December 31, 2003.

For  information  regarding the bonus stock awards granted under this Deferred Bonus Plan in January 2004, see Note
18 to the Consolidated Financial Statements.

Share Repurchases

In 1999, the Company  authorized the repurchase of up to 1,000,000  shares of its common stock.  The shares will be
purchased from time to time through open market purchases or privately  negotiated  transactions.  During 2002, the
Company  purchased  9,300 shares for an  aggregate  purchase  price of $130.  During  2001,  the Company  purchased
58,100 shares for an aggregate purchase price of $929. No shares were repurchased in 2003.

(17)     Gain on Sale of Land:

In April 2002,  the Company sold an industrial  property and recorded a gain of $4,766,  which is included in other
(income)/expense, net for the year ended December 31, 2002 in the accompanying Consolidated Statements of Income.

(18)     Subsequent Events:

Settled Insurance Litigation

In connection with an insurance  claim related to the default of a South Korean  customer and a subsequent  lawsuit
filed by the insurance  carriers  against the Company,  on June 17, 2004 the Company  signed an agreement  settling
the lawsuit and our claims under the policy.  Under the terms of the settlement  agreement,  the insurance carriers
paid the Company $26,400 in June and July 2004.

July 2004 Protocol to the United States and Barbados Tax Treaty

Interpool  Limited  currently  claims  treaty  benefits  under the  United  States and  Barbados  income tax treaty
("Treaty").  The Treaty  contains a limitation on benefits  provision  which denies treaty  benefits  under certain
circumstances.  However,  Interpool  Limited  currently  does not fall within the Treaty's  limitation  on benefits
provision.

On July 14, 2004,  the United  States and Barbados  signed a protocol to the Treaty  ("Protocol")  that  contains a
more  restrictive  limitation on benefits  provision than the current Treaty does. If ratified,  the Protocol might
result in Interpool  Limited losing its ability to rely on the Treaty to eliminate  current U.S.  income tax on its
container  rental and  container  sales  income.  This  Protocol  will not take effect  until it is ratified by the
United  States  Senate and the  government  of  Barbados.  It is currently  uncertain  whether the Senate will take
action before it adjourns  later in 2004.  The Protocol is generally  effective for taxable years  commencing on or
after the first of January in the year following the year the Protocol is ratified.

Under the  Protocol,  Interpool  Limited  would only be eligible for Treaty  benefits with respect to its container
rental and sales  income if,  among other  things,  Interpool,  Inc.  is listed on a  "recognized  stock  exchange"
(generally,  the NASDAQ system or an SEC registered  exchange such as the New York Stock Exchange),  and Interpool,
Inc.'s stock is "primarily" and "regularly" traded on such exchange.

As described  elsewhere in this report,  our common stock is currently not listed on a "recognized  stock exchange"
within the meaning of the Protocol.  Management  anticipates  that Interpool,  Inc. will examine all of its options
with regard to listing on a "recognized  stock  exchange" and  anticipates  applying for a listing as soon as it is
current with its SEC filings.  However,  even if Interpool,  Inc. is listed on a "recognized  stock exchange" as of
the date the Protocol comes into effect,  it is not clear whether  Interpool,  Inc.  would satisfy the  "primarily"
and  "regularly"  traded  requirement  as defined  within the Protocol.  If Interpool Inc. does not believe that it
can satisfy this  requirement,  it will investigate  alternatives to Interpool Limited being a resident in Barbados
that will still  entitle  Interpool  Limited to treaty  benefits  under  another tax treaty with the U.S.  Any such
alternative  would likely result in Interpool  Limited being subject to a higher non-U.S.  tax than the approximate
3% tax rate it currently enjoys in Barbados.

Financing Activities

The Company funds a significant  portion of the purchase price for new containers  and chassis  through  borrowings
under its  revolving  credit  agreement  and other lines of credit or through  secured  financings  with  financial
institutions.  The Company  successfully  completed secured financings of approximately  $81,600 during March 2004,
and $14,600  during May 2004,  the  proceeds of which were used to pay amounts due to equipment  manufacturers  and
for general corporate purposes.  The Company is currently evaluating a number of secured financing  proposals,  the
proceeds  of which  would be used to acquire new  equipment,  to  re-finance  existing  facilities  and for general
corporate purposes.

A financing  facility  entered into in March 2004 contains more  stringent  covenants than those that existed under
debt agreements at December 31, 2003,  including a requirement  that the Company  maintains a tangible net worth of
at least  $300,000.  The  Company  will seek to  eliminate  these more  stringent  covenants  by  refinancing  this
facility during the second half of 2004.

During July 2004, the Company completed a secured  financing in the amount of $15,000,  of which $5,000 was used to
satisfy a note payable from PCR to an  unrelated  financial  institution  which was  guaranteed  by the Company for
PCR. As disclosed in Notes 7 and 9 to the  Consolidated  Financial  Statements,  this  guarantee was accrued by the
Company  during  2002 and is recorded in accounts  payable and accrued  expenses on the  accompanying  Consolidated
Balance Sheets at December 31, 2003 and 2002. The remaining  $10,000 will be used for general  corporate  purposes,
including the acquisition of new equipment.  The term of this loan is six months with the principal  amount due and
payable in one lump sum on January  31,  2005.  This is a bridge loan with the  Company's  intent to roll this loan
into a larger  revolving  facility at a later date.  Interest is payable monthly at a floating rate of 1% per annum
plus the prime rate with the right to elect 2.5% per annum plus LIBOR for a specified  contract  period and amount.
Interest is payable every three months if the Company elects the interest charge at 2.5% per annum plus LIBOR.

Debt Modifications and Waivers

During January and February 2004, in conjunction  with obtaining  amendments to its revolving  credit  facility due
to the late  filing  of the  Company's  periodic  reports  with the SEC,  the  interest  rate on the  facility  was
increased and the Company became obligated,  among other things, to make amortization  payments under the revolving
credit facility  beginning in March 2004. The related  minimum cash  requirement (as described more fully in Note 4
to the  Consolidated  Financial  Statements)  was  subsequently  reduced  dollar-for-dollar  with the  amortization
payments and, as of July 31, 2004,  amounts to $50,000.  Beginning with the  amortization  payment due on September
1, 2004, the minimum cash requirement will again be reduced  dollar-for-dollar  as amortization  payments are made.
The minimum cash balance  requirement  will be  eliminated  once the Company is current with its delayed  financial
filings.

The Company also agreed to specific  reporting  requirements to holders of certain other indebtedness in connection
with obtaining  necessary  waivers from such holders  during January and February,  2004, due to the late filing of
its SEC reports.

During  February 2004, the Company  provided its lenders with a revised  schedule for completing and submitting all
of its financial  statements  and periodic SEC filings for the years 2003 and 2004,  and requested that the lenders
waive any  non-compliance  with the reporting  requirements  contained in the loan  documents and debt  instruments
relating to these  statements  and filings  until the  respective  dates  included  in the  revised  schedule.  The
revised dates provided by the Company and agreed by its lenders, are:

`Statement                                       Revised Completion Date
---------                                       ------------------------
2003 - 10-K                                     On or before August 31, 2004
2004 - First Quarter 10-Q                       On or before December 31, 2004
2004 - Second Quarter 10-Q                      On or before December 31, 2004
2004 - Third Quarter 10-Q                       On or before December 31, 2004`

The Company has received
waivers from all of its lenders agreeing to the dates above. (See Ongoing Debt
Waivers section below for further discussion).

Rating Agency
Downgrades

On January 27, 2004,
Moodys downgraded the Companys debt securities citing continued
uncertainty associated with the delayed release of the Companys financial
information for 2003. The Company has been advised that Moodys also
reduced the "shadow rating" of the Companys chassis
securitization. The Company has been advised by the participants in this
securitization that they will waive any early amortization event or default
associated with the downgrade of the "shadow rating" on a periodic
basis, and such participants have given such a waiver through January 1, 2005.
The Company has been advised by the provider of the insurance "wrap"
portion of the chassis securitization that, as a result of the downgrade of the
shadow rating, it is liable to indemnify such provider for certain of its
increased capital charge costs, which the Company has estimated at approximately
$590 per month beginning June 20, 2004 and continuing until it is notified by
the wrap provider that its "shadow rating" has improved sufficiently.
The additional cost per month will be reduced on a pro-rata basis as the
outstanding obligations are repaid. The Company disputed whether any such
indemnification obligation exists under the terms of its agreement with the
"wrap" provider. This matter is currently under negotiation. There can
be no assurance that the Company will prevail in this matter, nor can we
estimate the likelihood or timing of any potential future shadow rating upgrade.
There also can be no assurance that the waiver described above will continue to
be granted or extended. Should such waiver not be granted or extended beyond
January 1, 2005, the unfavorable impact on the Companys near-term
liquidity would likely be significant. Such downgrades may also have a negative
effect on the Companys ability to access the capital markets in the
future, as well as on the Companys interest cost. During July 2004, Fitch
Ratings affirmed the Companys ratings, removed the Company from rating
watch negative status, and changed their rating outlook for the Company to
positive.(See Ongoing Debt Waivers section below for further discussion.)

Delisting by
the New York Stock Exchange

On December 29, 2003, the
New York Stock Exchange ("the Exchange") suspended trading in the
Companys common stock and other listed securities and the staff of the
Exchange informed the Company that they had recommended that delisting
procedures be commenced. The Exchange stated that this action was taken because
of the overall uncertainty surrounding the Companys previously announced
restatement of its 2001 and 2000 results and the continued delay in the
completion of its current financial statement filing requirements. The
Companys 2002 Form 10-K, which reflected the restated results, was
subsequently filed on January 9, 2004. The Company appealed the decision and
recommendation of the staff of the Exchange, and a hearing before a Committee of
the Board of Directors of the Exchange was held March 10, 2004. Following this
hearing, the Committee determined to affirm the staffs recommendation and
to delist the Companys common stock and other listed securities. The
delisting became effective during early April 2004. The Company intends to
examine all of its options with regard to listing, and anticipates re-applying
for a listing on the Exchange once it is current with its SEC filings. Since the
suspension of trading on the Exchange took effect on December 29, 2003, the
Companys common stock has been traded on the over-the-counter market under
the symbol IPLI.

Stockholder
Litigation

In February and March 2004,
several lawsuits were filed in the United States District Court for the District
of New Jersey, by purchasers of the Companys common stock naming the
Company and certain of its present and former executive officers and directors
as defendants. The complaints alleged violations of the federal securities laws
relating to the Companys reported Consolidated Financial Statements for
the years ended December 31, 2000 and 2001 and the nine months ended September
30, 2002, which the Company announced in March 2003 would require restatement.
Each of the complaints purported to be a class action brought on behalf of
persons who purchased the Companys securities during a specified period.
The lawsuits which seek unspecified amounts of compensatory damages and costs
and expenses, including legal fees have been consolidated in a single action
with lead plaintiffs and lead counsel being appointed. The Company intends to
vigorously defend these lawsuits but is unable at this time to ascertain the
impact these lawsuits may have on our financial position or results of
operations.

Ongoing Debt
Waivers

As described in the Debt Modifications
and Waivers and Rating Agency Downgrades sections above, the Company may be
required to obtain additional waivers in the future. In the event that (i) any
such required waiver could not be obtained before the applicable deadline; or
(ii) any of the Companys existing waivers ceased to be effective in
accordance with their terms based upon future developments, the Company might be
in violation of the terms of its indebtedness, and the lenders could exercise
their right to declare the Company in default, accelerate the indebtedness owed
to such lenders, and take other action against the Company. Moreover, the taking
of such action, or the possibility that such action could be taken, could cause
one or more of the Companys other financial institutions to take action
against the Company, such as declaring the Company in default, accelerating the
indebtedness owed to such lender, and/or attempting to exercise rights as a
secured creditor with respect to any collateral. In addition, several of the
waivers the Company has obtained are contingent upon certain events, including
but not limited to (1) a determination by the applicable lenders that the
changes resulting from the Companys financial restatement to its
historical financial statements for 2001 and 2000 and the first nine months of
2002 did not represent a material adverse change to the Companys financial
condition for these periods as originally reported; or (2) that the delisting of
the Companys common stock and other listed securities from the Exchange
did not represent a material adverse change in the Companys ability to act
as servicer for certain financings. The one lender for whom continued listing of
the Companys common stock on the Exchange was required to avoid an event
of default eliminated that requirement during early March 2004. While the
restatement was necessary, the Company believes that its revised financial
statements did not represent such a material change. The Company also believes
that the delisting of its securities by the Exchange does not affect its ability
to perform as servicer for the financings in question. Further, none of the
Companys lenders has taken any action to indicate that they believe a
material adverse change has occurred. If either of these circumstances were to
occur the Company could be deemed to be in default under the terms of its
indebtedness, in which event, the Company might not be able to meet its
obligations to its lenders or other creditors and might not be able to prevent
such parties from taking actions that could jeopardize the Companys
ability to continue to operate its business.

Employment
Agreements

In July 2004, the Company
entered into Employment Agreements with certain executive officers with various
expiration dates up to 28 months. Under the terms of the Employment Agreements,
each Executive is paid a base salary, a target bonus, participates in fringe
benefit programs and may receive additional bonuses at the sole discretion of
the Compensation Committee. The minimum obligation related to these agreements
is approximately $2,606. In addition, the Employment Agreements obligate the
Company to pay severance payments in the event of termination or change of
control and include non-compete clauses.

In connection with these
employment agreements, because the Company was unable to grant stock options,
the Company instead agreed to grant common stock appreciation rights that
provide for the grantees to receive cash payments measured by any appreciation
in the market price of the common stock over a specified base price. The Company
granted such stock appreciation rights with respect to a total of 275,000 share
units at a base price of $14.05. The $14.05 base price reflected the price on
the over-the-counter market on February 20, 2004, the business day before the
date on which the terms of the stock appreciation rights were fixed. The grant
of stock appreciation rights was subsequently ratified by the Board of Directors
on March 30, 2004, by which time the closing price of the Companys common
stock had increased to $15.00. At July 1, 2004, the date the employment
agreements became effective, the most recent closing stock price of the
Companys common stock was $16.55. Under the terms of the employment
agreements, a total of 260,000 of these stock appreciation rights will vest in
2005 (or earlier upon a change in control) with the remaining 15,000 rights
vesting in three equal installments on December 31, 2006, 2007 and 2008. Upon
vesting, these stock appreciation rights may be exercisable at any time prior to
the expiration of the earlier of 10 days following the termination of the
employee or June 30, 2014. The Company has reserved the right to substitute
common stock options under the same terms and conditions of the stock
appreciation rights upon approval by the Companys stockholders of a Stock
Option Plan for executive officers of the Company.

Agreement with
CAI

In April 2004, the Company reached
an agreement with CAI resolving differences in interpretation of the CAI
Agreement provisions governing payment of appropriate remedial compensation when
an age disparity develops between the Companys containers managed by CAI
and the balance of CAIs managed fleet. Pursuant to its agreement with CAI,
the Company agreed to pay CAI $2,000 for resolution of all disputes through
February 29, 2004. The impact of this agreement, which will be recorded by the
Company during the three months ended March 31, 2004, will be a reduction in
consolidated pre-tax income of $1,000 ($600 net of tax). The Company and CAI are
currently in negotiations to simplify the terms of the portion of the CAI
Agreement governing age parity adjustments.

Deferral of
Dividend Payment to Board Members

In connection with the
Companys delayed SEC filings and the receipt of waivers from its lenders
necessitated by the delayed filings beginning in January 2004, the members of
the Companys Board of Directors and certain of its affiliates who own
shares of the Companys common stock have agreed to defer their receipt of
any dividend payments, including those the Company may declare in the future,
until the Company is in compliance with all SEC filings requirements. As of July
15, 2004, recorded dividend payments in the amount of $2,616 have been deferred.

Other

On January 2, 2004, under
the Deferred Bonus Plan as detailed in Note 16 to the Consolidated Financial
Statements, the Company granted to eligible employees 27,259 shares of
restricted stock of which 7,303 vest over a five-year period and 19,956 vest
over a ten-year period. The restricted stock had a fair value of $13.60 per
share at the grant date for a total value of $371.

(19)     Quarterly
financial data (unaudited)

Restatement of previously
reported quarterly results

During its 2003 year-end
closing procedures, the Company identified a number of previously undetected
flaws with the systems (both manual and computer based) used to account for
certain transactions.

The most significant of
these was the handling of amounts billed to customers at the end of an operating
lease when the customer has damaged the Companys equipment. These amounts
are not recorded in revenue when invoiced; rather, they are used to establish a
liability to cover the repair of the equipment. In many cases, these liabilities
were not being properly reversed when payment was made for the repaired
equipment. In addition, in some cases, the liability was not being properly
reversed when the equipment was sold or remanufactured.

The Company has a program
of remanufacturing chassis when they near the end of their useful life or if the
equipment is impaired in its present condition. In certain cases, the impairment
of these chassis was not recognized on a timely basis.

Finally, as noted in the
Companys Form 10-K for the year ended December 31, 2002, the system used
to account for direct financing leases was inadequate in providing the necessary
data for the amortization of the leases and the recognition of revenue. As a
result, the Company continued to perform manual calculations for all financing
leases until the new finance lease system can be implemented. A number of these
manual calculations were performed incorrectly during the year ended December
31, 2003. The Company has purchased and is in the process of implementing its
new finance lease system to handle the accounting for these leases.

The Company has determined
that the effect of these previously undetected flaws on years ended prior to
January 1, 2003 is immaterial. The Company has restated its Consolidated
Financial Statements to reflect these changes for the quarters ended March 31,
2003, June 30, 2003, and September 30, 2003 and has reflected the impact of
these adjustments on the previously reported quarterly results below:

`2003
                                                                   As Restated
                                       ---------------------------------------------------------------------
                                             1st               2nd              3rd              4th
                                       ----------------- ---------------- ---------------- -----------------

Equipment leasing revenue                 $89,868            $91,549          $95,119           $97,751
Net income                                $11,769            $12,336           $6,546           $10,539
Basic income per share                      $0.43              $0.45            $0.24             $0.38
Diluted income per share                    $0.41              $0.42            $0.23             $0.36

                                                              2003
                                                           As Reported
                                       ----------------------------------------------------
                                             1st               2nd              3rd
                                       ----------------- ---------------- -----------------
Equipment leasing revenue                 $89,070           $91,319          $94,887
Net income                                $10,876           $11,172           $6,117
Basic income per share                      $0.40             $0.41            $0.22
Diluted income per share                    $0.38             $0.38            $0.21

                                                                       2002
                                       ---------------------------------------------------------------------
                                             1st               2nd              3rd             4th(a)
                                       ----------------- ---------------- ---------------- -----------------
Equipment leasing revenue                  $74,483          $75,598          $86,028          $88,971
Net income/(loss)                           $6,190           $4,265           $3,032          $(9,098)
Basic income/(loss) per share                $0.23            $0.16            $0.11           $(0.33)
Diluted income/(loss) per share              $0.21            $0.14            $0.10           $(0.32)

                                                                       2001
                                       ---------------------------------------------------------------------
                                             1st               2nd              3rd             4th(a)
                                       ----------------- ---------------- ---------------- -----------------
Equipment leasing revenue                 $88,311           $85,315          $82,337           $82,755
Net income                                $10,354            $9,879           $2,939            $4,932
Basic income per share                      $0.38             $0.36            $0.11             $0.18
Diluted income per share                    $0.36             $0.34            $0.10             $0.17`

|(a) | The net (loss) during the fourth quarter of 2002 was principally
due to pre-tax impairment losses of $5,715 relating to idle equipment, $3,417 of
pre-tax losses resulting from the Company's share of equity losses and
write-downs for certain investments accounted for under the equity method and
$9,678 of pre-tax losses recognized as a result of the deteriorating financial
condition of PCR.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ITEM 9A.
CONTROLS AND PROCEDURES

The effectiveness of our or
any systems of disclosure controls and procedures and internal controls is
subject to certain limitations including the exercise of judgment in designing,
implementing and evaluating the controls and procedures, the assumptions used in
identifying the likelihood of future events, and the inability to eliminate
misconduct completely. As a result, there can be no assurance that our
disclosure controls and procedures and internal controls will prevent all errors
or fraud or ensure that all material information will be made known to
management in a timely fashion.

We, in conjunction with our
independent auditors, KPMG, identified certain material weaknesses within our
system of internal control. We noted that formal procedures were not in place
that required management to properly communicate the terms of proposed
transactions with internal and external technical accounting resources to make
certain that transactions are accounted for in accordance with accounting
principles generally accepted in the United States of America. In addition, we
noted that we did not have an individual with the proper level of understanding
to account for swap derivatives according to accounting principles generally
accepted in the United States of America. In response to these weaknesses, we:

| |  | Initiated regular meetings of senior management, including the
Chief Financial Officer and representatives of the Accounting Department, to
discuss all new significant transactions in order to determine the proper
accounting treatment under accounting principles generally accepted in the
United States of America and
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Retained the services of a consultant to assist in the proper
documentation and accounting for swap derivative transactions.
| | - | ----------------------------------------------------------------------------------------------------------------------------

In addition, our general
counsel, who was not located in our executive offices in New York, N.Y. or
Princeton, N.J., was not always informed about, and was inconsistently consulted
regarding, factual and legal issues critical to our compliance with securities
laws and accounting rules. We also concluded that we were late in responding to
warning signs pointing to inadequate staffing and controls in our Accounting
Department and inadequate information systems capabilities, even though members
of our Audit Committee had repeatedly urged management to respond to these
problems.

As a result, we, in
connection with the preparation of our 2002 and 2003 financial statements,
concluded that the following internal control deficiencies which were identified
constituted "material weaknesses" or "significant
deficiencies" as defined under the standards established by the American
Institute of Certified Public Accountants:

| |  | Deficiencies related to the accounting for direct finance leases.
We noted weaknesses in the technical accounting skills of certain employees
involved in the classification of leases under the provisions of SFAS 13. In
addition, we found that the system used to account for these leases was
inadequate in providing the necessary data to the accounting department.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Deficiencies related to ineffective policies for complex
transactions. We noted the weaknesses noted above in the accounting for swap
derivative transactions and residual guarantees provided to certain financial
institutions.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Deficiencies related to inadequate communication of complex
transactions. We noted a lack of effective communication of complex
transactions with both internal and external accounting resources that existed
throughout this period.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Deficiencies related to the lack of adequate staffing within
the accounting department. This resulted in incomplete account
reconciliation and analysis.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Deficiencies related to accounting for income taxes. We
noted that the accounting department did not have adequate knowledge of
accounting principles generally accepted in the United States of America related
to accounting for income taxes and did not perform periodic reviews of the
carrying value of its deferred tax assets.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Deficiencies related to communication of information regarding
related-party transactions. We noted that there were no formal procedures in
place for gathering complete and accurate information about related-party
transactions and for communicating such information to the parties responsible
for disclosing it.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Deficiencies related to the security of information
technology. We noted a need for the implementation of such security measures
as comprehensive encryption procedures, documentation of standards for setting
operating systems security parameters, and a disaster recovery plan.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Deficiencies related to accounting for inter-company
eliminations. We noted a need to implement formal procedures for identifying
necessary intercompany eliminations.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Deficiencies related to recordkeeping by various internal
departments. We noted a need to improve certain verification and
documentation procedures in our Contracts, Billing, Collections, and Credit
Quality departments to improve the accuracy of the records kept by those
departments.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Deficiencies related to accounting for amounts billed to
customers at the end of an operating lease for damaged equipment. We noted a
need to improve our manual and computer-based systems in order to properly
account for billings to customers for damaged equipment and the related repair
costs at the end of an operating lease.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Deficiencies related to recognition of impairment charges
associated with the chassis remanufacturing program. We noted a need to
recognize impairment charges on a more timely basis in order to properly
distinguish between costs that should be capitalized and those that should be
expensed.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition to the
deficiencies mentioned above, we have identified other less significant
deficiencies that we do not consider "material weaknesses" or
"significant deficiencies" but which we nonetheless believe should be
remedied.

We are continuing to review
and evaluate our internal controls and procedures and may identify additional
areas where corrective measures are advisable or required.

We have assigned the
highest priority to the short and long-term correction of the internal control
deficiencies that have been identified and are taking the steps necessary to
strengthen our internal controls and to address their deficiencies. Among other
things, we have taken and are taking the following remedial measures:

|1. | We have implemented new procedures relating to the communication
of information between management and all levels of the Company, including our
internal and external accountants, to ensure proper reporting and disclosure.
These steps include regular meetings of a committee of senior management, known
as the Office of the President, which generally includes a member of the Audit
Committee, to discuss important topics such as new business, financing,
accounting and personnel matters, and the formation of a Disclosure Committee to
ensure that information required to be disclosed pursuant to SEC rules is made
known to the appropriate individuals at the Company.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. | Our former general counsel, Arthur Burns has rejoined us as full
time Executive Vice President and General Counsel residing in our New York
office. Mr. Burns is a member of our Board of Directors.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. | An experienced financial and leasing executive, James Walsh, a
former financial executive at GE Capital Corporation and General Electric
Company, joined us during November, 2003, and was appointed Executive Vice
President and Chief Financial Officer in early 2004.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. | We have hired eight additional accountants, and will continue to
hire additional experienced personnel in the accounting department, and are
planning additional training for our accounting staff. We have also hired an
experienced tax professional who is also a certified public accountant to
improve our skills base in that critical area.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5. | We have added staff in several other areas, including insurance,
accounts receivable, customer service and the legal department.
|-- | --------------------------------------------------------------------------------------------------------------------------------

|6. | We have engaged J.H. Cohn, an independent accounting and
consulting firm, as our internal auditors, and have been working closely with
them to identify and correct weaknesses in our internal controls and procedures
and to develop an accounting policies and procedures manual. Remedial actions
are in process in all areas where such actions have been deemed necessary.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7. | We are improving the quality of our file maintenance and record
retention for completed transactions.
|-- | -----------------------------------------------------------------------------------------------------

|8. | We are in the process of testing an upgrade to our accounting system for
recording and tracking finance lease transactions, which we expect to have in
place later in 2004. We have negotiated a contract for a disaster recovery
hotsite facility, and are in the process of developing a formal disaster
recovery plan. We are committed to upgrading and enhancing other aspects of our
information systems, including encryption procedures and other security
measures, as required.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|9. | Our Board of Directors appointed a corporate governance committee
and has adopted and implemented a comprehensive set of corporate governance
documentation, including a revised Board of Directors Charter, a revised Audit
Committee Charter, a Code of Business Conduct and Ethics, a Whistleblower and
Nonretaliation Policy, and a Disclosure Committee Charter.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10. | We have designated an employee to communicate with all related
parties on a quarterly basis to determine if new related party transactions have
been completed. In addition, we are canvassing all employees on a regular basis
in order to ensure that any new related party transactions are identified,
reviewed, and reported where appropriate. We have also assigned a member of our
accounting department having knowledge of the relevant disclosure standards the
responsibility for monitoring transactions on an ongoing basis to identify any
related party transactions.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|11. | We have implemented a procedure to review intercompany accounts on
a regular basis to identify appropriate intercompany eliminations.
|--- | -------------------------------------------------------------------------------------------------------------------------------------

|12. | We have implemented additional manual controls to properly account
for billings to customers for damage they cause to our equipment and the costs
associated with these repairs. In addition, we are hiring additional personnel
that will focus on the timely recognition of impairment related to chassis.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Management has discussed
its action plan with the Audit Committee and will continue to provide periodic
updates on progress made. As of the date of this filing, we are satisfied that
actions implemented to date and those in progress will correct the material
weaknesses in our internal controls and information systems and that our
processes and systems of internal controls will be adequate. We note that, like
other companies, management cannot provide absolute assurance that internal
control weaknesses will not be identified from time to time in the future or
that any such weaknesses would not materially affect our financial results.

We believe that these
efforts have addressed the material weaknesses and significant deficiencies that
have affected our internal controls in the past. We can give no assurances,
however, that all material weaknesses and significant deficiencies have been
entirely corrected. We continue to look for methods to improve our overall
system of control.

We carried out an
evaluation, under the supervision and with the participation of our management,
of the effectiveness of the design and operation of our disclosure controls and
procedures as of December 31, 2003 pursuant to SEC Rules 13a-15 and 15d-15 under
the Exchange Act. Our management, including our Chief Executive Officer and
Chief Financial Officer, has concluded that, due to the internal control
deficiencies as described herein, as of the evaluation date, our disclosure
controls and procedures were not effective to give reasonable assurance that
information we must disclose in reports filed with the SEC is properly recorded,
processed, and summarized, and then reported within the time periods specified
in the rules and forms of the SEC. In light of the ineffectiveness of our
disclosure controls and procedures as mentioned above, we performed additional
analysis and other procedures to ensure that our consolidated financial
statements included in our amended Annual Report on Form 10-K for the year ended
December 31, 2003 have been prepared in accordance with U.S. generally accepted
accounting principles.

Other than the internal
control issues and corresponding corrective actions discussed above, our Chief
Executive Officer and Chief Financial Officer have each confirmed that, since
the date of the evaluation to the date of the filing of this our amended Form
10-K, there have been no significant changes in the disclosure controls and
procedures or in other factors that could significantly affect such controls or
procedures, including any corrective actions with regard to significant
deficiencies and material weaknesses.

Our management, including
our Chief Executive Officer and Chief Financial Officer, do not expect that our
disclosure controls and procedures or internal controls will prevent all errors
and all improper conduct. A control system, no matter how well conceived and
operated, can provide only reasonable, not absolute, assurance that the
objectives of the control system are met. Further, the design of a control
system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the
inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of improper
conduct, if any, within a company have been detected. The design of any system
of controls also is based in part upon certain assumptions about the likelihood
of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions. Over time,
controls may become inadequate because of changes in conditions, or the degree
of compliance with the policies or procedures may deteriorate.

ITEM 15.     EXHIBITS AND
REPORTS ON FORM 10-K/A

(a)     Exhibits:

`31.1       Certification of Martin Tuchman.

                 31.2       Certification of James F. Walsh.

                 32.1       Certification of Martin Tuchman.

                 32.2       Certification of James F. Walsh.`

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.

| | INTERPOOL, INC.
(Registrant)
| | ----------------------------

|June 6, 2005 | By /s/ Martin
Tuchman
Martin Tuchman
Chairman of the Board, Chief Executive Officer,
President, Chief Operating Officer, and Director
(Principal 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.

|June 6, 2005 | By By /s/ Martin
Tuchman
Martin Tuchman
Chairman of the Board of Directors, Chief
Executive Officer, President, Chief Operating
Officer and Director
|------------ | ----------------------------------------------------------------------------------------------------------------------------------------------------

|June 6, 2005 | By /s/ Warren L. Serenbetz, Jr.
Warren L. Serenbetz, Jr.
Director
|------------ | -----------------------------------------------------------------

|June 6, 2005 | By /s/ Arthur L. Burns
Arthur L. Burns
Executive Vice President, General Counsel
and Director
|------------ | ---------------------------------------------------------------------------------------------

|June 6, 2005 | By /s/ Peter D. Halstead
Peter D. Halstead
Director
|------------ | ---------------------------------------------------

|June 6, 2005 | By /s/ Joseph J. Whalen
Joseph J. Whalen
Director
|------------ | -------------------------------------------------

|June 6, 2005 | By /s/ Clifton H. W. Maloney
Clifton H. W. Maloney
Director
|------------ | -----------------------------------------------------------

|June 6, 2005 | By /s/ James F. Walsh
James F. Walsh
Executive Vice President and Chief Financial
Officer
|------------ | -----------------------------------------------------------------------------------------

|June 6, 2005 | By /s/ Brian Tracey
Brian Tracey
Senior Vice President (Chief Accounting Officer)
|------------ | ---------------------------------------------------------------------------------

|June 6, 2005 | By /s/ Michael S. Mathews
Michael S. Mathews
Director
|------------ | -----------------------------------------------------

|June 6, 2005 | By /s/ William J. Shea, Jr.
William J. Shea, Jr.
Director
|------------ | ---------------------------------------------------------

INDEX TO EXHIBITS

Filed with Interpool, Inc. Report on Form 10-K/A

`31.1        Certification of Martin Tuchman.
                 31.2        Certification of James F. Walsh.
                 32.1        Certification of Martin Tuchman.
                 32.2        Certification of James F. Walsh.`