##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q

(Mark One)

|  |  |                                                                                        
|- |  | ---------------------------------------------------------------------------------------
|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2003

OR

|  |  |                                                                                         
|- |  | ----------------------------------------------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from:  to

Commission file number: 0-24464

THE CRONOS GROUP

(Exact name of Registrant as specified in its charter)


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

16, ALLÉE MARCONI, BOÎTE POSTALE 260, L-2120 LUXEMBOURG
(Address of principal executive offices)(zip code)

Registrants telephone number, including area codes:
(352) 453145

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

The number of Common Shares outstanding as of August 12, 2003:

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





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TABLE OF CONTENTS



|                               |                                                                                                |                                                                    |  |  |  |  |  | 
|------------------------------ | ---------------------------------------------------------------------------------------------- | ------------------------------------------------------------------ |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION
|                               | Item 1  Financial Statements                                                                 
|                               |                                                                                                | Management Representation                                         
|                               |                                                                                                | Condensed Unaudited Consolidated Statements of Income             
|                               |                                                                                                | Condensed Unaudited Consolidated Balance Sheets                   
|                               |                                                                                                | Condensed Unaudited Consolidated Statements of Cash Flows         
|                               |                                                                                                | Consolidated Unaudited Statement of Shareholders Equity          
|                               |                                                                                                | Notes to the Condensed Unaudited Consolidated Financial Statements
|                               | Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
|                               | General                                                                                       
|                               | Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002                 
|                               | Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002                     
|                               | Liquidity and Capital Resources                                                               
|                               | Item 3  Quantitative and Qualitative Disclosures about Market Risk                           
|                               | Item 4  Controls and Procedures                                                              
|PART II  OTHER INFORMATION   
|                               | Item 1  Legal Proceedings                                                                    
|                               | Item 2  Changes in Securities and Use of Proceeds                                            
|                               | Item 3  Defaults Upon Senior Securities                                                      
|                               | Item 4  Submission of Matters to a Vote of Security Holders                                  
|                               | Item 5  Other Information                                                                    
|                               | Item 6  Exhibits and Reports on Form 8-K                                                     
|Certification                 
|Certification                 
|Certification                 



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##### Table of Contents



The Cronos Group

TABLE OF CONTENTS

|                               |                                                                                                |  |    |    | 
|------------------------------ | ---------------------------------------------------------------------------------------------- |  | -- | -- | 
|PART I  FINANCIAL INFORMATION |                                                                                                |  | 1  |   
|                               | Item 1  FINANCIAL STATEMENTS                                                                  |  |    | 1  | 
|                               | Management Representation                                                                      |  |    | 1  | 
|                               | Condensed Unaudited Consolidated Statements of Income                                          |  |    | 2  | 
|                               | Condensed Unaudited Consolidated Balance Sheets                                                |  |    | 3  | 
|                               | Condensed Unaudited Consolidated Statements of Cash Flows                                      |  |    | 4  | 
|                               | Consolidated Unaudited Statement of Shareholders Equity                                       |  |    | 5  | 
|                               | Notes to the Condensed Unaudited Consolidated Financial Statements                             |  |    | 6  | 
|                               | Item 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS |  |    | 14 | 
|                               | General                                                                                        |  |    | 14 | 
|                               | Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002                  |  |    | 15 | 
|                               | Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002                      |  |    | 16 | 
|                               | Liquidity and Capital Resources                                                                |  |    | 17 | 
|                               | Item 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  |    | 20 | 
|                               | Item 4  CONTROLS AND PROCEDURES                                                               |  |    | 20 | 
|PART II  OTHER INFORMATION    |                                                                                                |  | 21 |   
|                               | Item 1  Legal Proceedings                                                                     |  |    | 21 | 
|                               | Item 2  Changes in Securities and Use of Proceeds                                             |  |    | 23 | 
|                               | Item 3  Defaults Upon Senior Securities                                                       |  |    | 23 | 
|                               | Item 4  Submission of Matters to a Vote of Security Holders                                   |  |    | 23 | 
|                               | Item 5  Other Information                                                                     |  |    | 25 | 
|                               | Item 6  Exhibits and Reports on Form 8-K                                                      |  |    | 25 | 





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##### Table of Contents



The Cronos Group




PART I  FINANCIAL INFORMATION




Item 1  Financial Statements




Management Representation

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

The unaudited condensed consolidated interim financial statements included
herein have been prepared by the Company pursuant to the rules and regulations
of the Securities and Exchange Commission (SEC). Certain information and
disclosures normally included in annual financial statements prepared in
accordance with accounting principles generally accepted in the United States
of America have been condensed or omitted pursuant to such rules and
regulations.

These condensed consolidated financial statements should be read in
conjunction with the financial statements and the notes thereto included in the
Companys latest Annual Report on Form 10-K.

This financial information reflects, in the opinion of management, all
adjustments necessary to present fairly, the results for the interim periods.
Such adjustments consist of only normal recurring adjustments. The results of
operations for such interim periods are not necessarily indicative of the
results to be expected for the full year.





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The Cronos Group




Condensed Unaudited Consolidated Statements of Income

(US dollar amounts in thousands, except share amounts)

|                                                |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        |  
|----------------------------------------------- |  | ------------------ | ------ | ---------------- |  | ---- | ------ | ---- |  | - | ------ |  |  | - | ------ | -
|                                                |  | Three Months Ended |        | Six Months Ended
|                                                |  | June 30,           |        | June 30,        
|                                                |  |                    |        |                 
|                                                |  | 2003               |        | 2002             |  | 2003 |        | 2002
|                                                |  |                    |        |                  |  |      |        |     
|Gross lease revenue                             |  | $                  | 28,626 |                  |  | $    | 27,925 |      |  | $ | 57,379 |  |  | $ | 56,254 |  
|Equipment trading revenue                       |  |                    | 790    |                  |  |      | 197    |      |  |   | 1,445  |  |  |   | 581    |  
|Commissions, fees and other income:             |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        |  
|- Container Equity Programs                     |  |                    | 276    |                  |  |      | 309    |      |  |   | 557    |  |  |   | 620    |  
|- Unrelated parties                             |  |                    | 816    |                  |  |      | 977    |      |  |   | 1,589  |  |  |   | 1,945  |  
|Equity in earnings of affiliate                 |  |                    | 296    |                  |  |      |       |      |  |   | 512    |  |  |   |       |  
|                                                |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        |  
|Total revenues                                  |  |                    | 30,804 |                  |  |      | 29,408 |      |  |   | 61,482 |  |  |   | 59,400 |  
|                                                |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        |  
|Direct operating expenses                       |  |                    | 7,206  |                  |  |      | 7,217  |      |  |   | 12,891 |  |  |   | 14,974 |  
|Payments to Managed Container Owners:           |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        |  
|- Container Equity Programs                     |  |                    | 5,072  |                  |  |      | 4,079  |      |  |   | 10,537 |  |  |   | 8,034  |  
|- Other Managed Container Owners                |  |                    | 8,569  |                  |  |      | 8,781  |      |  |   | 18,079 |  |  |   | 17,607 |  
|Equipment trading expenses                      |  |                    | 738    |                  |  |      | 151    |      |  |   | 1,308  |  |  |   | 518    |  
|Depreciation and amortization                   |  |                    | 3,550  |                  |  |      | 3,889  |      |  |   | 7,283  |  |  |   | 7,738  |  
|Selling, general and administrative expenses    |  |                    | 3,771  |                  |  |      | 3,404  |      |  |   | 7,599  |  |  |   | 6,770  |  
|Interest expense                                |  |                    | 1,094  |                  |  |      | 1,659  |      |  |   | 2,341  |  |  |   | 3,303  |  
|                                                |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        |  
|Total expenses                                  |  |                    | 30,000 |                  |  |      | 29,180 |      |  |   | 60,038 |  |  |   | 58,944 |  
|                                                |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        |  
|Income before income taxes                      |  |                    | 804    |                  |  |      | 228    |      |  |   | 1,444  |  |  |   | 456    |  
|Income taxes provision (benefit)                |  |                    | 295    |                  |  |      | (2,365 | )    |  |   | 466    |  |  |   | (2,325 | )
|                                                |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        |  
|Net income                                      |  |                    | 509    |                  |  |      | 2,593  |      |  |   | 978    |  |  |   | 2,781  |  
|                                                |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        |  
|Net income per common share (basic and diluted) |  | $                  | 0.07   |                  |  | $    | 0.35   |      |  | $ | 0.13   |  |  | $ | 0.38   |  
|                                                |  |                    |        |                  |  |      |        |      |  |   |        |  |  |   |        |  

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





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The Cronos Group




Condensed Unaudited Consolidated Balance Sheets

(US dollar amounts in thousands, except share amounts)

|                                                        |  |          |         |              |  |   |         |  
|------------------------------------------------------- |  | -------- | ------- | ------------ |  | - | ------- | -
|                                                        |  | June 30, |         | December 31,
|                                                        |  | 2003     |         | 2002        
|                                                        |  |          |         |             
|Assets                                                  |  |          |         |              |  |   |         |  
|Cash and cash equivalents                               |  | $        | 4,227   |              |  | $ | 4,626   |  
|Restricted cash                                         |  |          | 452     |              |  |   | 493     |  
|Amounts due from lessees, net                           |  |          | 22,545  |              |  |   | 22,580  |  
|Amounts receivable from container owners                |  |          | 7,507   |              |  |   | 7,542   |  
|New container equipment for resale                      |  |          | 14,277  |              |  |   | 2,570   |  
|Net investment in direct financing leases               |  |          | 8,208   |              |  |   | 7,912   |  
|Investment in unconsolidated affiliate                  |  |          | 5,589   |              |  |   | 3,603   |  
|Container equipment, net                                |  |          | 128,070 |              |  |   | 136,926 |  
|Other equipment, net                                    |  |          | 630     |              |  |   | 513     |  
|Goodwill, net                                           |  |          | 11,038  |              |  |   | 11,038  |  
|Other intangible assets, net                            |  |          | 815     |              |  |   | 909     |  
|Other assets                                            |  |          | 15,849  |              |  |   | 15,477  |  
|                                                        |  |          |         |              |  |   |         |  
|Total assets                                            |  | $        | 219,207 |              |  | $ | 214,189 |  
|                                                        |  |          |         |              |  |   |         |  
|Liabilities and shareholders equity                    |  |          |         |              |  |   |         |  
|Amounts payable to container owners                     |  | $        | 18,474  |              |  | $ | 18,583  |  
|Amounts payable to container manufacturers              |  |          | 20,312  |              |  |   | 8,590   |  
|Direct operating expense payables and accruals          |  |          | 6,144   |              |  |   | 5,071   |  
|Debt and capital lease obligations                      |  |          | 92,684  |              |  |   | 100,997 |  
|Current and deferred income taxes                       |  |          | 5,390   |              |  |   | 5,536   |  
|Deferred income and unamortized acquisition fees        |  |          | 4,854   |              |  |   | 5,201   |  
|Other amounts payable and accrued expenses              |  |          | 6,307   |              |  |   | 6,005   |  
|                                                        |  |          |         |              |  |   |         |  
|Total liabilities                                       |  |          | 154,165 |              |  |   | 149,983 |  
|                                                        |  |          |         |              |  |   |         |  
|Shareholders equity                                    |  |          |         |              |  |   |         |  
|Common shares issued and outstanding (7,372,080 shares) |  |          | 14,744  |              |  |   | 14,744  |  
|Additional paid-in capital                              |  |          | 46,983  |              |  |   | 47,125  |  
|Common shares held in treasury (12,000 shares)          |  |          | (37     | )            |  |   | (37     | )
|Restricted retained earnings                            |  |          | 1,832   |              |  |   | 1,832   |  
|Retained earnings                                       |  |          | 1,520   |              |  |   | 542     |  
|                                                        |  |          |         |              |  |   |         |  
|Total shareholders equity                              |  |          | 65,042  |              |  |   | 64,206  |  
|                                                        |  |          |         |              |  |   |         |  
|Total liabilities and shareholders equity              |  | $        | 219,207 |              |  | $ | 214,189 |  
|                                                        |  |          |         |              |  |   |         |  

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





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The Cronos Group




Condensed Unaudited Consolidated Statements of Cash Flows

(US dollar amounts in thousands, except share amounts)

|                                                                  |  |                  |         |      |  |   |         |  
|----------------------------------------------------------------- |  | ---------------- | ------- | ---- |  | - | ------- | -
|                                                                  |  | Six Months Ended
|                                                                  |  | June 30,        
|                                                                  |  |                 
|                                                                  |  | 2003             |         | 2002
|                                                                  |  |                  |         |     
|Net cash provided by operating activities                         |  | $                | 9,729   |      |  | $ | 8,916   |  
|                                                                  |  |                  |         |      |  |   |         |  
|Cash flows from investing activities                              |  |                  |         |      |  |   |         |  
|Purchase of container equipment                                   |  |                  | (7,572  | )    |  |   | (13,541 | )
|Purchase of property and other equipment                          |  |                  | (235    | )    |  |   | (205    | )
|Investment in unconsolidated affiliate                            |  |                  | (475    | )    |  |   |        |  
|Investment in direct financing lease equipment                    |  |                  | (283    | )    |  |   | (1,028  | )
|Proceeds from sales of container and other equipment              |  |                  | 7,570   |      |  |   | 1,335   |  
|                                                                  |  |                  |         |      |  |   |         |  
|Net cash used in investing activities                             |  |                  | (995    | )    |  |   | (13,439 | )
|                                                                  |  |                  |         |      |  |   |         |  
|Cash flows from financing activities                              |  |                  |         |      |  |   |         |  
|Proceeds from issuance of term debt and capital lease obligations |  |                  | 8,636   |      |  |   | 15,407  |  
|Repayments of term debt and capital lease obligations             |  |                  | (17,516 | )    |  |   | (10,732 | )
|Dividend paid                                                     |  |                  | (294    | )    |  |   |        |  
|Cash deposits (restricted)                                        |  |                  | 41      |      |  |   | (41     | )
|                                                                  |  |                  |         |      |  |   |         |  
|Net cash (used in) provided by financing activities               |  |                  | (9,133  | )    |  |   | 4,634   |  
|                                                                  |  |                  |         |      |  |   |         |  
|Net (decrease) increase in cash and cash equivalents              |  |                  | (399    | )    |  |   | 111     |  
|Cash and cash equivalents at beginning of period                  |  |                  | 4,626   |      |  |   | 4,914   |  
|                                                                  |  |                  |         |      |  |   |         |  
|Cash and cash equivalents at end of period                        |  | $                | 4,227   |      |  | $ | 5,025   |  
|                                                                  |  |                  |         |      |  |   |         |  
|Supplementary disclosure of cash flow information:                |  |                  |         |      |  |   |         |  
|Cash paid during the period for:                                  |  |                  |         |      |  |   |         |  
|- interest                                                        |  | $                | 2,107   |      |  | $ | 2,789   |  
|- income taxes                                                    |  |                  | 756     |      |  |   | 208     |  
|Cash received during the period for:                              |  |                  |         |      |  |   |         |  
|- interest                                                        |  |                  | 146     |      |  |   | 27      |  
|- income taxes                                                    |  |                  | 60      |      |  |   | 107     |  
|Non-cash activities:                                              |  |                  |         |      |  |   |         |  
|- container equipment acquired under capital lease                |  |                  |        |      |  |   | 3,930   |  
|- direct financing lease equipment acquired under capital lease   |  |                  | 567     |      |  |   | 116     |  
|- equity contribution to Joint Venture Program                    |  |                  | 999     |      |  |   |        |  

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





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The Cronos Group




Consolidated Unaudited Statement of Shareholders Equity

(US dollar amounts in thousands, except share amounts)

Six months ended June 30, 2003

|                                     |  |        |        |         |  |             |        |          |  |            |     |               |  |   |       |       |  |   |       |  |  |   |        |  
|------------------------------------ |  | ------ | ------ | ------- |  | ----------- | ------ | -------- |  | ---------- | --- | ------------- |  | - | ----- | ----- |  | - | ----- |  |  | - | ------ | -
|                                     |  |        |        |         |  | Additional  |        | Common   |  | Restricted |     |               |  |   |       | Total
|                                     |  | Common |        | paid-in |  | shares held |        | retained |  | Retained   |     | shareholders'
|                                     |  | shares |        | capital |  | in treasury |        | earnings |  | earnings   |     | equity       
|                                     |  |        |        |         |  |             |        |          |  |            |     |              
|Balance,
December 31, 2002           |  | $      | 14,744 |         |  | $           | 47,125 |          |  | $          | (37 | )             |  | $ | 1,832 |       |  | $ | 542   |  |  | $ | 64,206 |  
|Amortization of
employee share
grant |  |        |       |         |  |             | 5      |          |  |            |    |               |  |   |      |       |  |   |      |  |  |   | 5      |  
|Declaration of
dividend              |  |        |        |         |  |             | (147   | )        |  |            |     |               |  |   |       |       |  |   |       |  |  |   | (147   | )
|Net income                           |  |        |       |         |  |             |       |          |  |            |    |               |  |   |      |       |  |   | 978   |  |  |   | 978    |  
|                                     |  |        |        |         |  |             |        |          |  |            |     |               |  |   |       |       |  |   |       |  |  |   |        |  
|Balance,
June 30, 2003               |  | $      | 14,744 |         |  | $           | 46,983 |          |  | $          | (37 | )             |  | $ | 1,832 |       |  | $ | 1,520 |  |  | $ | 65,042 |  
|                                     |  |        |        |         |  |             |        |          |  |            |     |               |  |   |       |       |  |   |       |  |  |   |        |  

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





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##### Table of Contents



The Cronos Group




Notes to the Condensed Unaudited Consolidated Financial Statements

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



|1. |  | The condensed unaudited consolidated financial statements include the
accounts of The Cronos Group and its wholly owned subsidiaries. All
material intercompany accounts and transactions have been eliminated.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Stock-Based Compensation (US dollar amounts in thousands, except share
and per share amounts)                                                                                                                  

The Group has adopted disclosure requirements under Statement of Financial
Accounting Standards No. 123 (SFAS 123) Accounting for Stock-Based
Compensation, but continues to account for stock-based compensation under
Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock
Issued to Employees under which no compensation expense has been recognized.
In accordance with SFAS 123, the Company discloses the fair value of its stock
options, which is calculated based on the Black Scholes option-pricing model.

In December 2002, the Financial Accounting Standards Board issued SFAS No.
148 (SFAS 148), Accounting for Stock-Based Compensation  Transition and
Disclosure. SFAS 148 provides alternative methods of transition for a
voluntary change to the fair value based method of accounting for stock-based
compensation. In addition, SFAS 148 amended the disclosure requirements of
SFAS 123 to require prominent disclosures in both annual and interim financial
statements of the method of accounting for stock-based employee compensation
and the method used to report results. The Company has adopted the disclosure
requirements of SFAS 148.

If the stock options had been accounted for under SFAS 123, the impact on
the Groups net income and net income per share would have been as follows:

|                                                       |  |                    |      |                  |  |      |       |      |  |   |      |   |  |   |       |  
|------------------------------------------------------ |  | ------------------ | ---- | ---------------- |  | ---- | ----- | ---- |  | - | ---- | - |  | - | ----- | -
|                                                       |  | Three Months Ended |      | Six Months Ended
|                                                       |  | June 30,           |      | June 30,        
|                                                       |  |                    |      |                 
|                                                       |  | 2003               |      | 2002             |  | 2003 |       | 2002
|                                                       |  |                    |      |                  |  |      |       |     
|Net income:                                            |  |                    |      |                  |  |      |       |      |  |   |      |   |  |   |       |  
|- as reported                                          |  | $                  | 509  |                  |  | $    | 2,593 |      |  | $ | 978  |   |  | $ | 2,781 |  
|- stock-based compensation expense,
net of tax effects |  |                    | (29  | )                |  |      | (63   | )    |  |   | (84  | ) |  |   | (186  | )
|                                                       |  |                    |      |                  |  |      |       |      |  |   |      |   |  |   |       |  
|- pro forma                                            |  | $                  | 480  |                  |  | $    | 2,530 |      |  | $ | 894  |   |  | $ | 2,595 |  
|                                                       |  |                    |      |                  |  |      |       |      |  |   |      |   |  |   |       |  
|Basic and diluted net income per share:                |  |                    |      |                  |  |      |       |      |  |   |      |   |  |   |       |  
|- as reported                                          |  | $                  | 0.07 |                  |  | $    | 0.35  |      |  | $ | 0.13 |   |  | $ | 0.38  |  
|                                                       |  |                    |      |                  |  |      |       |      |  |   |      |   |  |   |       |  
|- pro forma                                            |  | $                  | 0.07 |                  |  | $    | 0.34  |      |  | $ | 0.12 |   |  | $ | 0.35  |  
|                                                       |  |                    |      |                  |  |      |       |      |  |   |      |   |  |   |       |  





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##### Table of Contents



The Cronos Group



|3. |  | Operating segment data
|-- |  | ----------------------

Condensed segment information is provided in the tables below:

|                                       |  |           |        |           |  |            |        |       |  |   |         |  |  |   |         | 
|-------------------------------------- |  | --------- | ------ | --------- |  | ---------- | ------ | ----- |  | - | ------- |  |  | - | ------- | 
|                                       |  |           |        |           |  | Other      |        |       |  |   |         |  |  |  
|                                       |  | Container |        | Managed   |  |            |        |       |  |   |         | 
|                                       |  | Equity    |        | Container |  | Owned      |        |       |  |  
|                                       |  | Programs  |        | Owners    |  | Containers |        | Total
|                                       |  |           |        |           |  |            |        |      
|Three months ended June 30, 2003       |  |           |        |           |  |            |        |       |  |   |         |  |  |   |         | 
|Gross lease revenue                    |  | $         | 8,505  |           |  | $          | 12,381 |       |  | $ | 7,740   |  |  | $ | 28,626  | 
|Operating profit before indirect items |  |           | 1,739  |           |  |            | 496    |       |  |   | 2,398   |  |  |   | 4,633   | 
|Operating profit (loss)                |  |           | 535    |           |  |            | (664   | )     |  |   | 1,670   |  |  |   | 1,541   | 
|Segment assets at end of period        |  |           | 15,874 |           |  |            | 20,752 |       |  |   | 156,821 |  |  |   | 193,447 | 
|Three months ended June 30, 2002       |  |           |        |           |  |            |        |       |  |   |         |  |  |   |         | 
|Gross lease revenue                    |  | $         | 7,002  |           |  | $          | 12,502 |       |  | $ | 8,421   |  |  | $ | 27,925  | 
|Operating profit before indirect items |  |           | 1,034  |           |  |            | 155    |       |  |   | 2,500   |  |  |   | 3,689   | 
|Operating profit (loss)                |  |           | 28     |           |  |            | (1,002 | )     |  |   | 1,721   |  |  |   | 747     | 
|Segment assets at end of period        |  |           | 10,217 |           |  |            | 22,116 |       |  |   | 173,659 |  |  |   | 205,992 | 
|Six months ended June 30, 2003         |  |           |        |           |  |            |        |       |  |   |         |  |  |   |         | 
|Gross lease revenue                    |  | $         | 16,563 |           |  | $          | 25,101 |       |  | $ | 15,715  |  |  | $ | 57,379  | 
|Operating profit before indirect items |  |           | 3,158  |           |  |            | 998    |       |  |   | 5,021   |  |  |   | 9,177   | 
|Operating profit (loss)                |  |           | 796    |           |  |            | (1,463 | )     |  |   | 3,480   |  |  |   | 2,813   | 
|Segment assets at end of period        |  |           | 15,874 |           |  |            | 20,752 |       |  |   | 156,821 |  |  |   | 193,447 | 
|Six months ended June 30, 2002         |  |           |        |           |  |            |        |       |  |   |         |  |  |   |         | 
|Gross lease revenue                    |  | $         | 14,352 |           |  | $          | 25,198 |       |  | $ | 16,704  |  |  | $ | 56,254  | 
|Operating profit before indirect items |  |           | 2,413  |           |  |            | 329    |       |  |   | 4,613   |  |  |   | 7,355   | 
|Operating profit (loss)                |  |           | 349    |           |  |            | (2,028 | )     |  |   | 3,051   |  |  |   | 1,372   | 
|Segment assets at end of period        |  |           | 10,217 |           |  |            | 22,116 |       |  |   | 173,659 |  |  |   | 205,992 | 

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

|                                                         |  |                    |       |                  |  |      |      |      |  |   |        |   |  |   |       |  
|-------------------------------------------------------- |  | ------------------ | ----- | ---------------- |  | ---- | ---- | ---- |  | - | ------ | - |  | - | ----- | -
|                                                         |  | Three Months Ended |       | Six Months Ended
|                                                         |  | June 30,           |       | June 30,        
|                                                         |  |                    |       |                 
|                                                         |  | 2003               |       | 2002             |  | 2003 |      | 2002
|                                                         |  |                    |       |                  |  |      |      |     
|Operating profit                                         |  | $                  | 1,541 |                  |  | $    | 747  |      |  | $ | 2,813  |   |  | $ | 1,372 |  
|Unallocated selling,
general and administrative
expenses |  |                    | (690  | )                |  |      | (472 | )    |  |   | (1,275 | ) |  |   | (822  | )
|Amortization of intangibles                              |  |                    | (47   | )                |  |      | (47  | )    |  |   | (94    | ) |  |   | (94   | )
|                                                         |  |                    |       |                  |  |      |      |      |  |   |        |   |  |   |       |  
|Income before income taxes                               |  | $                  | 804   |                  |  | $    | 228  |      |  | $ | 1,444  |   |  | $ | 456   |  
|                                                         |  |                    |       |                  |  |      |      |      |  |   |        |   |  |   |       |  





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|4. |  | Earnings per common share (US dollar amounts in thousands, except share and per share amounts)
|-- |  | ----------------------------------------------------------------------------------------------

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

|                                             |  |                    |           |                  |  |      |           |      |  |   |           |  |  |   |           | 
|-------------------------------------------- |  | ------------------ | --------- | ---------------- |  | ---- | --------- | ---- |  | - | --------- |  |  | - | --------- | 
|                                             |  | Three Months Ended |           | Six Months Ended
|                                             |  | June 30,           |           | June 30,        
|                                             |  |                    |           |                 
|                                             |  | 2003               |           | 2002             |  | 2003 |           | 2002
|                                             |  |                    |           |                  |  |      |           |     
|Net income available for common shareholders |  | $                  | 509       |                  |  | $    | 2,593     |      |  | $ | 978       |  |  | $ | 2,781     | 
|                                             |  |                    |           |                  |  |      |           |      |  |   |           |  |  |   |           | 
|Average outstanding shares of common stock   |  |                    | 7,360,080 |                  |  |      | 7,364,580 |      |  |   | 7,360,080 |  |  |   | 7,364,580 | 
|Dilutive effect of:                          |  |                    |           |                  |  |      |           |      |  |   |           |  |  |   |           | 
|- 1998 Stock Option Plan                     |  |                    |          |                  |  |      |          |      |  |   |          |  |  |   | 22        | 
|- Non-Employee Directors Equity Plan         |  |                    | 94,494    |                  |  |      | 51,804    |      |  |   | 94,494    |  |  |   | 48,531    | 
|                                             |  |                    |           |                  |  |      |           |      |  |   |           |  |  |   |           | 
|Common stock and common stock equivalents    |  |                    | 7,454,574 |                  |  |      | 7,416,384 |      |  |   | 7,454,574 |  |  |   | 7,413,133 | 
|                                             |  |                    |           |                  |  |      |           |      |  |   |           |  |  |   |           | 
|Basic and diluted net income per share       |  | $                  | 0.07      |                  |  | $    | 0.35      |      |  | $ | 0.13      |  |  | $ | 0.38      | 
|                                             |  |                    |           |                  |  |      |           |      |  |   |           |  |  |   |           | 



|5. |  | Amounts receivable from container owners
|-- |  | ----------------------------------------

Amounts receivable from container owners include amounts due from related
parties of $3.4 million at June 30, 2003, and December 31, 2002, respectively.



|6. |  | Investments in related parties
|-- |  | ------------------------------

Investments in related parties take two forms:

Under the first form, the investments comprise interests as a general
partner and as a limited partner in eight sponsored funds. These general and
limited partner investments are accounted for using the equity method. The
subsidiary of the Company that acts as a general partner maintains insurance
for bodily injury, death and property damage for which a partnership may be
liable, and may be contingently liable for uninsured obligations of the
partnerships. The investment in US Limited Partnerships was $nil at both June
30, 2003, and December 31, 2002, respectively.

Under the second form, the Group has a 50% equity investment in a joint
venture container purchase entity (the Joint Venture Program). The Joint
Venture Program operates as a bankruptcy-remote, special purpose entity
organized under the laws of Bermuda and is accounted for using the equity
method. The investment in the joint venture entity was $5.6 million and $3.6
million at June 30, 2003, and December 31, 2002, respectively.



|7. |  | Container equipment
|-- |  | -------------------

Container equipment is net of accumulated depreciation of $90.2 million
and $91.7 million at June 30, 2003, and December 31, 2002, respectively.



|8. |  | Amounts payable to container owners
|-- |  | -----------------------------------

Amounts payable to container owners include amounts payable to related
parties of $8.7 million and $8.2 million at June 30, 2003, and December 31,
2002, respectively.





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|9. |  | Debt and capital lease obligations
|-- |  | ----------------------------------

Debt and capital lease obligations are secured by container equipment and
include amounts due within twelve months of $13.6 million and $13.1 million at
June 30, 2003, and December 31, 2002, respectively. Interest rates under these
facilities range from 2.7% to 8.6% and they extend to various dates through
2012. At June 30, 2003, the Group had provided guarantees for the payment of
the $92.7 million of outstanding debt and capital lease obligations, plus
related interest.



|10. |  | Commitments and contingencies (to be read in conjunction with Note 13 to
the Companys 2002 Consolidated Financial Statements on Form 10-K)
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|   
|i.  |  | Commitments                                                                                                                                

At June 30, 2003, the Group had outstanding orders to purchase $13.8
million of container equipment.



|ii. |  | Guarantee to US Limited Partnership
|--- |  | -----------------------------------

During 2000, the Group provided an unsecured guarantee under a $5 million
third-party loan note (the Note), with a 2006 maturity date, to a US Limited
Partnership. Under the terms of the guarantee, the Group may be liable for any
principal and interest outstanding under the terms of the Note in the event of
a default by the US Limited Partnership. At June 30, 2003, the balance
outstanding under the Note was $2.5 million.



|iii. |  | Guarantee of third-party loan and rent support agreement
|---- |  | --------------------------------------------------------

During 1996 and 1997, the Group sold a total of $26.3 million of
equipment, which was under a direct financing lease with a major shipping line,
to a third-party. The third-party financed the acquisition of this equipment
with a loan of $26.3 million, with a 2004 maturity date, to which the Group
provided a first loss guarantee for 20% of the outstanding debt. The Group can
collateralize up to 50% of the guarantee with a first security interest in
additional equipment. At June 30, 2003, the balance outstanding under the loan
was $2.2 million. In addition, under the terms of a rent support agreement for
which Cronos earns a fee of $0.1 million per annum, the Group is required to
deposit an amount equal to the aggregate of all rental charges scheduled to be
paid under the direct financing lease for the next twelve months or until the
end of the lease, if sooner, upon the occurrence of a continuing event of
default by the shipping line. At June 30, 2003, there were $0.9 million of
rental charges remaining until the scheduled expiry date in 2004.



|iv. |  | Guarantee under a purchase, assignment and agency agreement
|--- |  | -----------------------------------------------------------

During 1996, the Group entered into a term lease with a lessee. During
1997, the containers held under the lease were sold, and the lease was assigned
to a financial institution. The transaction was accounted for as a sale. As
part of this contract, the Group continues to manage the containers held under
the term lease and invoices the lessee and collects monies on behalf of the
financial institution. Rental under the lease is approximately $0.5 million
per annum of which the Group remits $0.4 million to the financial institution
as rent and $0.1 million to a retention account held as security by the
institution. As compensation for this service, the Group earns an agency fee.
Under the terms of the contract with the financial institution, if the lessee
fails to make payments, other than in the event of being declared bankrupt, the
Group has provided an unsecured guarantee that it will continue to make
payments to the financial institution. The guarantee and agreement with the
financial institution will expire in 2005.

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|v. |  | Guarantees under fixed non-cancellable operating leases
|-- |  | -------------------------------------------------------

Cronos, as lessee, has entered into secured fixed operating lease
contracts for container equipment under which it has guaranteed the payment of
the future minimum lease obligations. As of June 30, 2003, the future minimum
annual lease payments under these non-cancellable operating leases were:

|                    |  |   |        | 
|------------------- |  | - | ------ | 
|2004                |  | $ | 6,588  | 
|2005                |  |   | 8,066  | 
|2006                |  |   | 9,085  | 
|2007                |  |   | 2,563  | 
|2008                |  |   | 2,563  | 
|2009 and thereafter |  |   | 13,795 | 
|                    |  |   |        | 
|Total               |  | $ | 42,660 | 
|                    |  |   |        | 



|vi. |  | Agreements with Other Managed Container Owners  early termination options
|--- |  | --------------------------------------------------------------------------

Approximately 49% (based on original equipment cost) of the agreements
(the Agreements) with Other Managed Container Owners contain early
termination options, whereby the container owner may terminate the Agreement if
certain performance thresholds are not achieved. At June 30, 2003,
approximately 36% (based on original equipment cost) of total Agreements were
eligible for early termination. Cronos believes that early termination of
these Agreements by the Other Managed Container Owners is unlikely.



|vii. |  | Agreements with Other Managed Container Owners  change of control provisions
|---- |  | -----------------------------------------------------------------------------

Approximately 54% (based on original equipment cost) of Agreements with
Other Managed Container Owners provide that a change in ownership of the Group,
without the prior consent of the container owner, may constitute an event of
default under the Agreement. In substantially all of these Agreements, the
consent of the container owners may not be unreasonably withheld. In the event
that consent is not obtained, 31% of total Agreements may require the Group to
transfer possession of the equipment to another equipment manager. Such
transfer of possession may result in the Group incurring certain costs. The
remaining 23% of total Agreements may require the Group to purchase the
equipment from the container owners pursuant to the terms of their respective
Agreements, generally a stipulated percentage (determined by age of the
equipment) of the original cost of the equipment.



|viii. |  | Contingencies  Disputes with Contrin Holding S.A.
|----- |  | --------------------------------------------------

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

As described further below, the Group is in litigation with Contrin over
funds that Contrin claims to have remitted to the Group for the purchase of
containers. Contrin claims that in 1994 it transmitted $2.6 million to the
Group for the purchase of containers. The Group did not receive these funds
and believes that the funds were diverted to an account controlled by Stefan M.
Palatin, a former chairman and chief executive officer of the Group, and that
this was known or should have been known by Contrin.

In December 1997, the Group recorded an accrual of $3.4 million relating
to the alleged transfer of $2.6 million, the related interest, plus the
estimated settlement costs of this and other claims by Contrin. On June 30,
2003, the balance of this accrual was $3 million.

10



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The Cronos Group

On August 8, 2000, Contrin, through an affiliate, Contrin Worldwide
Container Leasing GmbH (CWC) filed an action in the Luxembourg District Court
against the Company, seeking recovery of $2.6 million, together with interest
and costs. On January 10, 2001, the Company responded to Contrins complaint,
requesting that the District Court dismiss the proceeding for lack of
jurisdiction over the dispute, and denying Contrins claims on the merits.
Since January 10, 2001, the parties have supplemented their pleadings and filed
documentary evidence with the court to respond to assertions made by the other
party. No date has been set for a final hearing on CWCs claims against the
Company.

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

In anticipation of the filing of Contrins claims against the Company in
Luxembourg, the Group, in June of 2000, filed claims for indemnity against Mr.
Palatin and his wife in the High Court of Justice, London, England, and in July
2000, separately, a claim against Barclays Bank PLC (Barclays). Barclays was
the bank that received the $2.6 million from Contrin. For a description of
these claims, see Legal Proceedings.

On August 2, 2001, CWC filed a separate claim against Cronos Containers
N.V. (CNV), a wholly owned Netherlands Antilles subsidiary of the Company, in
the High Court of Justice, London, England. By its claim, Contrin asserts that
CNV, wrongfully and in violation of the container management agreement between
Contrin and CNV, failed to distribute to Contrin $0.5 million in distributions
for the second through fourth calendar quarters of 1996. Contrin seeks
recovery of this sum, plus interest. On December 31, 2001, CNV filed its
defence to CWCs claim, denying CWCs claims and denying that CNV is liable to
CWC in any amount. The trial of CWCs claim is scheduled for December 8, 2003.

Concurrently with the filing of its defence to CWCs claims, CNV filed a
separate claim against the Palatins and Klamath, seeking recovery of $0.5
million from the Palatins that CNV alleges was misappropriated from CNV by Mr.
Palatin. For the status of this separate claim by CNV against the Palatins and
Klamath, see Legal Proceedings.

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

CNV filed its defence to the Disposals Claim on December 13, 2002, denying
the substantive allegations of the claim and that the claimants are entitled to
the relief claimed or to any other relief. Trial of the Disposals Claim is
scheduled for October 6, 2003.

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

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

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The Cronos Group

to these
commitments and contingencies within one year of the date of these financial
statements. In such an event, management estimates that possible losses could
exceed the amount accrued by $3.2 million.

12



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The Cronos Group



|ix. |  | TOEMT
|--- |  | -----

TOEMT, which is currently in liquidation in the United Kingdom, has been
separately registered by the same name in both the United Kingdom and in the
Isle of Man. At June 30, 2003, the Group had $1.3 million in amounts payable
to TOEMT on deposit in a bank account pending clarification of the proper
claimants to the distributions payable with respect to the containers owned by
TOEMT. Contrin has provided the Group with copies of default judgements that
Contrin secured in January and June 2001 from the Commercial Court of Vienna,
Austria, against TOEMT, the UK company, in the amount of $0.1 million, and
against TOEMT, the Isle of Man company, in the amount of $0.4 million. Contrin
has retained separate UK insolvency counsel, and has initiated proceedings to
place TOEMT (Isle of Man) in liquidation. Contrin has claimed an entitlement
to all of the distributions that the Group has set aside with respect to the
TOEMT containers, and its insolvency counsel, which also represents the
liquidator of the UK TOEMT and the proposed liquidator of TOEMT (Isle of Man),
has requested an accounting and extensive information on the Groups management
of the containers for TOEMT. Until clarification is secured by the court(s)
overseeing the liquidation(s) of UK TOEMT and TOEMT (Isle of Man) and/or
through agreement with the liquidators of TOEMT, the Group presently intends to
continue to set aside the distributions due and payable by the Group on the
containers it manages for TOEMT.



|11. |  | New accounting pronouncements
|--- |  | -----------------------------

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

In January 2003, the Financial Accounting Standards Board issued
Interpretation No. 46 (FIN 46), Consolidation of Variable Interest
Entities. FIN 46 is applicable immediately to any variable interest entity
created after January 31, 2003, and must be applied in the first fiscal year or
interim period after June 15, 2003, for an interest in a variable interest
entity that was acquired before February 1, 2003. The Group has not yet
completed the process of identifying whether it has variable interests in any
variable interest entities. The Group is evaluating the impact that will
result from adopting FIN 46 and is therefore unable to disclose the impact that
adopting FIN 46 will have on its financial position and results of operation
when such statement is adopted.

In April 2003, the Financial Accounting Standards Board issued SFAS No.
149 (SFAS 149), Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. The Statement amends and clarifies accounting for
derivative instruments, including certain derivative instruments embedded in
other contracts, and for other hedging activities under Statement 133. SFAS
149 is effective for contracts entered into or modified after June 30, 2003,
and for hedging relationships designated after June 30, 2003. The Group is
evaluating SFAS 149 but does not believe it will have an impact on its
financial statements.

In May 2003, the Financial Accounting Standards Board issued SFAS 150,
Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity (SFAS 150). This statement establishes standards for
how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. It requires that an issuer
classify a financial instrument that is within its scope as a liability (or an
asset in some circumstances). Many of those instruments were previously
classified as equity. This statement 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. The
Company believes that SFAS 150 will not have a significant impact on its
financial statements.

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Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations




General

The Group generates revenues by leasing to ocean carriers, marine
containers that are owned either by managed container programs (Managed
Container Owners), comprising Container Equity Programs and Other Managed
Container Owners, or by the Group itself (Owned Containers). These leases,
which generate most of the Groups revenues, are generally operating leases.

The following chart summarizes the composition of the Cronos fleet (based
on original equipment cost) at June 30 for each of the periods indicated:

|                               |  |      |     |      |  |  |     |  
|------------------------------ |  | ---- | --- | ---- |  |  | --- | -
|                               |  | 2003 |     | 2002
|                               |  |      |     |     
|Container Equity Programs      |  |      | 31  | %    |  |  | 28  | %
|Other Managed Container Owners |  |      | 43  | %    |  |  | 45  | %
|Owned Containers               |  |      | 26  | %    |  |  | 27  | %
|                               |  |      |     |      |  |  |     |  
|Total                          |  |      | 100 | %    |  |  | 100 | %
|                               |  |      |     |      |  |  |     |  

All containers, whether owned or managed, are operated as part of a single
fleet. The Group has discretion over which ocean carriers, container
manufacturers and suppliers of goods and services it deals with. Since the
Groups management agreements with the Managed Container Owners meet the
definition of leases in SFAS No. 13 (SFAS 13) Accounting for Leases, they
are accounted for in the Groups financial statements as leases under which the
container owners are lessors and the Group is lessee. In the six months ended
June 30, 2003, 88% of payments to Managed Container Owners represented
agreements which generally provided that the amounts payable to container
owners were based upon the rentals to ocean carriers after deducting direct
operating expenses and a management fee. The remaining 12% of payments to
Managed Container Owners represented agreements under which there were fixed
payment terms.

The Group reviews its Owned Container equipment when changes in
circumstances require consideration as to whether the carrying value of the
equipment has become impaired, pursuant to SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. Management considers assets to
be impaired if the carrying value of the asset exceeds the future projected
cash flows from related operations (undiscounted and without interest charges).
When impairment is deemed to exist, the assets are written down to fair value
or projected discounted cash flows from related operations. The Group
periodically evaluates future cash flows and potential impairment of its fleet
by container type rather than for each individual container. Therefore, future
losses could result for individual container dispositions due to various
factors including age, condition, suitability for continued leasing, as well as
geographic location of the containers where disposed. In addition, subjective
management judgement is required in estimating future cash flows from container
operations. Accordingly, the estimates may not be indicative of the amounts
that may be realized in future periods.

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The following chart summarizes the composition of the Cronos fleet (in
thousands), based on twenty-foot equivalent units (TEU), by equipment type,
at June 30 for each of the periods indicated:

|                      |                            |  |       |      |      |  |       |     | 
|--------------------- | -------------------------- |  | ----- | ---- | ---- |  | ----- | --- | 
|                      |                            |  | 2003  |      | 2002
|                      |                            |  |       |      |     
|Dry Cargo             |                            |  | 375.7 |      |      |  | 365.4 |    
|Refrigerated          |                            |  | 12.6  |      |      |  | 13.8  |    
|Tank                  |                            |  | 2.5   |      |      |  | 2.3   |    
|Dry Freight Specials: |                            |  |       |      |      |  |       |    
|                      | CPCs                       |  |       | 10.7 |      |  |       | 6.5 | 
|                      | Rolltrailer                |  |       | 2.8  |      |  |       | 2.7 | 
|                      | Other Dry Freight Specials |  |       | 4.2  |      |  |       | 3.6 | 
|                      |                            |  |       |      |      |  |       |    
|Total Fleet           |                            |  | 408.5 |      |      |  | 394.3 |    
|                      |                            |  |       |      |      |  |       |    

During the first half of 2003, the Group added $30.1 million of new
equipment to its container fleet. Of this amount, $20.1 million was invested
in dry cargo containers, primarily for term and direct finance leases. CPCs
represented $4.7 million of new container expenditure, with refrigerated
containers, tanks and dry freight specials accounting for the remaining
balance.

Cronos operates a diversified fleet of containers, including refrigerated
containers, tanks, cellular palletwide containers (CPCs) and rolltrailers
(Specialized Containers). Specialized Containers account for over 50% of the
Cronos owned fleet (based on original equipment cost).

Off-hire container inventories have declined by 42% since January 2002 due
to an improvement in market conditions and the implementation of several Cronos
marketing initiatives. Utilization increased by 12% to 85% in the same period.
The Company continues to reposition off-hire containers from low demand
markets into markets of higher demand as and when conditions allow. In this
regard, Cronos undertook $2 million in repositioning moves during the second
quarter of 2003.




Three Months Ended June 30, 2003 Compared to Three Months Ended June 30, 2002

Gross lease revenueof $28.6 million for the three months ended June 30,
2003, was $0.7 million, or 3%, higher than in the corresponding period of 2002.
Gross lease revenue for dry cargo containers increased by $0.3 million
reflecting increases in the quantity of on-hire containers and fleet size. CPC
gross lease revenue increased by $0.3 million due primarily to a 65% increase
in the size of the CPC fleet. In addition, gross lease revenue increased by
$0.1 million for each of the tank and rolltrailer fleets. However, such
increases were partly offset by a $0.1 million reduction in revenue for
refrigerated containers due to the disposal of older equipment.

Equipment trading revenueof $0.8 million in the second quarter of 2003
represented transactions undertaken in which the Group used its relationships
with equipment manufacturers to assist third-parties to design and acquire
their own equipment and organize delivery to designated locations. Equipment
trading expenses of $0.7 million represented equipment and related costs for
this activity. The Group earned $0.1 million from equipment trading activity
during this period.

Commissions, fees and other incomefor the quarter ended June 30, 2003, of
$1.1 million were $0.2 million, or 15%, lower than in the same quarter of 2002.
Direct finance lease income and unrealized exchange gains recognized on Euro
direct finance lease receivables each increased by $0.1 million. Such
increases were offset by declines of $0.2 million in each of CPC licence fee
income and interest income.

Equity in earnings of affiliateduring the quarter ended June 2003 was
$0.3 million and represented the recognition of the Cronos share of earnings
from the Joint Venture Program entity which was established in September 2002.

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Direct operating expensesof $7.2 million for the three months ended June
30, 2003, were essentially unchanged when compared to the same period in 2002.
A $0.8 million reduction in storage costs, reflecting improved on-hire volumes
and the sale of certain older equipment, was offset by an increase of $0.4
million in
costs for repositioning equipment from low demand locations to markets of
higher demand, and a $0.3 million increase in the provision for doubtful
accounts.

Payments to Managed Container Ownersof $13.6 million during the three
months ended June 30, 2003, were $0.8 million, or 6%, higher when compared to
the corresponding period in 2002. This increase is attributable to the total
increase in net lease revenue (gross lease revenue net of direct operating
expenses) for the managed segments and includes the effect of the Joint Venture
Program, which commenced in September 2002. This was partly offset by a $0.4
million reduction in payments to a container owner resulting from the change in
a number of agreements from a fixed payment basis to a variable management fee
basis.

Depreciation and amortizationof $3.6 million for the three months ended
June 30, 2003, was $0.3 million lower than in the same period of 2002. The
reduction was primarily due to the sale of containers from the Group to the
Joint Venture Program and to the disposal of older equipment.

Selling, general and administrative expensesof $3.8 million during the
second quarter of 2003 were $0.4 million, or 11%, higher than in the
corresponding period of 2002. This is primarily due to a $0.4 million increase
in manpower costs which resulted in part from the decline in the value of the
US dollar against Sterling, the Euro and other major currencies. It is
estimated that $0.2 million of the total increase in selling, general and
administrative expenses may be attributed to exchange rate movements.

Interest expenseof $1.1 million for the three months ended June 30, 2003,
declined by $0.6 million, or 34%, when compared to the corresponding period in
2002. The decline in interest expense is due to the global reduction in
interest rates, as well as lower debt balances resulting from the partial
repayment of the Groups revolving credit facility in September 2002 following
the sale of equipment to the Joint Venture Program.

Income taxesfor the three months ended June 30, 2003 were $0.3 million.
In the second quarter of 2002, the Group agreed to a settlement with a foreign
taxation authority. This followed a review that focused primarily on the
transfer prices under the terms of the principal trading agreements between
Cronos Group companies prior to December 31, 1998. The Group had previously
recorded a charge of $2.9 million in this regard. As a result of the
settlement, the Group reversed $2.5 million of the tax liability and recorded a
tax benefit of the same amount.




Six Months Ended June 30, 2003 Compared to Six Months Ended June 30, 2002

Gross lease revenueof $57.4 million for the first half of 2003 was $1.1
million, or 2%, higher than for the first half of 2002 as the combined effects
of improved utilzation and increased fleet size resulted in revenue growth for
most products. Revenue for refrigerated containers declined by $0.5 million
due to the disposal of equipment that had reached the end of its economic life.

Equipment trading revenueof $1.4 million in the first six months of 2003
represented transactions undertaken in Australia and Scandinavia where the
Group used its relationships with equipment manufacturers to assist
third-parties to design and acquire their own equipment and organize delivery
to designated locations. Equipment trading expenses represented equipment and
related costs for this activity. The Group earned $0.1 million from equipment
trading activity during the first six months of 2003, essentially unchanged
from the same period in 2002.

Commissions, fees and other incomeof $2.1 million in the six months ended
June 2003 were $0.4 million, or 16%, lower than in the corresponding period of
2002. CPC license fee income declined by $0.2 million due to lower third-party
demand during the first half of 2003. Additionally, design and consultancy fee
income declined by $0.2 million, interest income declined by $0.2 million and
amortized acquisition fee income declined by $0.1 million reflecting a maturing
portfolio of managed container programs. These reductions were partly offset
by unrealized exchange gains of $0.2 million recognized on Euro direct finance
lease receivables and a $0.1 million increase in income earned on direct
finance leases.

Equity in earnings of affiliateof $0.5 million in the first half of 2003
represented the recognition of the Cronos share of earnings from the Joint
Venture Program entity that was established in September of 2002.

Direct operating expenseswere $12.9 million in the first half of 2003, a
decrease of $2.1 million, or 14%, compared to 2002. A reduction of $2.5
million in inventory related costs was partially offset by an increase
in the provision for doubtful accounts, reflecting a deterioration in the
credit position of a Far East based shipping line.

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The Cronos Group

Payments to Managed Container Ownerswere $28.6 million for the six months
ended June 30, 2003, an increase of $3 million, or 12%, when compared to the
same period of the prior year. Net lease revenue for Container Equity Programs
increased by $2.8 million due primarily to the addition of the Joint Venture
Program which was established in September 2002. Net lease revenue for the
Other Managed Container Owner segment increased by $1.3 million due to the
improved operating performance of the fleet. In addition, payments to one
container owner in this segment declined by $0.7 million as the payment terms
for a number of Agreements changed from a fixed payment basis to one under
which the Group earned a management fee based upon the rentals to ocean
carriers after deducting direct operating expenses.

Depreciation and amortizationwas $7.3 million for the six months ended
June 30, 2003, compared with $7.7 million for the corresponding period of 2002.
The increase in depreciation attributable to new container additions was more
than offset by the disposal of refrigerated equipment at the end of its
economic life and by the sale of equipment to the Joint Venture Program.

Selling, general and administrative expenseswere $7.6 million in the
first six months of 2003, an increase of $0.8 million, when compared to the
same period of 2002. A reduction of $0.1 million in occupancy costs was more
than offset by increases of $0.5 million in manpower expense and $0.4 million
in business insurance, legal and other costs. The decrease in occupancy was
due to office relocations in the UK and US. It is estimated that $0.5 million
of the total increase in selling, general and administrative expenses may be
attributed to exchange rate movements.

Interest expenseof $2.3 million in the first half of 2003, was $1
million, or 29%, lower than in the first half of 2002. The decline in interest
expense is due to reductions in debt balances, resulting from the partial
repayment of the Groups revolving credit facility in September 2002 following
the sale of equipment to the Joint Venture Program, and interest rates.

Income Taxeswere $0.5 million for the six months ended June 2003. In the
second quarter of 2002, the Group agreed to a settlement with a foreign
taxation authority. This followed a review that focused primarily on the
transfer prices under the terms of the principal trading agreements between
Cronos Group companies prior to December 31, 1998. The Group had previously
recorded a charge of $2.9 million in this regard. As a result of the
settlement, the Group reversed $2.5 million of the tax liability and recorded a
tax benefit of the same amount.




Liquidity and Capital Resources

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

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

Operating cash flow is largely dependent upon the timely collections of
lease revenues from shipping lines. Based on loss experience for the last
eleven years, bad debts have approximated 1% of lease revenues. The Group
monitors the ageing of lease receivables, collections and the credit status of
existing and potential customers. In the current economic climate, there is a
risk that some shipping lines may experience financial difficulty. Any
resultant material increase in the level of bad debts could potentially impair
the ability of the Group to meet its operating commitments.

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The Cronos Group

At June 30, 2003, the Group had $107.1 million of available container
borrowing facilities under which $92.7 million was outstanding. In addition,
the Group had $1.7 million of unutilized overdraft facilities.

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The container borrowing facilities include a revolving credit loan for
which the maximum debt commitment is $50 million and the balance outstanding at
June 30, 2003, was $41.6 million. Under the terms of this facility, the
balance outstanding on September 18, 2003, is scheduled to amortize over a
period of five years. The Group has entered into discussions with the
institution providing this facility to extend the revolving credit period for
an additional year.

Cash Flow Statements for the Six Months ended June 30, 2003 and 2002

Operating Activities:Net cash provided by operating activities was $9.7
million and $8.9 million for the first six months of 2003 and 2002,
respectively and was primarily generated by earnings from operations in each
respective period.

Investing Activities:Net cash used in investing activities was $1 million
during the first half of 2003 and $13.4 million in the first six months of
2002. During the first six months of 2003, proceeds from the sale of fixed
assets of $7.6 million, including the sale of $4.6 million of refrigerated
equipment to the Joint Venture Program, were more than offset by equipment
acquisitions totalling $8.1 million and a $0.5 million equity investment in the
Joint Venture Program. In 2002, the acquisition of $13.7 million of container
and other equipment and an investment of $1 million in direct finance lease
equipment was partly offset by $1.3 million of proceeds from the sale of
container equipment.

Financing Activities:Net cash used in financing activities was $9.1
million during the first six months of 2003 as $8.6 million of additional debt,
utilized to finance the acquisition of new container equipment, was more than
offset by debt and capital lease repayments of $17.5 million. The repayments
included $4.6 million received on the sale of equipment to the Joint Venture
Program. In addition, the Group made payments of $0.3 million for an interim
dividend that was declared in December 2002. Net cash provided by financing
activities was $4.6 million during the first six months of 2002. Proceeds from
the issuance of debt of $15.4 million was partly offset by the repayment of
$10.7 million of debt and capital lease obligations.

Capital Resources

Capital Expenditures and Commitments

The Group purchases new containers for its own account and for resale to
Managed Container Owners and other parties. At June 30, 2003, the Group owed
container manufacturers $20.3 million for equipment. The Group will fund $5.5
million of this equipment utilising new and existing debt and capital lease
facilities, with $14 million to be sold to the Joint Venture Program and the
remaining $0.8 million will be sold to a third-party under an equipment trading
transaction.

In addition, the Group had outstanding orders to purchase container
equipment of $13.8 million at June 30, 2003. Of this amount, $10.5 million
will be financed by the Group using new and existing container funding
facilities and $3.2 million will be sold to the Joint Venture Program.

At the annual meeting of shareholders held on June 5, 2003, a dividend of
2 cents per common share was approved for the second calendar quarter of 2003
to be paid on July 15, 2003, to shareholders of record as of the close of
business on June 26, 2003.

On April 1, 2003, the Group sold $4.6 million of containers to the Joint
Venture Program and transferred an additional $1 million of containers as a
capital contribution. The Group utilized the proceeds from the sale of
containers to repay approximately $4.6 million of indebtedness outstanding
under an existing revolving line of credit. The sale of the containers by the
Group to the Joint Venture Program was at book value and therefore did not
result in a gain or loss.

At the
2002 annual meeting of the shareholders of the Company, the
shareholders granted to the Board of Directors of the Company the
authority to adopt and implement from time to time a share repurchase
program, subject to certain restrictions. The Board adopted a share
repurchase program on December 10, 2002, authorizing the
expenditure of up to $500,000 to purchase no more than 200,000 of the
Companys outstanding common shares. As previously reported by
the Company, under the program adopted by the Board, the Company
repurchased, in the fourth calendar quarter of 2002, 12,000 of its
common shares.

As
reported below under Item 4 of Part II, Submission of
Matters to a Vote of Security Holders, at the annual meeting of
shareholders of the Company held on June 5, 2003, the shareholders
approved an extension of the grant of authority to the Board to
implement a share repurchase program and granted the Board the
authority to authorize common share repurchases both in the open
market and through privately-negotiated transactions.

Pursuant
to this expanded authority, on August 4, 2003, the Company
entered into an agreement to repurchase 100,000 of its outstanding
common shares from a single shareholder of the Company, at a purchase
price of $2.60 per share, or $260,000 in the aggregate. The
Company has agreed to pay for the shares at such time as the selling
shareholder complies with the requirements of the Companys
transfer agent to transfer the shares to the Company, free of
restriction. The Company anticipates that this condition will be
satisfied and the shares will be repurchased on or before
August 15, 2003.

Upon
repurchase of the 100,000 shares, the number of outstanding common
shares of the Company will be reduced from 7,360,080 to 7,260,080.

The
Group believes that it has sufficient capital resources to support
its operating and investing activities for the next twelve months.

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Item 3  Quantitative and Qualitative Disclosures about Market Risk

Interest rate risk:Outstanding borrowings are subject to interest rate
risk. Approximately 86% of total borrowings had floating interest rates at
June 30, 2003. The Group conducted an analysis of borrowings with variable
interest rates to determine their sensitivity to interest rate changes. In
this analysis, the same change was applied to the current balance outstanding,
leaving all other factors constant. It was found that if a 10% increase were
applied to variable interest rates, the effect would be to reduce annual cash
flows by $0.1 million.

Exchange rate risk:Substantially all of the Groups revenues are billed
and paid in US dollars and a significant portion of costs are billed and paid
in US dollars. Of the remaining costs, the majority are individually small,
unpredictable and incurred in various denominations and thus are not suitable
for cost effective hedging. By reference to 2002, it is estimated that for
every 10% incremental decline in the value of the US dollar against various
foreign currencies, the effect would be to reduce annual cash flows by $0.9
million in any given year.

As exchange rates are outside of the control of the Group, there can be no
assurance that such fluctuations will not adversely effect its results of
operations and financial condition.




Item 4  Controls and Procedures

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

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

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The Cronos Group




PART II  OTHER INFORMATION




Item 1  Legal Proceedings

Contrins $2.6 Million Claim. The Group manages containers for investment
entities sponsored by or affiliated with Contrin. Approximately 1% (measured
by TEUs) of the Groups fleet of containers is owned by Contrin. The Group is
in litigation with Contrin over funds that Contrin claims to have remitted to
Cronos for the purchase of containers. Contrin claims that in 1994 it
transmitted $2.6 million to Cronos for the purchase of containers. The Group
did not receive these funds and believes that the funds were diverted to an
account controlled by Mr. Palatin, and that this was known or should have been
known by Contrin.

On August 8, 2000, Contrin, through its affiliate, CWC, filed an action in
the Luxembourg District Court against the Company, seeking recovery of $2.6
million, together with interest and costs. On January 10, 2001, the Company
responded to CWCs complaint, (i) requesting that the District Court dismiss
the proceeding for lack of jurisdiction over the dispute, and (ii) denying
Contrins claims on the merits. Since January 10, 2001, the parties have
supplemented their pleadings and filed documentary evidence with the court to
respond to assertions made and evidence submitted by the other party. No date
has been set for a final hearing on CWCs claims against the Company.

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

In anticipation of the filing of Contrins claims against the Company in
Luxembourg, the Group, on June 1, 2000, filed a protective claim in the High
Court of Justice, London, England, against Mr. Palatin and his wife. By this
claim, the Group seeks to establish that the Palatins are liable to the Group
for any liability which the Group may have to Contrin arising out of the 1994
transfers. On March 29, 2001, the Group secured a freezing injunction from
the High Court of Justice in aid of its UK claim against the Palatins. By the
injunction, the Palatins are prohibited from selling, charging, or otherwise
disposing of their interest in the Amersham estate. The injunction also extends
to Klamath, the record owner of the estate.

The Palatins and Klamath contested the jurisdiction of the High Court of
Justice over them, or, in the alternative, requested that the court exercise
its discretion not to exercise jurisdiction over them. In support of their
application, the Palatins filed an affidavit with the court asserting that the
Amersham estate is owned by Pontino S.A., a Panamanian company, in which they
disclaim any interest. The Group opposed the applications of the Palatins and
Klamath. On December 22, 2002, the court rendered its decision rejecting the
defendants motion for dismissal and on February 26, 2003, the court rejected
the defendants motion for leave to appeal the courts decision, awarded the
Company 90% of its costs in opposing the motions, and ordered the defendants to
pay $30,000 on account of these costs. The defendants have failed to comply
with the courts order, and their counsel has resigned. The Group has sought
and secured a debarring order, preventing the defendants from defending the
action until they comply with the courts cost award.

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

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The Cronos Group

Contrins $0.5 Million Claim. On August 2, 2001, CWC filed a separate
claim against CNV in the High Court of Justice, London, England. By its claim,
CWC asserts that CNV, wrongfully and in violation of the container management
agreement between CWC and CNV, failed to distribute to CWC $0.5 million in
distributions for the second through fourth calendar quarters of 1996. CWC
seeks recovery of this sum, plus
interest. On December 31, 2001, CNV filed its defence to CWCs claim,
denying CWCs claims and denying that CNV is liable to the CWC in any amount.
The trial of CWCs claim is scheduled for December 8, 2003. Concurrently with
the filing of its defence to CWCs claims, CNV filed a separate claim against
the Palatins and Klamath, seeking recovery of $0.5 million from the Palatins
that CNV alleges was misappropriated from CNV by Mr. Palatin. On April 8,
2002, Klamath filed its application with the court seeking an order declaring
that the court has no jurisdiction over Klamath or, in the alternative, that it
should exercise its discretion not to assert jurisdiction over the Groups
claims against Klamath. The Palatins filed their application for dismissal
with the court on July 5, 2002, alleging that the court has no jurisdiction
over them. CNV opposed both applications, and both were heard by the court at
the same time as Klamaths and the Palatins challenge to the jurisdiction of
the UK court over them with respect to the Groups $2.6 million claim against
them, discussed above. The court, by its decision of December 22, 2002,
rejected the defendants jurisdictional challenge to CNVs claim. The
defendants in this action were also subject to the courts award of costs
rendered in the $2.6 million action, discussed above. They have failed to
comply with the order, and their counsel has likewise resigned from
representing them in this claim. On May 2, 2003, CNV secured a default
judgement against the Palatins in the amount of $0.5 million, plus interest of
$0.4 million. On July 8, 2003, CNV secured from the court a charging order in
respect of the default judgement against Mr. Palatins interest in the Amersham
estate.

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

CNV filed its defence to the Disposals Claim on December 13, 2002, denying
the substantive allegations of the claim and that the claimants are entitled to
the relief claimed or to any other relief. Trial of the Disposals Claim is
scheduled for October 6, 2003.

Collection of Palatin Notes

On May 8, 2001, the Massachusetts Superior Court entered its judgement
against Mr. Palatin and Klamath, affirming the default judgement secured on
February 8, 2000, in the New York State Supreme Court by a subsidiary of the
Company, Cronos Equipment (Bermuda) Limited (CEB) against Mr. Palatin in the
amount of $6.6 million. The court further ordered the Groups transfer agent
to cancel 1,793,798 outstanding common shares of the Company owned of record by
Klamath (the Klamath Shares), beneficially owned by Mr. Palatin, in partial
satisfaction of the New York State Supreme Court judgement, and to transfer the
Klamath Shares on the books and records of the transfer agent to CEB. The
Groups transfer agent promptly cancelled the Klamath Shares and issued a new
stock certificate for 1,793,798 common shares of the Company to CEB. (The
Group subsequently retired and cancelled these shares.) As of May 8, 2001, the
amount owed by Mr. Palatin to CEB under the New York judgement totalled $7.3
million, representing the amount of the judgement ($6.6 million) plus interest
thereon at 9% per annum. The Group reduced the amount owed by Mr. Palatin to
CEB under the judgement by $6 million as a result of the cancellation of the
Klamath Shares, leaving a balance due under the judgement of $1.3 million as of
May 8, 2001.

On November 23, 2001, CEB filed its claim against Mr. Palatin in the High
Court of Justice, London, England, for the purpose of collecting the remaining
balance due to CEB under the New York judgement. On May 23, 2003, the Court
entered summary judgement in CEBs favour and against Mr. Palatin in the amount
of $1.3 million, together with interest of $0.2 million. CEB intends to
enforce the judgement against Mr. Palatins interest in the Amersham estate.

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Item 2  Changes in Securities and Use of Proceeds

Not applicable




Item 3  Defaults Upon Senior Securities

Not applicable




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

The Company held its 2003 annual meeting of shareholders on June 5, 2003,
in Luxembourg. The record date of the meeting was fixed by the Board of
Directors of the Company at April 8, 2003. As of the record date, the Company
had outstanding 7,360,080 common shares. The holders of 6,629,080 common
shares of the Company were represented at the 2003 annual meeting of
shareholders in person or by proxy, thus constituting a quorum of the
shareholders for the meeting.

The following sets forth the proposals submitted to the shareholders and
the results of the shareholder voting on the matters at the annual meeting. The
election of the two nominees for director required the approval, in person or
by proxy, of the holders of a majority of the issued and outstanding common
shares of the Company; the balance of the proposals submitted to the
shareholders required the approval of the holders of a majority of the shares
present in person or represented by proxy, and voting, at the meeting.
Abstentions and broker non-votes were each excluded in the determination of the
number of shares present and voting.

Proposal No. 1. The election of two directors, Maurice Taylor and Charles
Tharp, to serve three-year terms expiring in 2006.

|               |  |                    |  |       |           |  |  | 
|-------------- |  | ------------------ |  | ----- | --------- |  |  | 
|Nominee        |  | Vote               |  | Count
|               |  |                    |  |      
|Maurice Taylor |  | For                |  |       | 6,609,230 | 
|               |  | Authority Withheld |  |       | 19,850    | 
|Charles Tharp  |  | For                |  |       | 6,609,230 | 
|               |  | Authority Withheld |  |       | 19,850    | 

Each of managements two nominees for director was elected to the Board to
serve three-year terms expiring at the conclusion of the annual shareholders
meeting held for 2006.

Proposal No. 2. The approval of an amendment to the Companys
Non-Employee Directors Equity Plan (the Plan) to (a) extend the term of the
Plan to the close of business on the date of the annual shareholders meeting
held in 2006, and (b) reserve for issuance upon exercise of directors options
and settlement of directors stock units granted under the Plan an additional
325,000 authorized but unissued common shares of the Company.

|                 |  |       |           | 
|---------------- |  | ----- | --------- | 
|Vote             |  | Count
|                 |  |      
|For              |  |       | 1,467,855 | 
|Against          |  |       | 1,569,601 | 
|Abstain          |  |       | 15,050    | 
|Broker Non-Votes |  |       | 3,576,574 | 

Because Proposal No. 2 required the approval of the holders of a majority
of the shares present in person or represented by proxy at the meeting, and
voting, Proposal No. 2 was not approved.

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Proposal No. 3. The approval of an extension, from December 12, 2003, to
December 3, 2004, of the grant of authority to the Board of Directors to
implement a common share repurchase program and for an expansion of the
authority of the Board to authorize common share repurchases both in the open
market and through privately-negotiated transactions.

|                 |  |       |           | 
|---------------- |  | ----- | --------- | 
|Vote             |  | Count
|                 |  |      
|For              |  |       | 3,035,156 | 
|Against          |  |       | 3,300     | 
|Abstain          |  |       | 14,050    | 
|Broker Non-Votes |  |       | 3,576,574 | 

Proposal No. 3 submitted to the shareholders by management was approved.

Proposal No. 4. The approval of the declaration of a dividend of two (2)
cents per common share for the second calendar quarter of 2003, payable July
15, 2003 to shareholders of record as of the close of business on June 26,
2003.

|                 |  |       |           | 
|---------------- |  | ----- | --------- | 
|Vote             |  | Count
|                 |  |      
|For              |  |       | 6,612,030 | 
|Against          |  |       | 3,000     | 
|Abstain          |  |       | 14,050    | 
|Broker Non-Votes |  |       | 0         | 

Proposal No. 4 submitted to the shareholders by management was approved.

Proposal No. 5. The approval of the Companys appointment of Deloitte &
Touche S.A. as the Companys independent auditors for the year ending December
31, 2003, for both the consolidated and unconsolidated accounts and the grant
of authorization to the Board to fix the compensation of the independent
auditors.

|                 |  |       |           | 
|---------------- |  | ----- | --------- | 
|Vote             |  | Count
|                 |  |      
|For              |  |       | 6,627,280 | 
|Against          |  |       | 1,650     | 
|Abstain          |  |       | 150       | 
|Broker Non-Votes |  |       | 0         | 

Proposal No. 5 submitted to the shareholders by management was approved.

Proposal No. 6. The approval of the consolidated and unconsolidated
financial statements of the Company for the year ended December 31, 2002, and
the reports of the Companys Board and of the independent auditors thereon.

|                 |  |       |           | 
|---------------- |  | ----- | --------- | 
|Vote             |  | Count
|                 |  |      
|For              |  |       | 6,611,630 | 
|Against          |  |       | 3,300     | 
|Abstain          |  |       | 14,150    | 
|Broker Non-Votes |  |       | 0         | 

Proposal No. 6 submitted to the shareholders by management was approved.

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The Cronos Group

Proposal No. 7. The discharge of Dennis J Tietz, Peter J Younger, Maurice
Taylor, Charles Tharp, S Nicholas Walker, and Robert M Melzer, pursuant to
Article 74 of the Luxembourg Companies Law, from the execution of their mandate
as directors of the Company for the year ended December 31, 2002.

|                 |  |       |           | 
|---------------- |  | ----- | --------- | 
|Vote             |  | Count
|                 |  |      
|For              |  |       | 6,604,180 | 
|Against          |  |       | 24,750    | 
|Abstain          |  |       | 150       | 
|Broker Non-Votes |  |       | 0         | 

Proposal No. 7 submitted to the shareholders by management was approved.

Proposal No. 8. The approval of the allocation of the profit/loss
reported by the Company for the year ended December 31, 2002.

|                 |  |       |           | 
|---------------- |  | ----- | --------- | 
|Vote             |  | Count
|                 |  |      
|For              |  |       | 6,610,730 | 
|Against          |  |       | 3,300     | 
|Abstain          |  |       | 15,050    | 
|Broker Non-Votes |  |       | 0         | 

Proposal No. 8 submitted to the shareholders by management was approved.




Item 5  Other Information

Not applicable




Item 6  Exhibits and Reports on Form 8-K

| |  |      |  |                            
| |  | ---- |  | ---------------------------
| |  | (a)  |  | Exhibits                   
| |  |      |  |                            
| |  | 31.1 |  | Rule 13a-14 Certification  
| |  |      |  |                            
| |  | 31.2 |  | Rule 13a-14 Certification  
| |  |      |  |                            
| |  | 32   |  | Section 1350 Certifications
| |  |      |  |                            
| |  | (b)  |  | Reports on Form 8-K        

Not applicable

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The Cronos Group

Signatures

Pursuant to the requirements 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.

THE CRONOS GROUP

|          |  |                                     |  |                                                                                                                                      |  |                
|--------- |  | ----------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------ |  | ---------------
|SIGNATURE |  | TITLE                               |  | DATE                                                                                                                                
|          |  |                                     |  |                                                                                                                                     
|By        |  | /s/ PETER J YOUNGER
Peter J Younger |  | Director, Chief Operating Officer,
Chief Financial Officer and
Chief Accounting Officer
(Principal Financial and Accounting Officer) |  | August 12, 2003

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Exhibit Index

|       |  |                              |  |      |    | 
|------ |  | ---------------------------- |  | ---- | -- | 
|Number |  | Exhibit                      |  | Page
|       |  |                              |  |     
|31.1   |  | Rule 13a-14 Certification    |  |      | 28 | 
|       |  |                              |  |      |    | 
|31.2   |  | Rule 13a-14 Certification    |  |      | 29 | 
|       |  |                              |  |      |    | 
|32     |  | Section 1350 Certifications* |  |      | 30 | 



---

|* |  | This certification, required by Section 906 of the Sarbanes-Oxley Act of 2002, other than as required by
Section 906, is not deemed to be filed with the Commission or subject to the rules and regulations promulgated
by the Commission under the Securities Exchange Act of 1934, as amended, or to the liabilities of Section 18 of
said Act.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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