Document:

Exhibit 10.1

                      CP SHIPS LIMITED 2002 ANNUAL REPORT

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Photograph of containership in open water

                                                                CP SHIPS

                                                                    2002
                                                           ANNUAL REPORT

                                                OUR BUSINESS IS
                                             CONTAINER SHIPPING

<PAGE>

============================== CP SHIPS LIMITED ==============================

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Profitability Chart - showing the Company's unaudited profitability on an
                                            ---------
annual basis beginning from its financial year ended 1993 through the
financial year ended 2002. There are 3 measures within this chart: Operating
Income(1) and EBITDA(2).

(1)  Before exceptional items

(2)  Earnings before interest, tax, depreciation, amortization,
     exceptional items, goodwill charges and minority interest

    *Converted from Canadian dollars at average rates

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Cost Per TEU ("Twenty Foot Equivalent Unit") - showing the Company's unaudited
                                                                     ---------
cost per TEU on an annual basis, from their financial year ended 1996 through
the financial year ended 2002. Cost per teu is total cost divided by volume in
teu. Total cost is after deduction of slot charter revenue and excludes gains
and losses on disposal of capital assets and from currency exchange. There is
a 15% rate of decrease depicted between the years 1996 and 2001 and a 5% rate
of decrease between the years 2001 and 2002.

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Share Price History - 2002 - showing the Company's share price unaudited for
                                                               ---------
the calendar year ended 2002, beginning with a $10.86 share price on January 1,
2002 and ending with a share price of $13.58 on December 31, 2002. Along the
graphic there is mention of the Company's issuance of 9.6 million common shares
at $9.93 per common share in July 2002.

ABOUT CP SHIPS

One of the world's leading container shipping companies, CP Ships provides
international container transportation services in four key regional markets:
TransAtlantic, Australasia, Latin America and Asia. Within these markets CP
Ships operates 35 services in 22 trade lanes, most of which are served by two
or more of its seven readily recognized brands: ANZDL, Canada Maritime, Cast,
Contship Containerlines, Italia Line, Lykes Lines and TMM Lines. In a majority
of its core trade lanes, CP Ships is the leading carrier. As of 31st December
2002, CP Ships had a fleet of 89 ships and 413,000 teu in containers. Its
annual volume is 2 million teu, more than 80% of which is North American
exports or imports. It also owns Montreal Gateway Terminals, which operates
one of the largest marine container terminal facilities in Canada. CP Ships'
stock is traded on the Toronto and New York stock exchanges under the symbol
TEU and it is in the S&P/TSX 60 Index of top Canadian publicly listed
companies. CP Ships employs 4,400 staff.

For further information visit the CP Ships website, www.cpships.com.

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================================== Contents ==================================

  1 / we focus on what we do best              12-13 / we can navigate upstream
   2-3 / we manage international                    14-15 / our leadership
        transport networks                              is world-class
      4-5 / we have the tools                  16 / our chariman's letter
 6-7 / our brands drive the business              17-20 / our chief executive
     8-9 / we run a tight ship                          officer's letter
                                                     21 / financial report

==================================== 2002 ====================================

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     about our flag
     Our 2002 Annual Report marks the revival of the famous CP Ships red and
     white checkered flag as our corporate symbol for the first time since
     1968. Originally introduced in 1891, the flag's bold pattern was meant
     to stand out from other house flags of the day and to be readily
     recognizable whether or not the wind was blowing. Its timeless design
     means that, with just minor updating, the flag remains a fitting symbol
     for a modern-day transportation leader.

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CP SHIPS ANNUAL REPORT  /  OUR BUSINESS IS CONTAINER SHIPPING

WE FOCUS ON WHAT
WE DO BEST

Our proven six-point strategy focuses on what we do best. It is unique in the
container shipping industry. Others may employ one or more of the elements,
but none combines them all. Which is what sets us apart from the rest. And
which has helped CP Ships become a market leader in an industry that has grown
at a compound annual rate of 8.5% over the past 20 years, more than twice the
rate of world GDP growth. Most important, every point in our strategy comes
under continuous review.

Part of the challenge is to have the right strategy, the rest is to be able to
respond quickly to significant changes in market conditions. In other words...
be nimble.

                1. Concentration on container shipping - We specialize
                   in the business we know best.

                2. Focus on regional markets - We have built strong
                   regional positions so we can offer the best services
                   and maximize trade lane economies of scale.

                3. Pursue selective acquisitions - We have executed and
                   integrated successfully ten transactions since 1993.
                   In a fragmented industry under economic pressure,
                   further acquisitions are likely.

                4. Enhance strong brands - We serve nearly all our trade
                   lanes with two or more of our well known brands.
                   Which we see as the best way to build market share
                   and customer loyalty.

                5. Provide supply chain solutions - We emphasize
                   consistently reliable tailor-made solutions to strengthen
                   customer relationships and protect
                   operating margins.

                6. Reduce costs and innovate the product - We know how to cut
                   costs and still provide top quality service.

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Drawings of CP Ships flags

    key facts        VOLUME                        2 million teu

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                                      1
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 acquisitions        our acquisitions              Our networks have grown with
                                                   each acquisition:

    key facts        REVENUE                       $2.69 billion

                                                 plant or warehouse...

                                                             truck...

                                                         ship...

                                                         rail...

                                                      terminal...

                                      2
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Canada Maritime-43%         Contship Containerlines         TMM Lines-remaining
minority 1993               1997                            50% 2000
Cast 1995                   Ivaran Lines 1998               CCAL 2000
Lykes Lines 1997            ANZDL 1998                      Italia Line 2002
                            TMM Lines-50/50 joint
                            venture 1999

CP SHIPS 2002 ANNUAL REPORT  /  OUR BUSINESS IS CONTAINER SHIPPING

WE MANAGE INTERNATIONAL
TRANSPORT NETWORKS

Over the past 40 years, container shipping has been the facilitator of the
huge expansion of international trade, has helped redefine global sourcing and
manufacturing and dramatically expanded consumer choice at minimal cost to the
consumer. Today, container shipping tonnage is 40 times greater than air
freight.

Container shipping has become a key driver of today's just-in-time,
low-inventory strategy used by the world's major manufacturers and retailers,
a strategy that could not be realized without efficient, easy-to-use and
low-cost door-to-door international transportation systems.

We manage such systems. They move a broad spectrum of cargo through a network
of closely coordinated ocean and inland transportation links across global
trade lanes.

Our ship schedules are preset for fixed days of the week. Inland
service partners, rail, truck and barge specialists, who have worked closely
with us for years, coordinate their schedules with arrivals and departures of
our ships. CP Ships takes responsibility for the entire door-to-door movement,
offering competitive pricing across the intermodal chain.

Dedicated staff control the ocean and inland journeys of thousands of
containers on any given day. They depend on integrated information systems to
efficiently document, invoice and track cargo movements which, added to strong
personal relationships, ensures that customer expectations are met.

Because of its efficiency, reliability and speed, the door-to-door
containerized transportation system has become the principal way to move
exports and imports around the world.

                                      3
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      markets

    key facts        TRADE LANES                   22, of which 14 are core

<TABLE>
<CAPTION>

our markets in 2002                                  TransAtlantic Australasia Latin America  Asia     Other
<S>                                                  <C>           <C>         <C>            <C>      <C>
                                  Volume             52%           16%         9%             21%      2%
                                  Services           12            6           8              7        2
                                  Brands             6             3           4              3        2
</TABLE>

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Graphic of the global map of the world depicting the Company's shipping routes/
trading lanes and service frequency. Service frequency is shown by the
thickness of the line and it is clear from the graphic that the "TransAtlantic"
line is the thickest.

WE HAVE THE
TOOLS

We have all the tools to keep the transportation system running smoothly and
profitably.

Our marketing network is extensive and our people tightly focused,
with broad coverage in our trade lanes where we can build and maintain market
share, create economies of scale and make full use of our physical assets and
organization.

Our customer base is diverse and large, over 30,000. The top ten
customers represent only 7% of total sales revenue. From auto parts to wine,
from toys to pharmaceuticals, the commodities we transport are equally
broad-based, without undue dependence on any one sector.

Year after year, we are consistently profitable. By focusing on ship network
management and broad

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CP SHIPS 2002 ANNUAL REPORT  /  OUR BUSINESS IS CONTAINER SHIPPING

cost control, we operate from a low-cost platform always working at making
fixed costs variable by adjusting our ship networks to changes in demand to
maximize asset utilization.

We have a strong balance sheet, efficient capital structure and strong cash
flow even in weak market conditions. With the completion of our four-year $800
million ship replacement program later this year, there will be less need for
significant spend on ships for many years. Therefore our free cash flow will be
available to develop the business.

With the completion of our ship replacement program, the average age of our
owned fleet will be just seven years. And we will be less dependent on the
charter market to source the right ships for our specialized trades. Yet we
will still have the flexibility to increase or decrease the size of our fleet
to meet changing market conditions.

Bringing all the pieces together is an experienced management team and expert
staff. Training is a priority so that staff can keep their professional skills
up to date and learn new skills.

                                      5
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<TABLE>
<CAPTION>
<S>                  <C>         <C>          <C>          <C>          <C>            <C>                 <C>
       brands        ANZDL       CANADA       CAST         contship     Italia         Lykes Lines         TMMLINES
                     Making      MARITIME     THE          CONTAINER-   DI
                     Shipping                 PEOPLE,      LINES        NAVIA-         [GRAPHIC OMITTED]
                     Easy                     THE                       GAZIONE
                                              SYSTEMS,                  - SO-
                                              THE                       CIETA
                                              DIFFERENCE.               PER
                                                                        AZIONI
</TABLE>

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Graphics of the Company's seven (7) different brand name logos.

    key facts        EMPLOYEES                     4,400 people

No container shipping company has as many successful brands as CP Ships.
Nearly all of our 22 trade lanes are served by two or more of our seven
brands. In the majority of our core trade lanes our brands are market leaders.

Our brands are powerful because of their strength in customer relations,
reliable service products, quick response to problem solving and competitive
market positions.

                                      6
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CP SHIPS 2002 ANNUAL REPORT  /  OUR BUSINESS IS CONTAINER SHIPPING

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Photograph of an Italia customer service representative

OUR BRANDS DRIVE THE BUSINESS

What do we look for when we acquire a business? It has to fit our model. A
typical CP Ships acquisition offers solid earnings potential and has a sound
market position with strong customer relationships. It must be a good
geographic fit and offer the potential for trade lane economies of scale. It
must reinforce our regional leadership and create new opportunities for
growth. The acquisition of Italia Line in August 2002 was a classic CP Ships
transaction.

We believe keeping the brand is most often the best way to retain business
after an acquisition. And so, we nurture our brands by investing in them. We
review their business processes, systems, operations and marketing and
reinvigorate their image. All acquisitions are stronger since becoming part of
CP Ships.

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<PAGE>

                             ENVIRONMENT & SAFETY

We had no major environmental incidents in 2002. Our management committee for
environment draws on the group's wealth of expertise in deep sea, inland
transportation and marine terminal management to set our environmental agenda.
In 2002 we made solid progress towards our goal to have all ships in our owned
fleet coated with tin-free anti-fouling paint and accredited to the ISO 14001
environmental standard. Montreal Gateway Terminals is well along in its ISO
14001 accreditation process and two of the four ship management specialists
who manage our fleet are now also accredited to ISO 14001, with the other two
working towards accreditation. We are in the process of phasing out older
refrigerated containers that are less environmentally friendly than newer
models. And, we continue to emphasize training and drills to keep our
knowledge current and our incident response rapid.

                                   SECURITY

We have always taken security seriously. Our management committee for security
includes experts from marine and land-based operations, sales and customer
service, cargo documentation, systems, communications and regional management.
Our main priorities in 2002 were to ensure compliance with Customs-Trade
Partnership Against Terrorism (C-TPAT) in the US, Partners in Protection (PIP)
in Canada and the US Customs 24-Hour Advance Notification Rule. As these
programs and others develop, CP Ships will make compliance a top priority. We
also continue to work closely with the US government through the World
Shipping Council, the liner industry's US representative, and with other
governments to make the global supply chain system more secure and to keep
world trade moving freely.

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WE RUN A TIGHT SHIP

                             CORPORATE GOVERNANCE

We give priority to good corporate governance. Controls and procedures have
been implemented to address risks we face and they are periodically reviewed
by the Board and its committees. We now comply with the proposed NYSE listing
requirements because they reflect good governance, even though we are not
required to do so as a Canadian listed public company. We have also had from
the outset an insider trading policy, a disclosure policy and a code of
ethical business conduct reflecting up-to-date governance standards. As well,
membership of each of our three Board committees: Audit, Compensation and
Corporate Governance, consists of only independent directors.

                               TAKING OUT COSTS

Cost cutting is our watchword. We don't wait for downturns to identify
opportunities for cost cutting. We work at it all the time. In 2002 we
realized over $100 million in actual cost savings. Between 1996 and 2001 we
drove down our unit cost by 15% and a further 5% in 2002.

                          ALIGNED WITH SHAREHOLDERS

Our top 85 managers own 1.7% of the company's stock
and hold options over 1.3%, tying their long-term compensation to the interests
of our shareholders. Plus, our Employee Share Purchase Plan and annual cash
bonus based on profitability motivate all staff to maximize shareholder value.

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       symbol

    key facts        fleet           89 ships      192,000 teu capacity

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Photograph of a freight train pulling double-stacked containers.

                                      10
<PAGE>
our stock symbol

TEU, our stock symbol, stands for "twenty-foot equivalent unit," the standard
measure of container size and the container shipping industry's way of
measuring ship capacity and volume carried.

CP SHIPS 2002 ANNUAL REPORT  /  OUR BUSINESS IS CONTAINER SHIPPING

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Photograph of containership "Canmar Honour" in port

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<PAGE>

WE CAN NAVIGATE
UPSTREAM

Although a high growth business, container shipping is cyclical, the cycles
driven by changes between supply of capacity and demand for container
transport.

CP Ships' strategy is all about managing through the cycle: to earn superior
returns at the top and to continue to be profitable while outperforming the
industry even at the bottom.

Our business model of providing regionally-focused services from a low cost
platform gives us flexibility to adapt quickly and selectively to changes in
market conditions, giving us a powerful advantage at the bottom of the cycle
and in volatile political and economic environments.

We are willing, and able, to meet tough times with tough decisions. We adjust
capacity when demand falls. We restructure trade lanes to improve their rate
of return or exit completely if the outlook is poor. And we reshape our
organization when necessary.

With the container shipping cycle at one of its lowest points in history, it
has been a time to make tough decisions. For example, we decided to exit the
unprofitable Asia-Europe trade. At the same time, we also strengthened our
balance sheet and increased liquidity.

So we are well positioned to take advantage of the upturn when it comes.

RETURN ON CAPITAL EMPLOYED %
(unaudited)

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Chart Graph of Return on Capital Employed ("ROCE") Percentage (unaudited) -
                                                               ---------
depicts a bar chart with 2 lines (first line for CP Ships ROCE and the second
line for industry average ROCE, the latter being a simple average of carriers
in the top 20 that publish sufficient financial data) per financial year
beginning in the year ended 1998 through the year ended 2002.

================================ performance =================================

                      CP SHIPS OUTPERFORMS THE INDUSTRY

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                                      12
<PAGE>
================================ performance =================================

                            TRACK RECORD OF GROWTH

                               LAST 10 YEARS...

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                 ---------------------------------------------------
                      Ship fleet increased from 7 to 89
                 ---------------------------------------------------

                   ------------------------------------------
                         Port calls up from 12 to 146
                   ------------------------------------------

                  --------------------------------------------------
                              Brands from 1 to 7
                  --------------------------------------------------

                 ---------------------------------------------------
                             Revenue CAGR of 26%
                 ---------------------------------------------------

                      ----------------------------------
                                Volume CAGR of 29%
                      -----------------------------------

                        ---------------------------------
                           EBITDA more than tripled
                        ---------------------------------

================================ performance =================================

                                WE ARE NIMBLE

                                  IN 2002...
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           -----------------------------------------------------------
             Negotiated more than 20 ship charters at lower rates
           -----------------------------------------------------------

           ------------------------------------------------------------
                    Made over 26 ship network improvements
           -----------------------------------------------------------

           ------------------------------------------------------------
                     Cut costs by more than $100 million
           -----------------------------------------------------------

           -------------------------------------------------------------
            Minimized impact of major US West Coast labour dispute
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          --------------------------------------------------------------
                            Integrated Italia Line
          --------------------------------------------------------------

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<PAGE>

OUR LEADERSHIP IS
WORLD-CLASS

CP Ships' Board of Directors consists of six independent and three executive
directors. All of the independent directors have extensive public company
experience with a record of leadership in their fields.

a. Viscount Weir, Chairman, is also Chairman of Balfour Beatty, one of the
   -------------
UK's largest construction companies, where he has been a Director since 1977.
He was Chairman of the Weir Group, a UK-based mechanical engineering group,
from 1983 to 1999. He is also a Director of St James's Place Capital and
Canadian Pacific Railway. Formerly, he was a Director of the Bank of England,
British Steel and Canadian Pacific Limited. He is Chairman of the Compensation
Committee and a member of the Audit and Corporate Governance Committees.

b. John Bowmer is Chairman of Adecco of Switzerland, the world's largest
   -----------
international staffing and recruitment company where he was Chief Executive
Officer from 1996 to 2002 and Chief Executive Officer of its predecessor,
Adia, since 1993. He has served in a variety of executive positions in the UK,
Asia, Australia and the US since he joined Adia in 1987. He is a member of the
Audit, Corporate Governance and Compensation Committees.

c. Robert Clanin is Chairman of Overseas Partners, a Bermuda reinsurance
   -------------
company, a Director of Caraustar Industries, which produces recycled packaging
and of John H Harland, a financial services company. He was Chief Financial
Officer of United Parcel Service, the US-based international parcel delivery
and logistics company, from 1994 to 2001, having joined the company in 1971.
He oversaw what was at the time the largest ever initial public offering of
stock in the US. He is a member of the Audit, Corporate Governance and
Compensation Committees.

d. Peter Dey was Chairman of Morgan Stanley Canada from 1998 until 2001 and
   ---------
President from 1994. From 1985 to 1994 he was a partner in the Canadian law
firm Osler, Hoskin & Harcourt which he first joined in 1969 and to which he
returned as a partner in 2001. He was Chairman of the Ontario

                                      14
<PAGE>

Securities Commission from 1983 to 1985 and was responsible for the Dey Report
on corporate governance in Canada. He is Chairman of the Corporate Governance
Committee and a member of the Audit and Compensation Committees.

e. Frank Halliwell* was appointed Chief Operating Officer of CP Ships in 2001,
   ---------------
having been Executive Vice President since 1995. He has filled a number of
senior roles in the CP Ships group since joining Canada Maritime as Commercial
Director in 1991. He entered the container shipping industry in 1971.

f. John McNeil was Chairman and Chief Executive Officer of Sun Life Assurance
   -----------
Company of Canada from 1988 to 1998 and Chairman until 1999, having originally
joined the company in 1956. He is a Director of Sun Life Financial Services of
Canada and Sun Life Assurance Company of Canada. He serves as Chairman of
Fairmont Hotels and Resorts having been Director of its former parent company,
Canadian Pacific Limited from 1992 to 2001. He is also a Director of Shell
Canada, Hampton Re Holdings and DWL (USA). He is Chairman of the Audit
Committee and a member of the Compensation and Corporate Governance
Committees.

g. Ray Miles* joined CP Ships in 1988 as Chief Executive Officer. He has
   ---------
worked in the shipping industry since 1972. He is a non-executive Director of
the West of England P&I Club, Chairman of the World Shipping Council, the
liner industry's US representative organization and a trustee of the National
Maritime Museums at both Greenwich, London and Falmouth, Cornwall.

h. Nigel Rich is Chairman of Exel, the global logistics business. He is also
   ----------
Chairman of the Hamptons Group, a real estate services company, and a Director
of television company Granada and Pacific Assets Trust. He spent 20 years with
the Jardine Matheson group in Asia and was its Chief Executive from 1989 to
1994. He is a member of the Audit, Compensation and Corporate Governance
Committees.

i. Ian Webber,* a UK Chartered Accountant, was appointed Chief Financial
   ---------
Officer in 1996 after 17 years with PricewaterhouseCoopers, the last five as
an audit partner.

* Executive Director

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Photograph of Company's Board of Directors

                                      15
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                               CP SHIPS LIMITED
                                       ~
                   62-65 Trafalgar Square, London WC2N 5DY
                                United Kingdom

                                                      From Lord Weir, Chairman
                                                           ---------

DEAR SHAREHOLDERS:

In 2002, we marked the successful completion of CP Ships' first full calendar
year as a publicly traded company.

We also experienced a year that will be recorded as one of the lowest points
the container shipping cycle has ever seen, and one where financial markets
were in turmoil.

Yet, despite most unfavourable container shipping and financial market
conditions, CP Ships confirmed its track record of facing adversity head on,
turning in good results and building shareholder value. On 31st December 2002,
CP Ships' share price closed 25% higher than a year before and 90% higher than
the first day of regular trading on 3rd October 2001.

More importantly, we met financial market expectations and lived up to our
responsibilities to our investors by following through on our strategy to
outperform the industry.

Strong corporate governance has been our hallmark from the start. We foster an
atmosphere of openness at Board and Committee meetings and encourage full
debate and discussion of issues. Two-thirds of our Board members are
experienced, effective and independent non-executive directors. As a
relatively new public company, our corporate governance policies and processes
are up to date, reflecting current best practice.

Because of this strong foundation, only relatively minor adjustments have been
needed to bring CP Ships into compliance with Sarbanes-Oxley in the US and the
proposed New York Stock Exchange listing requirements. Similarly, we
anticipate little change to comply with corporate governance reforms being
considered in Canada.

After 18 months as a listed company, CP Ships has proved itself equal to the
challenge. We are committed to achieving no less than this as we go forward.

/s/
Lord Weir                          CP SHIPS
Chairman

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Photograph of Lord Weir

                                      16
<PAGE>

                              [GRAPHIC OMITTED]

                               CP SHIPS LIMITED
                                       ~
                    62-65 Trafalgar Square, London WC2N 5DY
                                United Kingdom

                                       From Ray Miles, Chief Executive Officer
                                            ---------

A YEAR OF ACHIEVEMENT...AND CHALLENGE

CP Ships delivered a strong finish for 2002, recovering steadily through the
year during one of the worst industry downturns ever at a time when many of
our major competitors were reporting heavy losses.

After posting in the first quarter our first quarterly loss in a decade,
operating income before exceptional items of $83 million for the full year was
satisfactory. Though lower than $139 million in 2001, it exceeded our
expectations amidst difficult trade and economic conditions.

Return on average capital employed was 6% compared with 13% in 2001, even
though we drove our unit cost down by 5%.

Achievements - Despite difficult conditions, the year was one of achievement,
which helped us progress our core strategies and continue to outperform
industry peers.

In July, CP Ships successfully raised capital in both the equity and public
debt markets, in spite of a severe loss of investor confidence following
revelations of financial scandals in several listed companies. The issue of
9.6 million common shares for $96 million and ten-year unsecured notes for
$195 million enabled us to strengthen our balance sheet and achieve greater
financial flexibility and additional liquidity for future growth.

In August, Italia Line became our seventh brand. It was a classic CP Ships
acquisition, one that fits well with our strategy to reinforce our regional
leadership, build trade lane economies and create new opportunities for
growth. Since becoming part of the group, Italia Line's services have been
expanded and it has become modestly profitable.

In June, Lykes Ranger, the first of ten new containerships being built under
our four-year, $800 million fleet renewal program, was delivered on schedule.
By the end of the year, five successive new containerships joined

                                   CP SHIPS

[GRAPHIC OMITTED]
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Photograph of Ray Miles

                                      17
<PAGE>

                              [GRAPHIC OMITTED]

                               CP SHIPS LIMITED
                                      ~
                    62-65 Trafalgar Square, London WC2N 5DY
                                United Kingdom

the fleet, following 12 used ships in 2000 and 2001. With the investment
program now nearly complete, we are close to achieving a more desirable fleet
composition of about two-thirds owned. We consider that, over the long term,
ownership gives a lower and less volatile cost and also delivers the right
ships for our more specialized trades.

During the course of the year, we made good progress on our program to reduce
the number of legacy information systems inherited with acquisitions. In 2002
we phased out two of these systems. Further rationalization is expected in
2003.

Countering Tough Market Conditions - Throughout the year, we took steps to
reduce operating costs and counter the effects of strong competition and
excess capacity in key trade lanes.

In April, Lykes Lines and TMM Lines joined their partners in the Grand
Alliance and three other lines to withdraw one weekly string of five 2000 teu
containerships. This has improved our capacity utilization and helped reverse
a steady decline in TransAtlantic freight rates that began in early 2001.

In December, we furthered the development of TransAtlantic efficiencies when
Canada Maritime, in cooperation with its partner in the Montreal Gateway
trade, agreed to charter a fixed number of container slots to members of the
competing Canex consortium. The agreement, which started in the first quarter
2003, enables Canada Maritime to maximize capacity utilization as its larger
new ships are introduced later this year. In addition, Canex is also moving
its existing service to our Montreal Gateway Terminals.

In October, we launched an extensive restructuring of our services in the
Europe and US East Coast to Australasia trade lane in cooperation with five
other carriers. As a result, Contship Containerlines has upgraded its services
and lowered its costs. Three new owned containerships specially equipped to
accommodate a large percentage of refrigerated containers have joined this new
network.

                                   CP SHIPS

                                      18
<PAGE>

                              [GRAPHIC OMITTED]

                               CP SHIPS LIMITED
                                      ~
                    62-65 Trafalgar Square, London WC2N 5DY
                                United Kingdom

Also in December, we announced that we would withdraw from our slot charter
agreement in the Asia-Europe trade, effective March 2003. After nearly two
years in Asia-Europe it became clear that being a relatively small newcomer in
a large, highly competitive market and doing so using a ship network which we
did not control was not a profitable long-term business model. After reviewing
other options for continuing to serve Asia-Europe, we concluded that despite
recent improvement in market conditions, the outlook is not strong enough to
justify our presence in these trades at this time.

However, in one of our Asian markets we added a new weekly Asia-Vancouver
service to our existing two TransPacific weekly services.

We reorganized all three Indian services during the year. We added West Africa
on a second loop to our Europe-East Coast South America service in October. We
expanded our Mediterranean-Gulf service in April. We added a new partner to
our US West Coast-Australasia service to improve capacity utilization. In
nearly all trades, we are responding to often quickly changing market
conditions to adjust capacity, lower costs and improve services. Having the
right strategy is clearly important, but being nimble with a management able
to react positively is just as important.

Challenges - In addition to difficult market conditions, the year brought
special challenges.

Following the terrorist attacks of September 11, 2001, government efforts in
the US, Canada and around the world are producing a wide range of regulations
and initiatives to improve supply chain security. CP Ships and the container
shipping industry in general strongly support these initiatives. We were among
the first to be accepted into the US Customs-Trade Partnership Against
Terrorism and sign up to Canada's Partners in Protection. We comply with US
Customs' 24-Hour Advance Notification Rule, which required significant change
to the industry's cargo acceptance and documentation procedures. And, through
the World Shipping Council, the industry's representative in Washington, we
are working closely with the US government to reach workable solutions for
securing the container shipment process without threatening the free flow of
foreign commerce. We are also

                                   CP SHIPS

                                      19
<PAGE>

                              [GRAPHIC OMITTED]

                               CP SHIPS LIMITED
                                      ~
                    62-65 Trafalgar Square, London WC2N 5DY
                                United Kingdom

closely monitoring security efforts under consideration in other countries and
by the International Maritime Organization so that we will be able to comply
promptly as these measures come into effect.

CP Ships fared relatively well compared to many other carriers during the
labour dispute on the US West Coast beginning in September. US West Coast
ports represent only 9% of our annual throughput. And, many of our Pacific
Coast services call at Vancouver and ports in Mexico, which were not affected
by work stoppages. There were some lost voyages and increased costs due to the
need to reposition ships and containers, but the net financial effect was less
than $2 million. Our US West Coast operations have returned to normal.

It was indeed an eventful year for CP Ships. In our first full year as a
listed company with increased scrutiny of public companies, growing security
concerns, a major capital raise and an acquisition, amidst a severe market
downturn and significant ship network changes, our staff performed well beyond
the call of duty. I thank everyone for their high level of effort and support.
This has resulted in a company that is stronger today than it was a year ago.

No doubt the current year will bring its competitive and economic challenges.
But we face the next upturn in the industry cycle with confidence and expect
to increase profits over last year.

/s/
Ray Miles
Chief Executive Officer

                                   CP SHIPS

                                      20
<PAGE>

============================== Financial Report ==============================

                                   CONTENTS

                    22  Management's Discussion and Analysis

                    30  Ten-Year Comparison

                    30  Quarterly Freight Rate Changes 2002 and 2001

                    31  Quarterly Results 2002 and 2001

                    32  Management's Responsibility for Financial Reporting

                    33  Auditors' Report

                    34  Consolidated Statements of Income

                    34  Consolidated Statements of Retained Earnings

                    35  Consolidated Balance Sheets

                    36  Consolidated Statements ofCash Flow

                    37  Notes to the Consolidated Financial Statements

                    52  Shareholder Information

==================================== 2002 ====================================

                                      21
<PAGE>

==================== Management's Discussion and Analysis ====================

Management's
Discussion and Analysis

Overview

CP Ships remained profitable in 2002 despite one of the worst downturns in
container shipping industry history.

Operating income before exceptional items was $83 million compared with $139
million in 2001. Significantly greater losses in the Asia-Europe trades and
weaker operating results in the TransAtlantic and Latin American markets
depressed overall performance for the year.

OPERATING INCOME BY MARKET

                              [GRAPHIC OMITTED]

(Narrative of Embedded Graphic)

Operating Income by Market (in $ Millions) - Bar graph for years 2001 and 2002
with the following bar lines: Transatlantic, Australia, Latin America, Asia,
and Other. Chart contemplates figures before exceptional items and goodwill
charges.

EBITDA for 2002 at $176 million was down from $213 million in 2001. Net income
was $52 million compared to $69 million in 2001.

($ millions)                       2002              2001
                                   ----              ----

Volume (teu 000s)                  2,008             1,842
Revenue                            2,687             2,646
Expenses                           2,604             2,507
EBITDA(1)                            176               213
Operating income(2)                   83               139
Net income                            52                69(3)

(1)  Earnings before interest, tax, depreciation, amortization, exceptional
     items, goodwill charges and minority interest
(2)  Before exceptional items
(3)  As revised. See note 2 of consolidated financial statements

Basic earnings per share was $0.61 in 2002 versus $0.83 for 2001 and before
exceptional items and goodwill was $0.59 for 2002 compared with $1.58.

In August 2002, the acquisition of Italia Line was completed for $40 million
in cash. The acquisition reinforces CP Ships' regional leadership position,
builds trade lane economies of scale and creates new opportunities for growth.
Operating results for the five months since the acquisition were modestly
profitable and are reported in our TransAtlantic and Latin American markets.

Industry Supply and Demand

After a significant slowdown in world container demand growth in 2001, the
industry cycle turned down sharply and many of our competitors made heavy
losses into 2002.

However, after a weak start, growth in 2002 was stronger than anticipated at
nearly 10%.

So, despite an increase in the supply of containership capacity, mainly in
Asian trades, of 10% or more for a third consecutive year, the lead legs of
most of the world's major trade lanes were reasonably full through the second
half of the year. This generally led to some improvement in industry freight
rates.

INDUSTRY SUPPLY AND DEMAND

                              [GRAPHIC OMITTED]

(Narrative of Embedded Graphic)

Industry Supply and Demand (as a percentage of annual growth) - Bar graph for
years 1997 through 2002 with 3 bar lines: Container Ship Capacity Growth,
World Container Trade Growth, and World Real GDP Growth.  Sources:  Clarkson
Research Studies and Drewry Shipping Consultants Ltd.

==================================== 2002 ====================================

                                      22
<PAGE>

==================== Management's Discussion and Analysis ====================

Revenue

Revenue at $2.69 billion was 2% higher than $2.65 billion in 2001. Container
carryings at 2.0 million teu were 9% higher than 2001, reflecting strong
growth in the Asian and TransAtlantic markets and the acquisition of Italia
Line in August 2002. Underlying volume increased 6% excluding Italia Line.

CP Ships' average freight rate, which includes inland transportation and slot
charter revenue, was down 10% compared with 2001 but improved in the third and
fourth quarters, after five consecutive quarters of decline. This reversal
reflected improved market conditions following slow economic and trade growth
in 2001.

CP SHIPS SEQUENTIAL QUARTERLY FREIGHT RATE CHANGES - OVERALL AND BY MARKET

                              [GRAPHIC OMITTED]

(Narrative of Embedded Graphic)

Bar chart graphic of CP Ships Sequential Quarterly Freight Rate Changes -
Overall and by Market (Percentage Change) - depicts quarterly information from
financial years ended 1999 through 2002 with 4 bar lines: Transatlantic,
Australia, Latin America, and Asia. Only 4th Quarter of 2002 includes data
from Italia Line.

==================================== 2002 ====================================

                                      23
<PAGE>

==================== Management's Discussion and Analysis ====================

Expenses

Total expenses increased by 4% to $2.60 billion in 2002 from $2.51 billion in
2001.

EXPENSES

($ millions)                            2002         2001
                                        ----         ----

Container shipping operations           2,148        2,068
General and administrative                367          363
Depreciation and amortization              93           74
Currency exchange (gain)/loss              (4)           2
                                        ------------------
Total expenses                          2,604        2,507

Container shipping operations expenses were also up 4% to $2.15 billion from
$2.07 billion in 2001 mainly due to the acquisition of Italia Line, underlying
volume growth and expanded services but partly offset by continuing cost
reduction programs. General administrative costs increased slightly with
organizational savings partly offsetting additional costs from Italia Line.
The increase in depreciation results mainly from the recent capital investment
in ships as well as depreciation on new computer systems.

Cost per teu for the year fell by just over 5% to $1,206 from $1,271 in 2001
due to the effect of cost saving programs and higher volumes.

In 2002, 50% of total expenses were in ship network, container and general and
administrative costs. Although regarded as fixed expenses, ship network and
container fleet are regularly adjusted in response to changes in business
demand. The remaining 50% were variable costs including inland transport,
terminal and empty container positioning costs.

Operating Results by Market

TransAtlantic Market

Operating income declined by $19 million to $60 million in 2002.

TRANSATLANTIC MARKET

($ millions)                            2002         2001
                                        ----         ----

Volume (teu 000s)                       1,039          942
Revenue                                 1,328        1,323
Expenses                                1,268        1,244
                                        ------------------
Operating income                           60           79

Volume was up 10% including five months of Italia Line and underlying volume
up 6% reflecting stronger growth both westbound and eastbound. However,
freight rates fell by 13% mainly in the first half of 2002 due to competitive
pressure.

During the year, service restructuring with other carriers combined with
strong volume led to higher westbound capacity utilization and some
improvement in freight rates in the second half. In May, Lykes Lines and TMM
Lines participated in the Atlantic Space Charter Agreement with its partners
in the Grand Alliance and three other lines, which led to a reduction in
capacity deployed. In December, Canada Maritime agreed to charter a fixed
number of slots starting in 2003 to members of the Canex consortium in the
Montreal Gateway trade, which is expected to lead to overall improvements in
trade lane operating efficiency.

In 2003, we expect volume to remain firm and freight rates to continue to
improve.

Australasian Market

Operating income of $27 million was slightly lower than 2001 with lower
operating costs offsetting weaker volume, down 4% due to slower exports from
Australasia, and 6% lower freight rates.

AUSTRALIAN MARKET

($ millions)                            2002         2001
                                        ----         ----

Volume (teu 000s)                         334          348
Revenue                                   531          549
Expenses                                  504          520
                                        ------------------
Operating income                           27           29

==================================== 2002 ====================================

                                      24
<PAGE>

==================== Management's Discussion and Analysis ====================

Operating income improved throughout the year with fourth quarter freight
rates up 2% from the third quarter which in turn were up 2% from the second
quarter. There was some adverse impact from the US West Coast labour dispute
settled in December.

In January 2003, an extensive restructuring of Australasian trade lanes was
completed. The new service structure, comprising two separate weekly fixed day
round-the-world routes, operates with 22 ships in place of 34 ships previously
deployed on four routes by Contship Containerlines and its partners and links
Australia, New Zealand and the Pacific Islands with Northern and Mediterranean
Europe and the US East Coast.

These new services are expected to create operating and cost efficiencies and
with trade conditions in the Australasian market anticipated to remain stable
will support 2003 operating results.

Latin American Market

For the full year, operating income declined to $21 million from $28 million
in 2001 with fourth quarter only $2 million partly due to losses from the
Italia Line expanded Gulf-West Coast South America service.

LATIN AMERICA MARKET

($ millions)                            2002         2001
                                         ---         ----

Volume (teu 000s)                         174          162
Revenue                                   238          244
Expenses                                  217          216
                                        ------------------
Operating income                           21           28

Volume was flat excluding Italia Line with weak import volume to Latin America
offsetting stronger exports. Lower freight rates, significantly down by 16%
after seven successive quarters of decline, were partly offset by lower unit
operating costs.

With the uncertain economic outlook in Argentina, Brazil, and Venezuela,
initiatives to restructure services will continue in order to reduce capacity
and improve efficiency.

Asian Market

For 2002, operating losses increased to $38 million from $13 million the
previous year with average freight rates down 11% due to excess trade lane
capacity.

ASIAN MARKET

($ millions)                            2002         2001
                                        ----         ----

Volume (teu 000s)                         424          331
Revenue                                   508          435
Expenses                                  546          448
                                        ------------------
Operating loss                            (38)         (13)

Volume was up 24% with growth in the Asia-Americas and Asia-Europe trade
lanes. Excluding Asia-Europe services now discontinued, Asian market volume
grew by 8%.

In January 2003, CP Ships decided to withdraw from the Asia-Europe trade at
the end of its slot charter agreement in early March 2003. Despite steady
improvement in freight rates particularly during the second half of 2002 the
trade remains unprofitable. The positive impact of withdrawal on full year
2003 results is expected to be partly offset by losses in the first quarter
and continuing overheads.

For 2003, CP Ships plans to grow volume in existing or new trade lanes. As a
part of this, in the first quarter, a new fixed-day weekly service was
launched between North East Asia including China and Vancouver in response to
strong growth in demand. This third Asia-Americas route will strengthen market
presence and create further operating efficiencies by using existing
organizations in Asia and North America.

Other Activities

In 2002, operating income at $13 million was down $3 million due to less
profit from chartering out surplus ships.

OTHER ACTIVITIES

($ millions)                            2002         2001
                                        ----         ----

Revenue                                    82           95
Expenses                                   69           79
                                        ------------------
Operating income                           13           16

==================================== 2002 ====================================

                                      25
<PAGE>

==================== Management's Discussion and Analysis ====================

This offset improved performance in the North America-South Africa and
break-bulk services and Montreal Gateway Terminals, where results improved due
to stronger TransAtlantic volume and are expected to further benefit
from the Canex consortium's planned move of its existing service from its
current marine terminal in March 2003.

Outlook

After a weak start, CP Ships recorded a solid result for 2002 with stronger
than expected volume, significant cost reduction and, in the second half, a
slowing or reversal of freight rate declines in all of our markets except
Latin America.

Providing there is sound US and world economic growth, we expect the
approximate global balance between supply of ship capacity and container
demand broadly achieved during 2002 to be maintained in 2003. But, any
weakness in economic activity would likely expose the significant increase in
new ship capacity being delivered this year. In our own trade lanes, we expect
a seasonally weak first quarter. For the year overall, we anticipate volume to
increase and freight rates to improve modestly, despite facing competitive
challenges.

However, fewer new cost saving opportunities in 2003, the negative impact of a
weaker US dollar and increases in some operating costs including fuel are
expected to partly offset the benefits of higher average freight rates and the
cost saving initiatives started in 2002. Overall, we expect
2003 operating income to be higher than 2002's $83 million, but below 2001's
$139 million.

Other Consolidated Income Statement Items

Exceptional Items. The exceptional item in 2002 was a credit of $2 million
resulting from the write-back of unutilized restructuring charges. This
compares with exceptional charges of $43 million in 2001, comprising
$24 million relating to the demerger from Canadian Pacific Limited and $19
million of restructuring charges.

Interest. Net interest expense was up $23 million for 2002, due to increased
borrowing mainly to finance investment in ships. During October 2002, the
10.375% fixed rate of interest payable on the $200 million senior notes was
swapped for the remaining life of the notes, to interest based on three month
LIBOR plus 5.77%, currently totalling about 7.15%.

Income Tax. The CP Ships group has been structured so that much of the income
it generates from container shipping carries tax of relatively low rates.
Furthermore, due in part to UK Tonnage Tax, the tax expense is now less
dependent on the level of profits earned. For 2002, income tax expense was
down $2 million from the previous year to $10 million.

Goodwill Charges. Following changes in Canadian accounting principles,
goodwill has not been amortized since 1st January 2002, but is subject to an
impairment test at least annually. The impairment tests have been completed
and no write-downs were required. Not amortizing goodwill benefited net income
by $16 million for the year.

Principal Consolidated Balance Sheet Items

Property, Plant and Equipment. In 2002, investment in property, plant and
equipment was $441 million including $208 million to acquire the first six new
ships delivered under the replacement program and a net payment of $181
million for the four previously bareboat chartered ice-strengthened ships.

Ship Replacement Program. The four-year $800 million capital investment
program to replace chartered ships, mainly inherited with acquisitions, with
23 owned ships is nearly complete. The replacement ships are medium-sized from
2000 to 4000 teu, the optimal size range for regional trades. Some are
specialized for their proposed trades.

TOTAL SHIP FLEET

                              [GRAPHIC OMITTED]

(Narrative of Embedded Graphic)

Total Ship Fleet - Bar chart depicting total ship fleet as a percentage for
the years 1999 through 2003 with 2 bars - Percentage capacity owned and long-
term committed and percentage capacity chartered. There is a further depiction
along the same chart for ship deliveries and expenditures in $ millions for
the same time periods.

==================================== 2002 ====================================

                                      26
<PAGE>

==================== Management's Discussion and Analysis ====================

The average cost to charter a standard 2750 teu container ship between 1996
and 2002 was $17,830 a day versus about $13,240 a day on a fully comparable
basis to own the same ship today. While the newbuilds have been under
construction, CP Ships has benefited from the decline in charter rates in 2001
and most of 2002.

During 2002, six newbuilds were delivered. Three 4100 teu ships, with high
refrigerated cargo carrying capacity, were deployed in the restructured
eastbound round-the-world service between Europe, Australasia, and North
America. Three 3200 teu geared ships, having on-board cranes enabling them to
operate in ports without shoreside cranes, operate in the Gulf-East Coast
South America trade lane.

The program is on schedule with a further two 3200 teu geared ships, now
delivered, two new and one used ice-strengthened ships, and six newly built
long-term chartered ships, all due for delivery by the end of third quarter
2003.

The investment is being financed by cash from operations and committed bank
borrowings. By completion of the program in the third quarter 2003, the
average age of the owned fleet will be just over seven years. As the normal
life of a ship is 25 years, it is expected that ship replacement on a large
scale will not be needed for a long time.

At the end of 2002, chartered ships represented about 50% of capacity and,
with more than 20 renewals at lower rates, significant cost savings were
achieved during the year.

On completion of the replacement program, owned or long-term chartered fleet
will represent nearly two-thirds of total capacity. The remaining chartered
fleet will leave sufficient flexibility to manage changing market conditions.

Deferred Charges. In 2002, deferred charges increased by $11 million from the
arrangement of new financings, mainly the ten-year senior notes, less $2
million for amortization.

Goodwill and Other Intangible Assets. At 31st December 2002, CP Ships had
goodwill and other intangible assets of $608 million, an increase of $106
million on the prior year as a result of the acquisition of Italia Line.

Working Capital. Non-cash working capital increased in 2002 by $56 million
mainly as a result of the Italia acquisition and higher revenue and accounts
receivable at the end of 2002 compared to 2001.

Liquidity and Capital Resources

Cash from operations before unusual and spin-off payments in 2002 was $89
million compared with $210 million in 2001 due to net income adjusted for
exceptional items being lower by $62 million and greater non-cash working
capital needs of $63 million.

In February 2002, commitments were received for the remaining $100 million of
a $350 million secured five-year revolving credit facility announced in
December 2001. The facility is secured on ships being built under the ship
replacement program. At 31st December 2002, CP Ships was able to borrow up to
$206 million and had drawn $151 million. Since the year end, further drawdown
conditions have been satisfied, allowing borrowings up to $263 million. The
$175 million secured four-year revolving credit facility was fully drawn at
31st December 2002.

In July 2002, the balance sheet was strengthened by raising $275 million, net
of fees, through the offering of 9.6 million common shares at C$15 ($9.93) and
$200 million principal amount 10.375% ten-year senior unsecured notes at
97.722%. The notes were converted to registered form on 31st October 2002. The
proceeds were used to pay for the acquisition of Italia Line, the purchase of
four ice-strengthened containerships previously bareboat chartered and to
reduce bank borrowings. Standard and Poor's and Moody's rated the notes BB+
and Ba3 respectively, in both cases one notch below the corporate rating.

In December 2002, liquidity was further increased with $90 million of
committed unsecured revolving credit facilities with a maturity of 364 days,
and an option to convert into a 12-month term loan prior to maturity. The
facilities, which are available for general corporate purposes excluding
acquisitions of ships and businesses were undrawn at the year end.

Some long-term debt and the senior unsecured notes have been guaranteed by the
three principal operating subsidiaries. Financial information on these
subsidiary guarantors can be found in note 23 of the audited annual financial
statements filed with the Canadian Securities Administrators.

Debt at 31st December 2002 was $597 million up from $230 million as at 31st
December 2001 due primarily to the investment in ships. Net debt at 31st
December 2002 was $487 million, representing 28% of total capital compared to
$114 million or 9% of total capital at the end of 2001.

==================================== 2002 ====================================

                                      27
<PAGE>

==================== Management's Discussion and Analysis ====================

Capital commitments at 31st December 2002 were $173 million including $170
million for ships to be delivered by third quarter 2003 under the replacement
program.

CP Ships considers that it will be able to meet its known financial
commitments from cash from operations and borrowing facilities.

Risk Analysis

CP Ships is exposed to market risk from foreign currency fluctuations, changes
in interest rates and bunker fuel prices. To manage these risks it enters into
hedging arrangements to hedge some or all of its anticipated net exposures.
Gains and losses resulting from hedges are recognized in income in the same
period as the underlying exposure. Hedging instruments are not used for either
trading or speculative purposes.

Foreign Currency Exchange Risk. Revenue is denominated primarily in US
dollars, the reporting currency. There is exposure through local operating
costs to other currencies, the most significant of which are Canadian dollar,
Euro and British pound. During 2002, all Canadian dollar and Euro transaction
exposures were hedged, which resulted in a positive impact on operating income
of $18 million.

The estimated impact of a 1% decrease in the US dollar exchange rate against
the Canadian dollar, Euro and British pound combined is to decrease operating
profit by $4 million.

At 31st December 2002, there were no hedging arrangements outstanding. Since
the year end, most of the exposure to the Canadian dollar for 2003 has been
hedged.

Interest Rate Risk. Interest on bank debt is LIBOR based. In October 2002, the
10.375% fixed rate of interest on the $200 million senior unsecured notes was
swapped to interest based on three-month LIBOR plus 5.77% for the remaining
life of the notes. Hence, the majority of long-term debt is generally at
floating rates.

Long-term debt of $522 million at 31st December 2002 was at floating interest
rates and there was $110 million of cash and cash equivalents. Based on this,
the estimated impact of each increase of 1% in interest rates is to decrease
net income by $4 million.

Fuel Price Risk. In 2002, 1.4 million tons of bunker fuel were purchased. The
estimated impact of a 1% movement in bunker prices is to change operating
profit by $2 million excluding any recoveries from fuel surcharges. There were
no hedging arrangements outstanding at 31st December 2002.

Critical Accounting Policies

Significant accounting policies are more fully described in note 1 to the
consolidated financial statements. Certain of the accounting policies are
particularly important to the reported financial position and results of
operations. These accounting policies include revenue and cost recognition and
restructuring costs which can be found in notes 1(b) and 1(m) to the
consolidated financial statements, respectively.

Dividends

Dividends of $14 million were paid on common shares in 2002. In 2001, $3
million was paid to a former Canadian Pacific Limited affiliate on preference
shares which were redeemed prior to the spin-off.

Comparatives

CP Ships has revised its 2001 financial statements, which are shown as
comparatives in the financial information in this annual report. This follows
a re-examination and correction of the accounting treatment for consent
payments made in August 2001 to parties to four ship leases to allow an
efficient spin-off from Canadian Pacific Limited. The costs were originally
deferred and were being amortized over the expected lives of the ship leases.
The remaining balance of $6 million was written off as an exceptional charge
in third quarter 2002 when the leases were terminated. However, it has been
determined that the consent payments should have been written off in the third
quarter 2001. The effect is to add $7 million to the 2001 exceptional charge
for costs related to the spin-off which was part of a total $36 million
exceptional charge, reducing earnings per share for 2001 by $0.09 per share.

==================================== 2002 ====================================

                                      28
<PAGE>

==================== Management's Discussion and Analysis ====================

FORWARD-LOOKING INFORMATION

This document contains certain forward-looking statements within the meaning
of the United States Private Securities Litigation Reform Act of 1995
relating, but not limited, to operations, anticipated financial performance,
business prospects and strategies of CP Ships. These statements can
be found in the CEO's Letter to Shareholders and Management's Discussion and
Analysis of Financial Condition and Results of Operations and elsewhere in
this document. Forward-looking information typically contains statements with
words such as "consider," "anticipate," "believe," "expect," "plan," "intend"
or similar words suggesting future outcomes or statements regarding an outlook
on future changes in freight rates, achievable cost savings, the estimated
amounts and timing of capital expenditures, anticipated future debt levels and
incentive fees or revenue, or other expectations, beliefs, plans, objectives,
assumptions, intentions or statements about future events or performance.
Investors should be aware that these statements are subject to known and
unknown risks, uncertainties and other factors that could cause actual results
to differ materially from those suggested by the forward-looking statements.

Investors are cautioned not to place undue reliance on forward-looking
information. By its nature, the forward-looking information of CP Ships
involves numerous assumptions, inherent risks and uncertainties, both general
and specific, that contribute to the possibility that the predictions,
forecasts and other forward-looking statements will not occur. These factors
include, but are not limited to, changes in business strategies; general
global and economic and business conditions, including the length and severity
of the current economic slowdown in the countries and regions where CP Ships
operates, particularly in the United States, Canada, Latin America,
Australasia, Asia and Europe; the effects of competition and pricing
pressures; industry overcapacity; changes in demand for container shipping;
changes in laws and regulations, including environmental, employment,
competition, anti-terrorism and trade laws; difficulties in implementing a
cost savings program; currency, fuel price and interest rate fluctuations;
changes in access to capital markets and other sources of financing; various
events which could disrupt operations, including war, acts of terrorism,
severe weather conditions and external labour unrest; compliance with security
measures introduced by governmental and industry trade practice groups; and CP
Ship's anticipation of and success in managing the risks arising from the
foregoing.

The above list of important factors is not exhaustive. CP Ships undertakes no
obligation, except as required by law, to update publicly or otherwise revise
any forward-looking information, whether as a result of new information,
future events or otherwise, or the list of factors affecting this information.

==================================== 2002 ====================================

                                      29
<PAGE>

==================== Management's Discussion and Analysis ====================

<TABLE>
<CAPTION>

TEN-YEAR COMPARISON
(unaudited)
<S>                                 <C>     <C>    <C>     <C>      <C>    <C>     <C>      <C>     <C>      <C>
                                    2002    2001   2000    1999     1998   1997    1996     1995    1994     1993
                                    ----    ----   ----    ----     ----   ----    ----     ----    ----     ----

Volume (teu millions)               2.01    1.84      1.83    1.37  1.16   .67     .48      .40     .24      .20
Revenue ($ billions)                2.69    2.65      2.64    1.88  1.78   1.03    .78      .69     .41      .34
EBITDA( 1 )($ millions)             176     213       224     136   163    142     106      79      77       53
Operating income( 2 )($ millions)   83      139       164     89    127    115     86       62      64       44
Cash from operations ($ millions)   77      185       174     29    135    118     117      64      75       58
Ships                               89      78        94      76    72     47      14       14      9        7
Containers (teu 000s)               413     345       327     303   232    175     65       64      36       29

</TABLE>

             ----------------------------------------------------

<TABLE>
<CAPTION>

QUARTERLY FREIGHT RATE CHANGES 2002 AND 2001
(unaudited)
<S>                                         <C>       <C>     <C>       <C>        <C>      <C>     <C>      <C>
                                              Q4        Q3      Q2        Q1         Q4       Q3      Q2       Q1
(Percentage change)                         2002      2002    2002      2002       2001     2001    2001     2001
                                            ----      ----    ----      ----       ----     ----    ----     ----

TransAtlantic                                  6        (1)     (6)       (6)        (3)      (2)     (3)       4
Australasia                                    2         2       -        (3)        (4)      (2)     (2)       6
Latin America                                 (4)       (1)     (4)       (4)        (5)      (1)     (2)       2
Asia                                           -        10       2       (10)        (5)      (8)

Overall                                        1         3      (2)       (7)        (4)      (1)     (1)       1

</TABLE>

Percentage increase/(decrease) compared with previous quarter in average
freight rates, which exclude inland revenue and slot charter revenue. Asia is
excluded prior to Q3 2001 due to substantial change in mix of trade lanes
during the period. Q4 2002 includes Italia Line. Overall is all trade lanes.

                                            (1) Earnings before interest, tax,
                                                   depreciation, amortization,
                                           exceptional items, goodwill charges
                                                         and minority interest
                                                  (2) Before exceptional items

==================================== 2002 ====================================

                                      30
<PAGE>

==================== Management's Discussion and Analysis ====================

<TABLE>
<CAPTION>
QUARTERLY RESULTS 2002 AND 2001
(unaudited)
<S>                                         <C>         <C>     <C>      <C>      <C>      <C>      <C>     <C>
                                              Q4          Q3      Q2       Q1       Q4       Q3       Q2      Q1
($ millions)                                2002        2002    2002     2002     2001     2001     2001    2001
                                            ----        ----    ----     ----     ----     ----     ----    ----

Volume (teu 000s)
TransAtlantic                                284         277     256      222      233      227      245     237
Australasia                                   87          84      86       77       90       89       89      80
Latin America                                 55          48      38       33       39       41       41      41
Asia                                         113         106     110       95       94       96       79      62
Other                                         11           9       8        9       12       16       14      17
                                            --------------------------------------------------------------------
                                             550         524     498      436      468      469      468     437
                                            --------------------------------------------------------------------

Revenue
TransAtlantic                                371         349     320      288      334      315      339     335
Australasia                                  143         132     136      120      140      136      142     131
Latin America                                 71          63      54       50       59       62       63      60
Asia                                         145         137     123      103      115      124      108      88
Other                                         24          23      18       17       21       26       23      25
                                            --------------------------------------------------------------------
                                             754         704     651      578      669      663      675     639
                                            --------------------------------------------------------------------

Expenses
TransAtlantic                                350         332     306      280      305      301      321     317
Australasia                                  130         121     130      123      133      127      132     128
Latin America                                 69          58      46       44       52       52       56      56
Asia                                         150         141     133      122      128      126      107      87
Other                                         21          18      15       15       16       23       20      20
                                            --------------------------------------------------------------------
                                             720         670     630      584      634      629      636     608
                                            --------------------------------------------------------------------

Operating income(2)
TransAtlantic                                 21          17      14        8       29       14       18      18
Australasia                                   13          11       6       (3)       7        9       10       3
Latin America                                  2           5       8        6        7       10        7       4
Asia                                          (5)         (4)    (10)     (19)     (13)      (2)       1       1
Other                                          3           5       3        2        5        3        3       5
                                            --------------------------------------------------------------------
                                              34          34      21       (6)      35       34       39      31
                                            --------------------------------------------------------------------

Analysis of expenses
Container shipping operations                596         558     520      474      524      519      524     501
General and administrative                   101          89      88       89       87       91       92      93
Depreciation and amortization                 30          23      20       20       23       19       16      16
Other                                         (7)          -       2        1        -        -        4      (2)
                                            --------------------------------------------------------------------
                                             720         670     630      584      634      629      636     608
                                            --------------------------------------------------------------------

EBITDA( 1 )                                   64          57      41       14       58       53       55      47
                                            --------------------------------------------------------------------
</TABLE>

==================================== 2002 ====================================

                                      31
<PAGE>

============ Management's Responsibility for Financial Reporting =============

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The information in this Annual Report is the responsibility of management and
has been reviewed and approved by the Board of Directors. The consolidated
financial statements have been prepared by management in accordance with
Canadian generally accepted accounting principles and include amounts based on
management's best estimates and careful judgment.

Management maintains a system of internal accounting controls to provide
reasonable assurance that assets are safeguarded and that transactions are
authorized, recorded and reported properly. The internal audit department
reviews these accounting controls on an ongoing basis and reports its findings
and recommendations to management and to the Audit Committee of the Board of
Directors.

The Board of Directors carries out its responsibility for the consolidated
financial statements principally through its Audit Committee, consisting of
all of the non-executive directors. This Committee reviews the consolidated
financial statements with management and the independent auditors prior to
submission to the Board for approval. It also reviews the recommendations of
both the independent and internal auditors for improvements to internal
controls as well as the actions of management to implement such
recommendations.

/s/ Ray Miles                                   /s/ Ian Webber
Raymond R. Miles                                Ian J. Webber
Chief Executive Officer                         Chief Financial Officer

6th March 2003

==================================== 2002 ====================================

                                      32
<PAGE>

============================== Auditor's Report ==============================

To the shareholders of CP Ships Limited

We have audited the consolidated balance sheets of CP Ships Limited as at 31st
December 2002 and 2001 and the consolidated statements of income, retained
earnings and cash flow for each of the years then ended. These consolidated
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the company as at 31st December
2002 and 2001, the results of its operations and its cash flow for each of the
years then ended in accordance with Canadian generally accepted accounting
principles.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chartered Accountants
Toronto, Ontario, Canada
6th March 2003

Notice to US readers

In the United States of America, reporting standards for auditors require the
addition of an explanatory paragraph (following the opinion paragraph) when
there are changes, such as the changes described in notes 2 and 22(h) to the
financial statements, that have a material effect on the comparability of the
amounts disclosed in the company's financial statements. Our report to the
shareholders dated 6th March 2003 is expressed in accordance with Canadian
reporting standards which does not require a reference in the auditors' report
to such changes when the change is properly acounted for and adequately
disclosed in the financial statements.

/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chartered Accountants
Toronto, Ontario, Canada
6th March 2003

==================================== 2002 ====================================

                                      33
<PAGE>

===================== Consolidated Financial Statements ======================

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
(US$ millions except per share amounts)

                                                                                          YEAR ENDED 31ST DECEMBER
                                                                                          2002                 2001
                                                                                          ----                 ----
                                                                                                       Revised (note 2)
<S>                                                                                           <C>                <C>

Revenue
Container shipping operations                                                                 2,687              2,646

Expenses
Container shipping operations                                                                 2,148              2,068
General and administrative                                                                      367                363
Depreciation and amortization of intangible assets                                               93                 74
Currency exchange (gain)/loss                                                                    (4)                 2
                                                                                    -----------------------------------
                                                                                              2,604              2,507
                                                                                    -----------------------------------

Operating income before exceptional items                                                        83                139
Unusual items (note 3)                                                                            2                (19)
Spin-off related items (note 3)                                                                   -                (24)
                                                                                    -----------------------------------

Operating income                                                                                 85                 96
Interest expense, net (note 4)                                                                  (23)                 -
                                                                                    -----------------------------------

Income before income tax                                                                         62                 96
Income tax expense (note 5)                                                                     (10)               (12)
                                                                                    -----------------------------------

Income before goodwill charges and minority interest                                             52                 84
Minority interest                                                                                 -                  1
                                                                                    -----------------------------------

Income before goodwill charges                                                                   52                 85
Goodwill charges, net of tax ($0)                                                                 -                (16)
                                                                                    -----------------------------------

Net income                                                                                       52                 69
Dividends on preference shares                                                                    -                 (3)
                                                                                    -----------------------------------

Net income available to common shareholders                                           $          52      $          66
                                                                                    ===================================

Average number of common shares outstanding (millions) (note 16)                               84.8               79.3
Earnings per common share basic (note 16)                                             $        0.61      $        0.83
Earnings per common share diluted (note 16)                                           $        0.60      $        0.83

CONSOLIDATED STATEMENTS OF RETAINED EARNINGS

Balance, 1st January                                                                            509                443
Net income                                                                                       52                 69
Dividends on preference shares                                                                    -                 (3)
Dividends on common shares                                                                      (14)                 -
                                                                                    -----------------------------------
Balance, 31st December                                                                $         547      $         509
                                                                                    ===================================

</TABLE>

==================================== 2002 ====================================

                                      34
<PAGE>

===================== Consolidated Financial Statements ======================

<TABLE>
<CAPTION>

CONSOLIDATED BALANCE SHEETS
(US$ millions)
                                                                                         AS AT 31ST DECEMBER
                                                                        2002                            2001
                                                                        ----                            ----
                                                                                             Revised (note 2)

<S>                                                           <C>                              <C>
ASSETS
Current assets
Cash and cash equivalents                                                110                             116
Accounts receivable                                                      526                             453
Prepaid expenses                                                          46                              38
Inventory                                                                 21                              12
                                                              ----------------------------------------------
                                                                         703                             619

Property, plant and equipment (note 7)                                 1,156                             795
Deferred charges (note 8)                                                 16                               7
Goodwill and other intangible assets (note 9)                            608                             502
Other assets (note 10)                                                     4                               -
                                                              ----------------------------------------------
                                                              $       2,487                    $       1,923
                                                              ==============================================

LIABILITIES
Current liabilities
Accounts payable and accrued liabilities                                 658                             589
Long-term debt within one year (note 11)                                  15                              15
                                                              ----------------------------------------------
                                                                         673                             604
Long-term liabilities
Long-term debt due after one year (note 11)                              582                             215
Future income taxes (note 5)                                               7                               8
                                                              ----------------------------------------------
                                                                         589                             223

Shareholders' equity
Common share capital (note 13)                                           685                             597
Contributed surplus (note 13)                                              1                               -
Retained earnings                                                        547                             509
Cumulative foreign currency translation adjustments                       (8)                            (10)
                                                              ----------------------------------------------
                                                                       1,225                           1,096
                                                              ----------------------------------------------
                                                              $        2,487                   $       1,923
                                                              ==============================================

Contingent Liabilities and Commitments - notes 18 and 19

</TABLE>

On behalf of the Board:

/s/ Ray Miles                            /s/ Ian Webber
Raymond R. Miles                         Ian J. Webber
Director and Chief Executive Officer     Director and Chief Financial Officer

==================================== 2002 ====================================

                                      35
<PAGE>

===================== Consolidated Financial Statements ======================

<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOW
(US$ millions)
                                                                                     YEAR ENDED 31ST DECEMBER
                                                                                   2002                       2001
                                                                                   ----                       ----
                                                                                                          Revised (note 2)

<S>                                                                       <C>                        <C>
Operating activities
Net income                                                                                  52                         69
Depreciation and amortization of intangible assets                                          93                         90
Unusual and spin-off related items                                                          (2)                        43
Future income tax expense                                                                   (1)                         -
Amortization of deferred charges                                                             2                          -
Other                                                                                        1                          1
                                                                       -----------------------------------------------------
                                                                                           145                        203
(Increase)/decrease in non-cash working capital (note 15)                                  (56)                         7
                                                                       -----------------------------------------------------
Cash from operations before unusual and spin-off related payments                           89                        210
Unusual and spin-off related payments                                                      (12)                       (25)
                                                                       -----------------------------------------------------

Cash from operations                                                                        77                        185

Financing activities
Increase in share capital                                                                   88                          -
Contributed surplus                                                                          -                          2
Return of share capital                                                                      -                        (14)
Redemption of preferred shares                                                               -                       (116)
Increase in long-term debt                                                                 557                        160
Repayment of long-term debt                                                               (212)                       (14)
Repayment of Italia short-term debt                                                        (11)                         -
Increase in deferred charges                                                               (11)                        (7)
Increase in loans from former affiliated companies                                           -                         88
Repayment of loans from former affiliated companies                                          -                       (138)
Preference dividends paid                                                                    -                         (3)
Common share dividends paid                                                                (14)                         -
                                                                       -----------------------------------------------------
Cash inflow/(outflow) from financing activities                                            397                        (42)

Investing activities
Additions to property, plant and equipment                                                (441)                      (292)
Acquisition of businesses (note 6)                                                         (40)                         -
Proceeds from disposal of property, plant and equipment                                      5                         15
Proceeds from disposal of investments                                                        -                         12
Increase in other assets                                                                    (4)                         -
Repayment of loans to former affiliated company                                              -                        116
                                                                       -----------------------------------------------------
Cash outflow from investing activities                                                    (480)                      (149)

Decrease in cash and cash equivalents*                                                      (6)                        (6)
Cash and cash equivalents at beginning of year                                             116                        122
                                                                       -----------------------------------------------------
Cash and cash equivalents at end of year                                  $                110       $                116
                                                                       =====================================================

Additional information
Taxes paid                                                                $                 12       $                 12
Interest paid                                                             $                 12       $                  7
                                                                       =====================================================

*Cash and cash equivalents comprises cash and temporary investments with a maximum maturity of three months.

</TABLE>

==================================== 2002 ====================================

                                      36
<PAGE>

=============== Notes to the Consolidated Financial Statements ===============

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS

(Unless otherwise indicated, all amounts are shown in US$ millions)

1. Significant Accounting Policies

These consolidated financial statements have been prepared in accordance with
Canadian generally accepted accounting principles ("Canadian GAAP") which
differ in certain respects from United States generally accepted accounting
principles ("US GAAP"). A reconciliation of significant measurement
differences between Canadian and US GAAP has been included in note 22.

(a) Basis of consolidation - The consolidated financial statements include CP
Ships Limited ("CP Ships") and the operations of all of its subsidiary
companies from the date of acquisition until the date of disposal.

(b) Revenue and cost recognition - Revenue and costs directly attributable to
loaded container movements are recognized when delivery of the loaded
container to its final destination is completed. Other revenue is accounted
for on completed service delivery and other costs are accounted for when
incurred.

(c) Use of estimates - The preparation of financial statements requires that
management make estimates in reporting the amounts of certain revenues and
expenses for each financial year and certain assets and liabilities at the end
of each financial year. Actual results may differ from these estimates.

(d) Income taxes - Income taxes are provided for using the liability method.
Under this method, future tax assets and liabilities are recognized based on
differences between the basis of assets and liabilities used for financial
statement and income tax purposes, using substantively enacted tax rates.
Future tax assets are not recognized if they are not expected to be utilized.

(e) Earnings per common share - Basic earnings per common share is calculated
using the weighted average number of common shares outstanding in the year.

The dilutive effect of outstanding stock options and unvested restricted
shares is reflected in diluted earnings per share by application of the
treasury stock method, which assumes any proceeds received from the exercise
of such awards are used to purchase common shares at the average market price
during the period. The resulting incremental shares are included in the
denominator of the diluted earnings per share calculation.

(f) Property, plant and equipment - Property, plant and equipment is stated at
cost less depreciation, which is determined on a straight line basis over the
estimated remaining useful life of each asset.

Depreciation on ships is calculated on a straight-line basis at rates to
reduce the book value of each ship to its estimated residual value by the end
of its estimated useful life which is considered to be 25 years.

Major additions, replacements and capital improvements to ships are
depreciated over the estimated remaining useful life of the ship.

Dry docking and special survey costs are deferred and amortized over the dry
docking cycle, typically between two to five years. Any unamortized cost is
written off on the disposal of the relevant ship.

Containers are depreciated on a straight-line basis over their estimated
useful life of 12 years to their estimated residual values.

Furniture and equipment is fully depreciated on a straight-line basis over the
estimated useful lives of the assets, a maximum of ten years.

Computer hardware and software is fully depreciated on a straight-line basis
over its estimated useful life which varies between three and eight years from
the date that it is brought into use. Costs directly associated with
developing or obtaining internal-use computer software are capitalized.

Trucking equipment is fully depreciated on a straight-line basis over the
estimated service lives of the assets, a maximum of ten years. Owned
automobiles are depreciated on a straight-line basis over four years.

Owned buildings are fully depreciated on a straight-line basis over the
estimated useful lives, a maximum of 50 years. Land is not depreciated.

Leasehold improvements are amortized over the lesser of the remaining lease
term or ten years.

==================================== 2002 ====================================

                                      37
<PAGE>

=============== Notes to the Consolidated Financial Statements ===============

Terminal equipment is depreciated on a straight-line basis over its estimated
useful life which varies between three and 30 years.

When depreciable assets are retired or otherwise disposed of, the related
costs and accumulated depreciation are removed from the accounts and the
remaining balance, net of any proceeds from sale or salvage value, is
reflected in the result from operations.

(g) Leases - Leases are classified as either capital or operating. Those
leases which transfer substantially all the benefits and risks of ownership of
property to CP Ships are accounted for as capital leases.

Capital leases are accounted for as assets and are fully amortized on a
straight-line basis over the period of expected use of the assets. Commitments
to repay the principal amounts arising under capital lease obligations are
included in current liabilities to the extent that the amount is repayable
within one year, otherwise the principal is included in amounts due after one
year. The capitalized lease obligation reflects the present value of future
lease payments. The finance element of the lease payments is charged to income
over the term of the lease.

Operating lease costs are charged to income on a straight-line basis.

(h) Goodwill and other intangible assets - Goodwill represents the excess of
the fair value of consideration paid over the fair value of net tangible and
other identifiable intangible assets acquired. Separately identifiable
intangible assets are recorded at fair value. CP Ships evaluates the carrying
value of goodwill for possible impairment of each reporting unit on an annual
basis. Prior to 2002, goodwill was amortized to income over a period of 35
years. The impact of not amortizing goodwill in 2001 would have been to
increase net income by $16 million to $85 million from an income of $69 million
and would have increased basic and diluted earnings per share by $0.20.
Identifiable intangible assets with indefinite lives are not amortized but are
subject to impairment review at least annually. All other intangible assets
are amortized on a straight-line basis over their estimated economic useful
lives ranging from 10 to 20 years.

(i) Foreign currency translation - Revenue and expense items and other
transactions denominated in foreign currencies are recorded in United States
dollars, which is the functional currency of CP Ships, at the exchange rates
in effect on the dates of the related transactions. Monetary assets and
liabilities denominated in foreign currencies are translated into United
States dollars at the year-end rates of exchange. Foreign currency gains and
losses arising from realization or remeasurement of foreign currency
denominated monetary assets and liabilities are recognized in income
as incurred.

The financial statements of subsidiary companies denominated in currencies
other than United States dollars, which are all considered to be self
sustaining, are translated into United States dollars using year-end rates of
exchange for assets and liabilities and average rates in effect during the
year for revenues and expenses. Exchange gains or losses arising from such
translation are deferred and included under shareholders' equity as foreign
currency translation adjustments.

(j) Employee future benefits - The costs of pensions are actuarially
determined using the projected benefit method prorated on service and
management's best estimate of expected plan investment performance, salary
escalation and retirement ages of employees. Market related values are used
for calculating the expected return on plan assets. The projected benefit
obligation is discounted using a market interest rate at the beginning of the
year on high quality corporate debt instruments.

Pension expense includes the cost of pension benefits earned during the year,
the interest cost on pension obligations, the expected return on pension plan
assets, settlement gains, the amortization of the net transitional asset, the
amortization of adjustments arising from pension plan amendments, and the
amortization of the excess of the net actuarial gain or loss over 10% of the
greater of the benefit obligation and the market related value of plan assets.
The amortization period covers the expected average remaining service lives of
employees covered by the various plans.

For defined contribution plans, pension costs generally equal plan
contributions due during the year.

(k) Derivative financial instruments - Hedging instruments are utilized by CP
Ships to manage its exposure to foreign currency exchange rates. Payments or
receipts under these contracts are recognized in the income statement
concurrently with the hedged transaction and are netted against the hedged
item providing the effectiveness of the hedge is reasonably assured. The fair
values of the outstanding contracts are not reflected in the financial
statements.

==================================== 2002 ====================================

                                      38
<PAGE>

=============== Notes to the Consolidated Financial Statements ===============

CP Ships also uses hedging instruments to manage its exposure to interest
rates. Net payments or receipts from such arrangements are accrued as
adjustments to interest expense and the fair values of the outstanding
contracts are not reflected in the financial statements.

(l) Stock-based compensation - CP Ships has stock-based compensation plans
described in note 14, under which stock options and restricted stock have been
granted to directors and certain key employees or were granted to former
Canadian Pacific Limited ("CPL") employees as part of the Plan of Arrangement
under which CP Ships was demerged from CPL on 1st October 2001 (note 13).

CICA 3870, "Stock-Based Compensation and Other Stock-Based Payments" was
adopted effective 1st January 2002. Any consideration paid by employees on the
exercise of stock options is credited to share capital. In the event options
are cancelled, no adjustment is made to share capital and no expense is
recognized. Compensation expense is not recognized for stock options.

Compensation expense is recognized for direct awards of stock at market value
when granted or if non-vested, such expense is spread over the vesting period.

Prior to 2002, all stock-based compensation was treated as an equity
transaction and no expense was recognized.

(m) Restructuring costs - Restructuring costs are recorded in the year
detailed exit and restructuring plans are approved. Provisions for
restructuring costs are recorded in liabilities.

(n) Acquisitions - CP Ships accounts for all of its acquisitions using the
purchase method. Under this method, all assets and liabilities are recorded at
their fair value at the acquisition date.

(o) Comparative figures - Certain comparatives are reclassified to conform
with the presentation adopted in the current year.

(p) New Canadian accounting pronouncements - CICA AcG-13
"Hedging Relationships" is effective for fiscal year beginning on or after 1st
July 2003 and specifies new criteria for applying hedge accounting. CP Ships
is assessing the impact that this guidance may have on its financial position
and results of operations.

CICA 3063, "Impairment of Long-Lived Assets" is effective for fiscal years
beginning on or after 1st January 2004 unless adopted earlier. This section
establishes standards for the recognition, measurement and disclosure of
impairment of long-lived assets using a two-step process. When conditions
exist, the first step determines when an impairment is recognized by measuring
the carrying value amount against the expected undiscounted cash flows from
use and disposal. The second step, if necessary, is to measure the amount of
impairment as the excess of carrying value exceeding fair value. CP Ships is
assessing the impact that this guidance may have on its financial position and
results of operations.

CICA 3475, "Disposal of Long-Lived Assets and Discontinued Operations" applies
prospectively to disposal activities initiated after 31st May 2003 unless
adopted earlier. The standard establishes the recognition, measurement,
presentation and disclosure of the disposal of long-lived assets and the
presentation and disclosure of discontinued operations. CP Ships is assessing
the impact that this guidance may have on its financial position and results
of operations.

2. Comparative Figures

The 2001 financial statements have been revised. This follows a re-examination
and correction of the accounting treatment for consent payments made in August
2001 to parties to the Montrose and Montclare ship leases to allow an
efficient spin-off from CPL under the Plan of Arrangement described in note
13. The costs were originally deferred and were being amortized over the
expected lives of the ship leases. However, it has been determined that the
consent payments should have been written-off in 2001. The effect is to add $7
million to the 2001 exceptional charge for costs related to the spin-off which
was part of a total $36 million exceptional charge. Previously reported 2001
net income has been reduced by $7 million and earnings per share by $0.09 per
share.

==================================== 2002 ====================================

                                      39
<PAGE>

=============== Notes to the Consolidated Financial Statements ===============

3. Exceptional Items

In 2002 the exceptional credit of $2 million arises from the write back of
unutilized provisions for unusual charges established in 2001 as an
exceptional charge.

The exceptional charges in 2001 comprised:

(a) Spin-off related items of $24 million for professional fees and other
expenses associated with the company's demerger from CPL under the Plan of
Arrangement described in note 13, including $7 million for consent payments to
parties to the Montrose and Montclare ship leases and $10 million for the cost
of terminating a cash-based long-term incentive plan ("LTIP") by converging it
into restricted stock awards. The total value of shares required to terminate
LTIP was $22 million. The amount of $10 million included in the exceptional
charge, together with an $8 million provision charged for the year ended 31st
December 2000 for LTIP earned to that date allowed for the purchase on the
market of CP Ship's shares at a value of $18 million. Shares valued at $4
million were issued from treasury. The shares were placed in an irrevocable
trust which was established to settle the company's obligations under the LTIP
termination arrangements.

(b) Unusual charges of $19 million for the restructuring of organization and
offices, mainly in Europe and North America, during 2001 and 2002. The charges
include the cost of employee severance and redundant office leases.

4. Interest Expense (net)

                                          2002                 2001
                                          ----                 ----

Long-term debt                               (24)                  (6)
Short-term debt                               (1)                  (1)
                                     ---------------------------------
Total interest expense                       (25)                  (7)
Interest income                                2                    7
                                     ---------------------------------
Net                                  $       (23)          $        -
                                     =================================

5. Income Tax Expense

Taxation in these financial statements arises from the activities of CP Ships'
trading companies. The principal operating subsidiaries have operations
taxable mainly in jurisdictions or programs with relatively low rates of tax
including under UK Tonnage Tax where taxation is based on the tonnage of ships
used by the subsidiary, rather than profits earned.

                                          2002                 2001
                                          ----                 ----

Income tax expense
Current                                       11                   12
Future                                        (1)                   -
                                     ---------------------------------
                                     $        10            $      12
                                     =================================

The difference between the income tax expense and the theoretical expense
obtained by applying the Canadian statutory tax rate is as follows:

                                          2002                 2001
                                          ----                 ----

Provision at Canadian statutory rates         19                   38
Foreign tax rate differentials               (14)                 (30)
Prior year items                              (1)                   1
Other                                          6                    3
                                     ---------------------------------
Income tax expense                   $        10            $      12
                                     =================================

The provision for future income taxes arises from differences in the
recognition of revenues and expenses for income tax and accounting purposes.
The temporary differences comprising the future income tax liability are:

                                          2002                 2001
                                          ----                 ----

Future income tax liabilities
Capital assets carrying value in
   excess of tax basis                         6                    7
Other items                                    1                    1
                                     ---------------------------------
                                     $         7            $       8
                                     =================================

At 31st December 2002, the amount of unused tax losses was $56 million (2001:
$17 million) for which no future tax asset has been recognized because it is
considered unlikely the losses will be utilized in the foreseeable future, if
at all. The tax losses will begin to expire in 2007.

6. Business Acquisitions

On 6th August 2002, CP Ships completed the acquisition of all the outstanding
shares of Italia di Navigazione S.p.A. ("Italia Line") and its sales agencies
in Italy and Spain together with certain assets of its Canadian and,
subsequently, Venezuelan agencies.

==================================== 2002 ====================================

                                      40
<PAGE>

=============== Notes to the Consolidated Financial Statements ===============

The acquisition gives rise to goodwill and other intangible assets of $106
million. No deferred tax asset has been created for tax losses or tax
deductible goodwill since they are not expected to be utilized. The estimated
fair values of the net assets acquired and consideration, which was paid in
cash, are summarized as follows:

Accounts receivable and inventory                                  36
All other tangible assets                                          16
Goodwill and other intangible assets                              106
Bank borrowings                                                   (11)
Accounts payable and accrued liabilities                          (85)
Long-term debt                                                    (22)
                                                                 -----
Consideration and costs                                          $ 40
                                                                 =====

Included above is a $9 million provision to terminate contracts and
restructure the organization. These costs relate to closing certain offices
and terminating contracts with third party suppliers that were not needed. The
restructuring will be substantially completed by the end of 2003 although some
costs of cancelled contracts will extend to 2006. At 31st December 2002, costs
paid were less than $1 million.

7. Property, Plant and Equipment

                                          2002                 2001

Ships
Cost                                       1,038                  640
Accumulated depreciation                    (148)                (114)
                                      -----------            ---------
                                             890                  526

Containers
Cost                                         139                  135
Accumulated depreciation                     (50)                 (44)
                                      -----------            ---------
                                              89                   91

Terminal equipment and other
Cost                                         126                  119
Accumulated depreciation                     (58)                 (53)
                                      -----------            ---------
                                              68                   66

Computer hardware and software
Cost                                         182                  162
Accumulated depreciation                     (73)                 (50)
                                      -----------            ---------
                                             109                  112

Total cost                                 1,485                1,056
Total accumulated depreciation              (329)                (261)
                                      -----------            ---------
Net book value                        $    1,156             $    795
                                      ===========            =========

Assets under construction which are not being depreciated included above
amount to $46 million at 31st December 2002 (31st December 2001: $97 million).

At 31st December 2002 assets held under capital leases included above had a
cost of $115 million (2001: $104 million) and accumulated depreciation of $64
million (2001: $59 million).

Ships with a net book value of $533 million at 31st December 2002 (2001: $301
million) were pledged as security against bank and other loans and buildings
with a net book value of $3 million (2001: $3 million) were mortgaged as
security against long-term loans.

8. Deferred Charges

Deferred charges represent $16 million (2001: $7 million) of costs less
amortization related to the arrangement of new financings including $200
million unsecured principal amount ten-year senior notes in 2002. These costs
are amortized evenly over the periods of the underlying arrangements which end
between 2005 and 2012. The amortization in 2002 was $2 million (2001: $0).

9. Goodwill and Other Intangible Assets

Balance, 1st January 2002                                         502
Additions                                                         106
                                                             --------
Balance, 31st December 2002                                  $    608
                                                             ========

Additions to goodwill and other intangible assets in 2002 comprise $106
million in respect of the Italia Line acquisition, of which $10 million was
assigned to trade names and customer service contracts and the remainder to
goodwill. Identifiable intangible assets have an estimated useful life of
between 10 and 20 years. Amortization expense for these items in 2002 was less
than $1 million. Of the goodwill, $69 million has been allocated to the
TransAtlantic market segment and $27 million has been allocated to the Latin
American market segment.

==================================== 2002 ====================================

                                      41
<PAGE>

=============== Notes to the Consolidated Financial Statements ===============

10. Other Assets

Other assets comprise cash on deposit of $4 million (2001: $0) in respect of
operational guarantees.

11. Long-Term Debt

                                        2002         2001
                                        ----         ----

Bank loans                              326          160
Long-term loans                          45           52
Ten-year senior notes                   196            -
Capital leases                           30           18
                                      -----        -----
                                        597          230
Amounts due within one year             (15)         (15)
                                      -----        -----
Amounts due after one year            $ 582        $ 215
                                      =====        =====

The bank loans represent amounts drawn on a $175 million revolving credit
facility that is committed to August 2005 with a $50 million step down in
August 2004 and a second revolving credit facility of $350 million that is
committed to December 2006, with a 25% step down in December 2005. Both
facilities are secured by certain owned ships and bear interest at a margin,
which depends on the facilities' credit rating, over LIBOR. As at 31st
December 2002, the margins were 1.05% and 1.75% respectively.

An additional $90 million of unsecured revolving facilities was available but
undrawn at 31st December 2002. The unsecured revolving facilities have a 364
day maturity with an option to convert to a 12 month term loan at maturity and
bear interest at 2%.

Long-term loans comprises $1 million repayable up to 2008 and bearing interest
at LIBOR plus 2.625% secured by an office building and $44 million repayable
up to 2008 bearing interest at 6.71% secured by ships.

Ten-year senior notes comprises $200 million unsecured principal amount notes
at 10.375% issued in July 2002 at a price of 97.722% for an effective rate of
10.75% which mature in July 2012. The issue discount is being accreted over
the life of the bonds. CP Ships may redeem the senior notes at any time
according to a predetermined pricing formula.

The bank loans, long-term loans and senior notes are subject to covenants
which are customary for these types of facility.

Aggregate maturities of the bank loans, long-term loans and senior notes over
the next five years and thereafter are as follows:

2003                                    7
2004                                   57
2005                                  133
2006                                  160
2007                                   10
Thereafter                            200
                                    -----
Total payments                      $ 567
                                    =====

Capital Leases - The capital leases consist of container leases of $30 million
(2001: $18 million).

The capital leases are repayable in monthly installments ending between 2003
and 2007 and are secured on the leased equipment. Obligations under capital
leases bear interest primarily at fixed rates, which range from 3% to 13%.
Interest expense on such leases amounted to $2 million (2001: $3 million).

Capital lease commitments are over the next five years as follows:

2003                                                   11
2004                                                   10
2005                                                    7
2006                                                    5
2007                                                    3
                                                     ----
Total minimum lease payments                           36
Less: imputed interest                                 (6)
                                                     ----
Present value of minimum lease payments                30
Less: current portion                                  (8)
                                                     ----
Long-term portion of capital lease commitments       $ 22
                                                     ====

==================================== 2002 ====================================

                                      42
<PAGE>

=============== Notes to the Consolidated Financial Statements ===============

12. Financial Instruments and Risk Management

Financial assets and liabilities - Short-term financial assets and liabilities
are valued at their carrying amounts as presented in the consolidated balance
sheet, which are reasonable estimates of fair value due to the relatively
short period to maturity of these instruments.

The fair value of third-party long-term debt has been estimated based on
current market prices and rates currently available to CP Ships for long-term
borrowing with similar terms and conditions to those borrowings in place at
the balance sheet date. The fair value of the senior notes results in a $14
million gain in favour of the holders. Otherwise, there is no material
difference between the carrying value and the fair value of third-party
long-term debt.

CP Ships is exposed to credit losses in the event of nonperformance by counter
parties to financial instruments including interest rate and foreign currency
hedge contracts. CP Ships mitigates this risk by contracting with counter
parties of high credit quality and by using an appropriate number of counter
parties, thereby reducing the risks that would result from concentration.

Interest rate and foreign currency hedge contracts - In 2002 CP Ships entered
into an interest rate swap agreement that swapped the 10.375% fixed rate of
interest on the senior notes to interest based on three-month LIBOR plus
5.77%. The swap agreement has the same term as the senior notes.

The fair value of the interest rate swap agreement as at 31st December 2002
was $4 million in favour of CP Ships, taking into account interest rates in
effect at that time.

CP Ships is exposed to changes in exchange rates on future net cost streams
denominated in certain currencies other than United States dollars. To manage
these exposures, CP Ships enters into foreign currency hedge contracts as it
deems appropriate, to cover some or all of its anticipated net exposure, which
is principally to Euro, Canadian dollars and British pounds.

At 31st December 2002 and 2001, CP Ships did not have any outstanding foreign
currency hedges in place.

13.  Shareholders' Equity

Prior to 1st October 2001, CP Ships Holdings Inc ("CPSHI") was the wholly
owned holding company of Canadian Pacific Limited's ("CPL") container shipping
interests. On 1st October 2001, as part of a Plan of Arrangement, CPL
distributed its interests in CPSHI to a newly created subsidiary company, CP
Ships. CPL then distributed its investment in CP Ships to CPL's common
shareholders on the basis of one new common share in CP Ships for four old CPL
common shares. Where appropriate, share numbers in the financial statements
reflect the effect of the share consolidation applied retroactively. As both
CPSHI and CP Ships were under the control of CPL at the time, the transactions
were accounted for in a manner similar to a pooling-of-interests and the
historical financial information of CPSHI became the historical financial
information of the now publicly held CP Ships. On 1st January 2002, CPSHI
amalgamated with CP Ships.

The authorized share capital of CP Ships is an unlimited number of common
shares and an unlimited number of preference shares.

An analysis of CP Ships common shares is as follows:

                                     Number        $ millions
                                    ----------    ------------

Balance, 1st January 2001                   -               -
New issue                           79,127,044            597
Issued under Launch Award,
stock option plans and
LTIP buy-out                           842,051              -
                                    -------------------------
Balance, 31st December 2001         79,969,095            597
New issue                            9,646,500             88
Issued under stock-based
compensation plans                     121,326              -
                                    -------------------------
Balance, 31st December 2002         89,736,921          $ 685
                                    =========================

On 3rd July 2002 CP Ships completed the issue of 8.5 million new common shares
at C$15.00 (US$9.93) for approximate net proceeds after deduction of offering
expenses of $77 million.

==================================== 2002 ====================================

                                      43
<PAGE>

=============== Notes to the Consolidated Financial Statements ===============

On 9th July 2002, CP Ships completed the issue of a further 1.1 million new
common shares at C$15.00 (US$9.93) under an over-allotment option for
additional net proceeds of approximately $11 million.

During 2002, 704,666 restricted shares were granted which become issued only
on vesting in 2004. The compensation expense recognized in 2002 for granting
these restricted shares is $1 million (2001: $0) and contributed surplus was
increased accordingly.

During 2001, and prior to CPL's disposal of CPSHI to CP Ships, CPL provided an
additional $2 million as contributed surplus, and CPSHI subsequently increased
its stated share capital to $550 million by the amount of its $487 million
contributed surplus. CPSHI also returned $14 million of share capital to CPL,
redeemed the 175,000 redeemable cumulative preference shares and issued 400
common shares to CPL at a value of $61 million as consideration for the
transfer of shipping related affiliates and other assets from CPL.

Shareholder Rights Plan - On 30th July 2001, CP Ships adopted a Shareholder
Rights Plan (the "Rights Plan") which became effective 1st October 2001. The
Rights Plan is designed to provide CP Ships with sufficient time to explore
and develop alternatives for maximizing shareholder value in the event of a
takeover bid and to provide all shareholders with an equal opportunity to
participate in the bid.

14. Stock Options

Under the CP Ships Employee Stock Option Plan ("ESOP") and Directors Stock
Option Plan ("DSOP") options may be granted to employees and directors to
purchase CP Ships common shares at a price normally based on the market value
of the shares on or immediately prior to the grant date. Each option may be
exercised on a date or dates set by the Board of Directors and generally
expires ten years after the grant date.

At 31st December 2002, 3,763,573 shares (2001: 2,453,429 shares) were
available for the granting of future options under the stock option plans out
of the 6,158,000 currently authorized.

The company has elected to not recognize stock option compensation as an
expense but to disclose the effect based on fair value spread over the period
to vesting. ESOP shares generally vest three years from grant. DSOP shares
vest immediately upon grant.

The company has used the Black-Scholes option-pricing model to assess the fair
value of the 155,000 options granted to employees and the 24,000 options
granted to directors in 2002 with the following assumptions:

Dividend yield                           1.4%
Volatility                              30.0%
Risk-free interest rate                  4.5%
Expected life (years)                    5

In view of the small numbers of options granted there is no material impact to
disclose on reported net income or earnings per common share.

During 2002, 2,114,012 stock options were replaced with 704,666 restricted
shares.

In the event of a change in control of CP Ships, all outstanding options and
unvested restricted shares under all plans become immediately exercisable.

Transition of CPL Option Plan - On the effective date of the Plan of
Arrangement described in note 13, outstanding options under the CPL Key
Employee Stock Option Plan ("KESOP") were replaced pro-rata with new options
under the new option plans of the five separately-listed companies, including
CP Ships, which were created by the spin-off. Former CPL shares may be
exercised after two years from the original grant date under KESOP in respect
to one-half of the number of shares and after three years in respect to the
balance and expire ten years after the original grant date.

==================================== 2002 ====================================

                                      44
<PAGE>

=============== Notes to the Consolidated Financial Statements ===============

Details of the stock options outstanding are as follows:

<TABLE>
<CAPTION>

                                                          2002                                2001
                                                          ----                                ----
                                                               Weighted Average                    Weighted Average
                                               Number of       Exercise Price       Number of       Exercise Price
                                                Options         ($ per share)        Options        ($ per share)
                                              -----------      ----------------     ---------      -----------------

<S>                                           <C>              <C>                  <C>            <C>
Outstanding at beginning of the year            3,673,520           7.334                   -              -
Granted to former CPL employees under
the Plan of Arrangement                                 -               -             548,983          4.052
Granted under:
  ESOP                                            155,000           9.660           3,136,000          7.840
  DSOP                                             24,000          10.390              48,000          7.840
Exercised                                        (107,733)          3.901             (51,051)         4.205
Forfeited                                      (2,213,785)          4.151              (8,412)         4.141
Expired                                               (25)          3.900                   -              -
                                              ---------------------------------------------------------------------
Outstanding at end of the year                  1,530,977           7.105           3,673,520          7.334
                                              =====================================================================
</TABLE>

Details as at 31st December 2002 of the stock options outstanding by year of
expiry are as follows:
<TABLE>
<CAPTION>

                                                Exercise Price     Weighted Average                      Weighted Average
                                   Number of        Range           Exercise Price         Number          Exercise Price
Year of Expiry                      Options     ($ per share)       ($ per share)        Exercisable       ($ per share)
                                   ---------    ---------------    ----------------      -----------     ----------------

<C>                                  <C>         <C>                     <C>                <C>                <C>
2003                                 24,826      2.703-3.049             2.994              24,826             2.994
2004                                 16,165            2.857             2.857              16,165             2.857
2005                                 30,391      3.228-3.280             3.229              30,391             3.229
2006                                      -                -                 -                   -                 -
2007                                 57,091      4.856-5.112             4.861              57,091             4.861
2008                                  9,400      4.542-5.509             4.866               9,400             4.866
2009                                 91,417            4.087             4.087              91,417             4.087
2010                                112,699      4.247-5.246             4.308             112,699             4.308
2011                              1,113,322            7.840             7.840              48,000             7.840
2012                                 75,666     9.660-10.390             9.892              24,000            10.390
                                  ----------------------------------------------------------------------------------------
                                  1,530,977      2.491-7.840             7.105             413,989             4.097
                                  ========================================================================================

</TABLE>

==================================== 2002 ====================================

                                      45
<PAGE>

=============== Notes to the Consolidated Financial Statements ===============

15. Change in Non-Cash Working Capital Balances

                                                  2002         2001
                                                  ----         ----

(Increase)/decrease in current assets
Accounts receivable                               (73)         (61)
Prepaid expenses                                   (8)          (6)
Inventory                                          (9)           2
                                                  ------------------
                                                  (90)         (65)

Increase/(decrease) in current liabilities
Accounts payable and accrued liabilities           83           62

Increase in non-cash working
  capital from acquisition of
  businesses (note 6)                             (49)           -
Decrease in non-cash working
  capital transferred in from
  shipping-related affiliates
  prior to spin-off (note 13)                       -            9
Other changes in non-cash
  working capital                                   -            1
                                                  ------------------
Total                                           $ (56)         $ 7

16. Earnings Per Share

Basic and diluted earnings per share are shown on the income statement and
have been calculated using net income available to common shareholders divided
by 84.8 million and 86.1 million shares respectively for 2002 and 79.3 million
and 79.9 million shares respectively for 2001.

The basic and diluted earnings per share figures for 2001 have been determined
as if the shares and options outstanding at the spin-off date (note 13) had
been in place for 2001.

(millions of shares)                     2002        2001
                                        ----         ----

Weighted average number of
  common shares outstanding
  for basic earnings per share           84.8        79.3
Effect of dilutive securities
  - stock options                         0.6         0.6
  - unvested restricted shares            0.7           -
                                         ----------------
Weighted average number of
  common shares outstanding
  for diluted earnings per share         86.1        79.9
                                         ================

17. Related Party Transactions

Container shipping operating expenses include $90 in 2001 in relation to
services provided by parties who related at the times of the transactions,
mainly for transportation costs paid to Canadian Pacific Railway, which
charges were established on normal commercial terms. There were dividends on
preference shares paid to former affiliated company amounting to $3 million in
2001.

18. Contingent Liabilities

At 31st December 2002, CP Ships had bank and other guarantees given in the
normal course of business of $2 (2001: $1 million).

During the normal course of business activity, CP Ships its subsidiaries are
occasionally involved in litigation proceedings. The company is currently
defending an action in Belgium that was initiated in 1999 totalling
approximately Euro 89 million ($93 million) against it and certain of its
subsidiaries relating to termination of contracts for stevedoring and related
services. CP Ships intends to defend vigorously this action. CP Ships and its
subsidiaries do not believe they will incur any liability and accordingly, no
provision has been made in the financial statements with respect to this
matter other than for legal costs.

19. Commitments

(a) Capital expenditures - CP Ships had capital commitments at 31st December
2002 of $173 million, principally in to shipbuilding contracts, which fall due
in 2003.

(b) Operating leases - CP Ships utilizes ships, containers and other equipment
and occupies premises under noncancelable operating leases.

Rent expense under operating leases:

                                           2002      2001
                                           ----      ----

Ships                                       207       308
Containers                                  131       132
Other                                        27        18
                                          ---------------
                                          $ 365     $ 458
                                          ===============

==================================== 2002 ====================================

                                      46
<PAGE>

=============== Notes to the Consolidated Financial Statements ===============

CP Ships has commitments under operating leases, including obligations under
time charters which include certain ship operating expenses, and under
long-term bare-boat charters. The commitments in each of the next five years
and thereafter are:

2003                                   159
2004                                    92
2005                                    97
2006                                    59
2007                                    53
2008 and thereafter                    162
                                     -----
                                     $ 622
                                     =====

20. Pensions

CP Ships operates a number of defined contribution and defined benefit pension
plans throughout the world.

Defined benefit plans are based principally on years of service and
compensation levels near retirement. Annual contributions to these plans,
which are based on various actuarial cost methods, are made on the basis of
not less than the minimum amounts required by national, federal or provincial
pension supervisory authorities.

Net benefit plan expense for each year for defined benefit plans includes the
following components:

                                       2002         2001
                                       ----         ----

Service cost - benefits earned
 during the year                         1            1
Interest cost on projected
 benefit obligation                      2            4
Expected return on pension
 fund assets                            (2)          (4)
Recognized net actuarial loss            -            4
Amount not recognized
 due to limitation                       2           (3)
Curtailment gain                        (2)           -
                                       ------------------
Net benefit plan expense               $ 1           $ 2
                                       ==================

Information about changes in CP plans is as follows:

                                            2002         2001
                                            ----         ----

Change in benefit obligation
Benefit obligation at beginning of year        32        85
Service cost                                    1         1
Interest cost                                   2         4
Amendments                                      -        (2)
Actuarial loss/(gain)                           2       (16)
Settlement                                      -       (38)
Benefits paid                                  (3)       (1)
Exchange rate fluctuation                       1        (1)
                                             -----------------
Benefit obligation at end of year            $ 35      $ 32
                                             =================

Change in plan assets
Fair value of assets at beginning of year      25        83
Actual return on plan assets                   (2)      (21)
Settlement                                      -       (38)
Employer contributions                          2         2
Benefits paid                                  (3)       (1)
Exchange rate fluctuation                       1         -
                                             -----------------
Fair value of plan assets at end of year     $ 23      $ 25
                                             =================

Included in the above accrued benefit obligation and fair value of plan assets
are the following amounts in respect to plans that are not fully funded:

                                                2002         2001
                                                ----         ----

Funded status                                   (12)          (7)
Unrecognized net actuarial loss                  13            8
Unrecognized prior service cost                   -           (2)
Amount not recognized due to limitation          (4)          (2)
                                               ------------------
Accrued benefit cost                           $ (3)        $ (3)
                                               ==================

Weighted-average assumptions as of 31st December:
Discount rate                                    6.1%        6.5%
Expected return on plan assets                   7.0%        7.2%
Rate of compensation increase                    4.2%        4.9%

CP Ships also has a number of defined contribution plans.
The net expense for such plans was $6 million (2001:
$4 million).

==================================== 2002 ====================================

                                      47
<PAGE>

=============== Notes to the Consolidated Financial Statements ===============

21. Segment Information

CP Ships provides regional containerized ocean and related inland
transportation services across the world in various trade lanes.

CP Ships manages its business by aggregating its container shipping services
into the four major markets that it serves, namely TransAtlantic, Australasia,
Latin America and Asia. Container shipping services in other regions and
services ancillary to container shipping are separately aggregated.
Accordingly, CP Ships has five reportable segments.

Revenue and operating expenses are either directly related to the activity in
a segment or are centrally managed and are allocated across the segments.

CP Ships does not manage or analyze its assets by segment and consequently no
segmented analysis of assets is presented. It is impractical to obtain an
analysis of revenue by customers' countries of domicile. CP Ships does not
rely on any single major customer or group of major customers. No customer
accounts for more than 10% of revenue.

                                             2002      2001
                                             ----      ----

Revenue
TransAtlantic                               1,328     1,323
Australasia                                   531       549
Latin America                                 238       244
Asia                                          508       435
Other                                          82        95
                                          -----------------
                                           $2,687    $2,646
                                          =================

Expenses
TransAtlantic                               1,268     1,244
Australasia                                   504       520
Latin America                                 217       216
Asia                                          546       448
Other                                          69        79
                                          -----------------
                                           $2,604    $2,507
                                          =================

Operating income before
 exceptional items
TransAtlantic                                  60        79
Australasia                                    27        29
Latin America                                  21        28
Asia                                          (38)      (13)
Other                                          13        16
                                          -----------------
                                              $83     $139
                                          =================

Depreciation and amortization included in expenses:

                                           2002    2001
                                           ----    ----

TransAtlantic                               50      44
Australasia                                 10       6
Latin America                                9       5
Asia                                        18       8
Other                                        6      11
                                           -----------
                                           $93     $74
                                           ===========

Geographical analysis of property, plant and equipment and goodwill and other
intangible assets:

                                           2002    2001
                                           ----    ----

Canada                                       33      36
United States                                88      85
Other countries                              56      57
Ships(1)                                    890     526
Containers(1)                                89      91
Goodwill and other intangible assets(1)     608     502
                                         --------------
                                         $1,764  $1,297
                                         ==============

(1) None of ships, containers or goodwill and other intangible assets are
located in a particular country

22. Differences Between Accounting Principles Generally Accepted in Canada and
in the United States

Summary of differences - The consolidated financial statements are prepared in
accordance with accounting principles generally accepted in Canada ("Canadian
GAAP") which differ in certain respects from accounting principles generally
accepted in the United States ("US GAAP"). The material differences are
described below along with their effect on CP Ships' Consolidated Statement of
Income, Retained Earnings, Consolidated Balance Sheets and Consolidated
Statements of Cash Flow. Certain additional disclosures as required under US
GAAP have not been provided as permitted by the Securities and Exchange
Commission.

(a) Derivative financial instruments - Adoption of FASB Statement No. 133
Effective 1st January 2001, CP Ships adopted FASB Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended by
FAS 137 and 138 for the purpose of presenting US GAAP financial information.
The cumulative effect of the adoption of FAS 133 at 1st January 2001 was to
reduce net income before taxes under US GAAP by approximately $4 million.

==================================== 2002 ====================================

                                      48
<PAGE>

=============== Notes to the Consolidated Financial Statements ===============

FAS 133 requires that all derivative instruments be recorded as assets or
liabilities on the balance sheet at fair value. Changes in the fair value of
derivatives are recorded in each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part
of a hedge transaction and, if it is, the type of hedge transaction.

CP Ships offers to certain customers the option to pay its receivables in
either US dollars or the local currency of the customer. These terms
constitute an embedded derivative and for US GAAP are accounted for under FAS
133 which requires revaluing these derivatives to fair value and recording a
liability with the offset to net income.

Foreign currency hedging Derivatives, which are designated as cash flow hedges
for Canadian GAAP, are used by CP Ships to hedge certain anticipated foreign
currency expenditures.

Under Canadian GAAP, gains and losses on foreign exchange hedge contracts are
recognized in income in the period that the hedged exposure is recognized in
income, which is the same period in which the instrument is settled. Under US
GAAP, CP Ships does not meet all of the criteria for hedge accounting and
therefore outstanding hedges have been marked-to-market through earnings.

Interest rate swaps Interest rate swap agreements are used by CP Ships to
manage interest rate risk. These swaps are accounted for as hedges under
Canadian GAAP. Under US GAAP, CP Ships does not meet all of the criteria for
hedge accounting and therefore outstanding hedges have been marked-to-market
through earnings.

(b) Acquisition integration and reorganization costs - There are differences
between Canadian and US GAAP as to the timing of the recognition of certain
liabilities associated with acquisition-related integration and reorganization
costs. Further, in the past under US GAAP certain of these costs were charged
to the income statement rather than being allocated to the cost of the
acquisition, with a consequent effect on the amount of goodwill and the
subsequent annual amortization charge. There are no longer any differences
between US and Canadian GAAP. Differences in the balance of goodwill will
remain.

(c) Employee future benefits - pension costs - The treatment of pension costs
is similar under both Canadian and US GAAP. The remaining differences
affecting CP Ships are the additional minimum liability required under US GAAP
and the recoverable surplus limitation calculated under Canadian GAAP. These
items account for the US GAAP reconciliation item.

(d) Income taxes - Although Canadian and US GAAP for income taxes are broadly
the same, Canadian GAAP uses substantively enacted, rather than enacted only,
tax rates to calculate future taxes.

(e) Goodwill charges - Effective 1st January 2002, CP Ships adopted
prospectively, without restating prior years, the provisions of the new
recommendations of the Canadian Institute of Chartered Accountants under CICA
3062. This eliminated most differences between Canadian and US GAAP with
respect to accounting for goodwill.

Prior to 2002, under Canadian GAAP goodwill charges net of any tax effects
were reported separately as a deduction from income after tax, whereas US GAAP
required goodwill charges to be reported within operating expenses and
consequently they were included in the determination of operating income.
Amortization expense for the year ended 31st December 2001 was $14million.

(f) Stock-based compensation - Under Canadian GAAP, compensation expense is
not recognized for stock options. Any consideration paid by employees on the
exercise of stock options is credited to share capital. For US GAAP under APB
25, the difference between the market value at the date of grant and the grant
price of the stock option or issuance of shares to employees would be
recognized as compensation expense.

Under both Canadian and US GAAP the issuance of shares to employees is
recognized as compensation expense based on market value at the date of grant.
Prior to 1stJanuary 2002, however, the issuance of shares to employees was not
recognized as compensation expense under Canadian GAAP.

(g) Comprehensive income - US GAAP requires the disclosure, as other
comprehensive income, of changes in equity during the period from transactions
and other events from non-owner sources. Canadian GAAP does not require
similar disclosure.

==================================== 2002 ====================================

                                      49
<PAGE>

=============== Notes to the Consolidated Financial Statements ===============

Other comprehensive income under US GAAP in these financial statements arises
from foreign currency translation adjustments and additional minimum pension
liability. A statement of comprehensive income under US GAAP for each of the
years ended 31st December 2002 and 2001 is shown in note 22(k).

(h) Ship leases - During August 2002, CP Ships purchased four ships that were
previously bareboat chartered. Under Canadian GAAP, these charters were
accounted for as operating leases. However, the ships were owned by special
purpose entities that have been consolidated under US GAAP. Consequently, for
US GAAP a loss on extinguishment of debt was recorded at purchase while this
amount was capitalized as part of the cost of the ships for Canadian GAAP. At
31st December 2002, the difference in equity of $23 million represents the
difference in capitalized ship costs between US and Canadian GAAP and will be
reduced as the assets are depreciated.

The US GAAP information as at 31st December 2001 previously treated these
charters as operating leases. However the accounting was changed to reflect
the consolidation of the special purpose entities. For the year ended 31st
December 2001 there was no material impact on net income as the decrease in
charter hire expense of $21 million was offset by an increase in interest of
$13 million and depreciation of $8 million. The impact on US GAAP
shareholders' equity is a $3 million reduction as at 31st December 2001
compared with shareholders' equity under Canadian GAAP. This comprises an
increase in property, plant and equipment of $160 million, in long-term debt
of $165 million and in accrued interest of $2 million and a decrease in
charter hire accruals of $4 million. For the year ended 31st December 2001,
cash flows from operations would be increased by $8 million and outflows from
financing activities would be increased by $8 million.

(i) Capitalized interest - Under Canadian GAAP, CP Ships does not capitalize
interest. US GAAP requires interest incurred as part of the costs of
constructing assets to be capitalized.

(j) Recent US GAAP pronouncements - FIN 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" has been issued and requires that at the time a
company issues a guarantee, the company must recognize an initial liability
for the fair value, or market value, of the obligations it assumes under that
guarantee and must disclose that information in its interim and annual
financial statements. The standard is effective for fiscal years beginning
after 31st December 2003. CP Ships is assessing the impact that this guidance
may have on its financial position and results of operations.

FAS 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB
Statement No. 13, and Technical Corrections" is effective 1st January 2003.
This Statement makes changes and technical corrections to several other
standards that do not affect CP Ships. It also rescinds FASB Statement No. 4,
"Reporting Gains and Losses from Extinguishment of Debt" to require that
extinguishment of debt is no longer automatically eligible to be classified as
an extraordinary item and must be retroactively restated into ordinary net
income unless the loss qualifies as extraordinary under the normal tests. CP
Ships will reclassify the loss of $25 million on extinguishment of debt as
required by the standard.

FAS 146, "Accounting for Costs Associated with Exit or Disposal Activities"
addresses financial accounting and reporting for costs associated with exit or
disposal activities. The standard requires that liabilities for such costs
associated with an exit or disposal activity be recognized when the liability
is incurred. Previously, such costs were accrued at the date the plan was
finalized. The standard is effective for exit or disposal activities initiated
after 31st December 2002 and will affect the timing of recognition for such
costs if CP Ships were to enter such a plan.

FIN 46, "Consolidation of Variable Interest Entities" addresses when a company
should include in its financial statements the assets, liabilities and
activities of a variable interest entity. The standard is effective for
variable interest entities created after 31st January 2003 and for existing
entities for the first interim period beginning after 15th June 2003. CP Ships
is assessing the impact that this guidance "Guarantor's may have on its
financial position and results of operation.

==================================== 2002 ====================================

                                      50
<PAGE>

=============== Notes to the Consolidated Financial Statements ===============

(k) Statements of consolidated income and shareholders' equity

The following is a reconciliation of net income under Canadian GAAP to net
income under US GAAP:
<TABLE>
<CAPTION>

                                                                                                 YEAR ENDED 31ST DECEMBER
(US$ millions except per share amounts)                                                       2002              2001
                                                                                              ----              ----
                                                                                                          Revised (note 2)

<S>                                                                                            <C>               <C>
Net income - Canadian GAAP                                                                     52                69
US GAAP adjustments
 Derivative financial instruments                                                               -                 2
 Interest rate swaps                                                                            4                 -
 Acquisition-related costs                                                                     (3)               (3)
 Pension costs                                                                                  2                (3)
 Stock-based compensation                                                                       -                (8)
 Ship leases                                                                                    5                 -
 Capitalized interest                                                                           5                 -
 Tax effect of US GAAP adjustments                                                              -                 -
                                                                                          ---------------------------------
Income - US GAAP before cumulative effect of accounting changes                                65                57
 Cumulative effect of adoption of FAS 133                                                       -                (4)
 Extraordinary loss                                                                           (25)                -
                                                                                          ---------------------------------
Net income - US GAAP                                                                           40                53
Other comprehensive income
 Foreign currency translation adjustments                                                       2                (2)
 Additional minimum pension liability                                                          (6)                -
                                                                                          ---------------------------------
Comprehensive income - US GAAP                                                                $36               $51
                                                                                          =================================
Earnings per common share basic ($ per share)*
Canadian GAAP                                                                               $0.61             $0.83
US GAAP
 Income before cumulative effect of accounting changes and extraordinary loss               $0.77             $0.68
 Cumulative effect of accounting changes                                                        -            $(0.05)
 Extraordinary loss                                                                        $(0.29)               -
                                                                                          ---------------------------------
Basic earnings per common share after cumulative effect of accounting changes               $0.48             $0.63
                                                                                          =================================
Earnings per common share diluted ($ per share)*
Canadian GAAP                                                                               $0.60             $0.83
US GAAP
 Income before cumulative effect of accounting changes and extraordinary loss               $0.75             $0.68
 Cumulative effect of accounting changes                                                        -            $(0.05)
 Extraordinary loss                                                                        $(0.29)               -
                                                                                          ---------------------------------
Diluted earnings per common share after cumulative effect of accounting changes             $0.46             $0.63
                                                                                          =================================
* Earnings per common share is calculated after deduction of preference share dividends

Reconciliation of equity under Canadian GAAP to equity under US GAAP:
                                                                                                 AS AT 31ST DECEMBER
(US$ millions except per share amounts)                                                       2002              2001
                                                                                              ----              ----

Equity - Canadian GAAP                                                                       1,225             1,096
US GAAP adjustments
 Derivative financial instruments                                                               (2)               (2)
 Interest rate swaps                                                                             4                 -
 Acquisition-related costs                                                                     (44)              (41)
 Pension costs                                                                                  (1)                3
 Ship leases                                                                                   (23)               (3)
 Capitalized interest                                                                            5                 -
 Tax effect of US GAAP adjustments                                                               -                 -
                                                                                          ---------------------------------
Equity - US GAAP                                                                            $1,164            $1,053
                                                                                          =================================

</TABLE>

==================================== 2002 ====================================

                                      51
<PAGE>

SHAREHOLDER INFORMATION

Trading Symbol

CP Ships trades under the symbol TEU on the Toronto and New York stock
exchanges.

Shareholder Services

CP Ships' transfer agent in Canada is Computershare Trust Company of Canada
with transfer facilities in Montreal, Toronto, Calgary and Vancouver.
Computershare Trust Company of New York serves as transfer agent and registrar
for common shares in New York. The handling of all inquiries is centralized in
Toronto. For information or copies of the Annual Report please contact:

By telephone toll free: 1 (800) 332-0095
By fax toll free: 1 (888) 453-0330
By e-mail: careregistryinfo@computershare.com

By mail and in person:
Computershare Trust Company of Canada
Shareholder Services
100 University Avenue, 9th Floor
Toronto, Ontario M5J2Y1, Canada

Investor Relations

Institutional investors, brokers, security analysts and others requiring
information on CP Ships' financial and operating performance should contact:

Jeremy Lee
Vice President Investor Relations
jeremy.lee@cpships.com

Corporate Governance

CP Ships' corporate governance guidelines, Code of Business Conduct and Terms
of Reference of the Audit, Compensation and Corporate Governance Board
committees are posted on the company website and are available in printed form
to any shareholder by contacting the corporate secretary at info@cpships.com.

CP SHIPS LIMITED
62-65 Trafalgar Square, London WC2N 5DY
United Kingdom

                                    52
<PAGE>

[GRAPHIC OMITTED]
(Narrative of Embedded Graphic)
Close-up Photograph of ice-strengthened containership

<PAGE>

CP SHIPS
REGIONAL FOCUS  o  GLOBAL SCALE

[GRAPHIC OMITTED]
(Narrative of Embedded Graphic)
Photograph of containership in open waters.

CP SHIPS LIMITED
62-65 Trafalgar Square
London WC2N5DY, United Kingdom
www.cpships.comExhibit 4.1

                                                                EXECUTION COPY

                               SERIES SUPPLEMENT

                      CORPORATE BACKED TRUST CERTIFICATES

                  ALTRIA DEBENTURE-BACKED SERIES 2003-8 TRUST

                                    between

                            LEHMAN ABS CORPORATION,

                                 as Depositor,

                                      and

                     U.S. BANK TRUST NATIONAL ASSOCIATION,

                                  as Trustee,

                      CORPORATE BACKED TRUST CERTIFICATES

                          Dated as of March 27, 2003

<PAGE>

                               Table of Contents

                                                                          Page
                                                                          ----

Section 1.  Incorporation of Standard Terms.................................1

Section 2.  Definitions.....................................................1

Section 3.  Designation of Trust and Certificates...........................8

Section 4.  Trust Certificates.............................................11

Section 5.  Distributions..................................................11

Section 6.  Trustee's Fees.................................................14

Section 7.  Optional Call; Optional Exchange...............................14

Section 8.  Notices of Events of Default...................................19

Section 9.  Miscellaneous..................................................19

Section 10.  Governing Law.................................................23

Section 11.  Counterparts..................................................23

Section 12.  Termination of the Trust......................................23

Section 13.  Sale of Underlying Securities; Optional Exchange..............23

Section 14.  Amendments....................................................23

Section 15.  Voting of Underlying Securities, Modification
             of Indenture..................................................24

Section 16.  Additional Depositor Representation...........................25

SCHEDULE I      SERIES 2003-8 UNDERLYING SECURITIES SCHEDULE
EXHIBIT A-1     FORM OF TRUST CERTIFICATE CLASS A-1
EXHIBIT A-2     FORM OF TRUST CERTIFICATE CLASS A-2
EXHIBIT B       FORM OF WARRANT AGENT AGREEMENT
EXHIBIT C       FORM OF INVESTMENT LETTER

                                      i
<PAGE>

                               SERIES SUPPLEMENT

                      CORPORATE BACKED TRUST CERTIFICATES

                  ALTRIA DEBENTURE-BACKED SERIES 2003-8 TRUST

          SERIES SUPPLEMENT, Altria Debenture-Backed Series 2003-8, dated as
of March 27, 2003 (the "Series Supplement"), by and between LEHMAN ABS
CORPORATION, as Depositor (the "Depositor"), and U.S. BANK TRUST NATIONAL
ASSOCIATION, as Trustee (the "Trustee").

                             W I T N E S S E T H:

          WHEREAS, the Depositor desires to create the Trust designated herein
(the "Trust") by executing and delivering this Series Supplement, which shall
incorporate the terms of the Standard Terms for Trust Agreements, dated as of
January 16, 2001 (the "Standard Terms" and, together with this Series
Supplement, the "Trust Agreement"), by and between the Depositor and the
Trustee, as modified by this Series Supplement;

          WHEREAS, the Depositor desires to deposit into the Trust the
Underlying Securities set forth on Schedule I attached hereto, the general
terms of which are described in the Prospectus Supplement under the heading
"Description of the Deposited Assets--Underlying Securities;"

          WHEREAS, in connection with the creation of the Trust and the
deposit therein of the Underlying Securities, it is desired to provide for the
issuance of trust certificates evidencing undivided interests in the Trust and
call warrants related thereto; and

          WHEREAS, the Trustee has joined in the execution of the Standard
Terms and this Series Supplement to evidence the acceptance by the Trustee of
the Trust.

           NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants expressed herein, it is hereby agreed by and between the
Depositor and the Trustee as follows:

     Section 1. Incorporation of Standard Terms. Except as otherwise provided
herein, all of the provisions of the Standard Terms are hereby incorporated
herein by reference in their entirety, and this Series Supplement and the
Standard Terms shall form a single agreement between the parties. In the event
of any inconsistency between the provisions of this Series Supplement and the
provisions of the Standard Terms, the provisions of this Series Supplement
will control with respect to the Altria Debenture-Backed Series 2003-8
Certificates and the transactions described herein.

     Section 2. Definitions.

     (a) Except as otherwise specified herein or as the context may otherwise
require, the following terms shall have the respective meanings set forth
below for all purposes under this Series Supplement. (Section 2(b) below sets
forth terms listed in the Standard Terms which are

                                      1
<PAGE>

not applicable to this Series.) Capitalized terms used but not defined herein
shall have the meanings assigned to them in the Standard Terms.

          "Accredited Investor" shall mean a Person that qualifies as an
"accredited investor" within the meaning of Rule 501(a) under the Securities
Act.

          "Available Funds" shall have the meaning specified in the Standard
Terms.

          "Business Day" shall mean any day other than (i) Saturday and Sunday
or (ii) a day on which banking institutions in New York City, New York are
authorized or obligated by law or executive order to be closed for business or
(iii) a day that is not a business day for the purposes of the Indenture.

          "Calculation Agent" shall mean Lehman ABS Corporation or such
affiliate thereof as shall be designated by Lehman ABS Corporation.

          "Call Date" shall mean any Business Day that any holder of Call
Warrants designates as a Call Date occurring (i) on or after March 27, 2008,
(ii) after the Underlying Securities Issuer announces that it will redeem,
prepay or otherwise make an unscheduled payment on the Underlying Securities,
(iii) after the Trustee notifies the Certificateholders of any proposed sale
of the Underlying Securities pursuant to the provisions of this Series
Supplement or (iv) on which a tender offer for some or all of the Underlying
Securities is consummated.

          "Call Notice" shall have the meaning specified in Section 1.1 of the
Warrant Agent Agreement.

          "Call Price" shall mean, for each related Call Date, (i) in the case
of the Class A-1 Certificates, 100% of the outstanding Certificate Principal
Balance of the Class A-1 Certificates being purchased pursuant to the exercise
of the Call Warrants, plus any accrued and unpaid interest on such amount to
but excluding the Call Date and, (ii) in the case of the Class A-2
Certificates, the present value of all amounts that would otherwise have been
payable on the Class A-2 Certificates being purchased pursuant to the exercise
of the Call Warrants for the period from the related Call Date to the Final
Scheduled Distribution Date using a discount rate of 7.75% per annum, assuming
no delinquencies, deferrals, redemptions or prepayments on the Underlying
Securities shall occur after the related Call Date.

          "Call Warrants" shall have the meaning specified in Section 3
hereof.

          "Called Certificates" shall have the meaning specified in Section
1.1 (b) of the Warrant Agent Agreement.

          "Certificate Principal Balance" shall have the meaning specified in
Section 3 hereof.

          "Certificates" shall have the meaning specified in Section 3 hereof.

          "Class A-1 Allocation" shall mean the sum of the present values
(discounted at the rate of 6.25% per annum) of (i) any unpaid interest due or
to become due on the Class A-1

                                      2
<PAGE>

Certificates and (ii) the outstanding Certificate Principal Balance of the
Class A-1 Certificates (in each case assuming that the Class A-1 Certificates
were paid when due and were not redeemed or prepaid prior to their stated
maturity).

          "Class A-1 Certificates" shall mean the Certificates, in the form
attached hereto as Exhibit A-1, to be issued by the Trust representing a
proportionate undivided beneficial ownership interest in certain distributions
to be made by the Trust and having the characteristics described herein and in
the Certificates.

          "Class A-2 Allocation" shall mean the present value (discounted at
the rate of 6.25% per annum) of any unpaid amounts due or to become due on the
outstanding notional amount of the Class A-2 Certificates (assuming that the
Class A-2 Certificates were paid when due and were not redeemed or prepaid
prior to their stated maturity).

          "Class A-2 Certificates" shall mean the Certificates, in the form
attached hereto as Exhibit A-2, to be issued by the Trust representing a
proportionate undivided beneficial ownership interest in certain distributions
to be made by the Trust and having the characteristics described herein and in
the Certificates.

          "Closing Date" shall mean March 27, 2003.

          "Code" means the Internal Revenue Code of 1986, as amended.

          "Collection Period" shall mean, (i) with respect to each July
Distribution Date, the period beginning on the day after the January
Distribution Date of such year and ending on such July Distribution Date,
inclusive and, (ii) with respect to each January Distribution Date, the period
beginning on the day after the July Distribution Date of the prior year and
ending on such January Distribution Date, inclusive; provided, however, that
clauses (i) and (ii) shall be subject to Section 9(f) hereof.

          "Corporate Trust Office" shall mean the office of U.S. Bank Trust
National Association located at 100 Wall Street, New York, New York 10005.

          "Currency" shall mean United States Dollars.

          "Depository" shall mean The Depository Trust Company, its nominees
and their respective successors.

          "Distribution Date" shall mean January 15th and July 15th of each
year (or if such date is not a Business Day, the next succeeding Business
Day), commencing on July 15, 2003, and ending on the earlier of the Final
Scheduled Distribution Date and any date on which all Underlying Securities
are redeemed, prepaid or liquidated in whole for any reason other than at
their maturity.

          "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.

                                      3
<PAGE>

          "Event of Default" shall mean (i) a default in the payment of any
interest on any Underlying Security after the same becomes due and payable
(subject to any applicable grace period), (ii) a default in the payment of the
principal of or any installment of principal of any Underlying Security when
the same becomes due and payable, and (iii) any other event specified as an
"Event of Default" in the Indenture.

          "Exchange Act" shall mean the Securities and Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.

          "Final Scheduled Distribution Date" shall mean the Distribution Date
in January 2027, or if such day is not a Business Day, the next succeeding
Business Day.

          "Indenture" shall mean the indenture among the Underlying Securities
Issuer and the Underlying Securities Trustee, pursuant to which the Underlying
Securities were issued.

          "Liquidation Price" shall mean the price at which the Trustee sells
the Underlying Securities.

          "Maturity Date" shall have the meaning specified in Schedule I
hereto.

          "Moody's" shall mean Moody's Investors Service, Inc.

          "Optional Call" shall mean the call of the Certificates by the
Warrant Holder, in whole or in part, resulting from the exercise of Call
Warrants by the Warrant Holder, pursuant to Section 7(d) hereof.

          "Optional Exchange" shall mean the exchange of the Certificates by
the Trust for the Underlying Securities pursuant to Section 7(a) hereof.

          "Optional Exchange Date" shall mean any date on which Underlying
Securities subject to Optional Exchange are distributed to a
Certificateholder.

          "Ordinary Expenses" shall mean the Trustee's ordinary expenses and
overhead in connection with its services as Trustee, including the items
referred to in the definition of Ordinary Expenses in the Standard Terms.

          "Plan" means (a) an employee benefit plan (as defined in Section
3(3) of ERISA), (b) a plan described in Section 4975(e)(1) of the Code or (c)
any entity whose underlying assets are treated as assets of any such plan by
reason of such plan's investment in the entity.

          "Prepaid Ordinary Expenses" shall be zero for this Series.

          "Prospectus Supplement" shall mean the Prospectus Supplement, dated
March 18, 2003, relating to the Class A-1 Certificates.

          "QIB" shall have the meaning set forth in Section 3(e) hereof.

          "Rating Agency" shall mean Moody's and S&P.

                                      4
<PAGE>

          "Record Date" shall mean, with respect to each Distribution Date,
the day immediately preceding the related Distribution Date.

          "Required Percentage--Amendment" shall be 66-2/3% of the aggregate
Voting Rights, unless the subject amendment requires the vote of holders of
only one class of Certificates pursuant to the Standard Terms, in which case
66-2/3% of the Voting Rights of such Class.

          "Required Percentage--Direction of Trustee" shall be 66-2/3% of the
aggregate Voting Rights.

          "Required Percentage--Remedies" shall be 66-2/3% of the aggregate
Voting Rights.

          "Required Percentage--Removal" shall be 66-2/3% of the aggregate
Voting Rights.

          "Required Rating" shall mean, in the case of Moody's, the rating
assigned to the Underlying Securities by Moody's as of the Closing Date, and,
in the case of S&P, the rating assigned to the Underlying Securities by S&P as
of the Closing Date.

          "Resale Restriction Termination Date" shall have the meaning set
forth in Section 3(e) hereof.

          "Rule 144A" shall have the meaning set forth in Section 3(e) hereof.

          "S&P" shall mean Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc.

          "SEC Reporting Failure" shall mean the date determined by the
Depositor within a reasonable time following the Underlying Securities
Issuer's either (x) having stated in writing that it intends permanently to
cease filing periodic reports required under the Exchange Act or (y) having
failed to file all required periodic reports for one full year.

          "Securities Act" shall mean the United States Securities Act of
1933, as amended.

          "Series" shall mean Altria Debenture-Backed Series 2003-8.

          "Special Distribution Date" shall have the meaning specified in
Section 5 hereof.

          "Trustee Fee" shall mean the amount paid to the Trustee by the
Depositor on the Closing Date.

          "Trust Property" shall mean the Underlying Securities described on
Schedule I hereto, the Certificate Account and any additional Underlying
Securities sold to the Trust pursuant to Section 3(d) hereof.

                                      5
<PAGE>

          "Underlying Securities" shall mean $25,000,000 aggregate principal
amount of 73/4% Debentures due 2027, issued by the Underlying Securities
Issuer, as set forth in Schedule I attached hereto (subject to Section 3(d)
hereof).

          "Underlying Securities Issuer" shall mean Philip Morris Companies
Inc., predecessor to Altria Group, Inc.

          "Underlying Securities Trustee" shall mean The Chase Manhattan Bank.

          "Underwriters" shall mean Lehman Brothers Inc. and Prudential
Securities Incorporated.

          "Voting Rights" shall be allocated between the holders of the Class
A-1 Certificates and the holders of the Class A-2 Certificates, pro rata, in
proportion to the ratio of the Class A-1 Allocation to the Class A-2
Allocation. The Class A-1 Voting Rights will be allocated among Class A-1
Certificateholders in proportion to the then unpaid Certificate Principal
Balances of their respective Certificates. The Class A-2 Voting Rights will be
allocated among the Class A-2 Certificateholders in proportion to the then
outstanding notional amounts of their respective Certificates.

          "Warrant Agent" shall mean initially, U.S. Bank Trust National
Association.

          "Warrant Agent Agreement" shall mean that certain Warrant Agent
Agreement, dated as of the date hereof, between the Depositor and U.S. Bank
Trust National Association, as Warrant Agent and as Trustee, as the same may
be amended from time to time.

          "Warrant Holder" shall mean the holder of a Call Warrant.

      (b) The terms listed below are not applicable to this Series.

               "Accounting Date"

               "Administrative Fees"

               "Advance"

               "Allowable Expense Amounts"

               "Basic Documents"

               "Call Premium Percentage"

               "Credit Support"

               "Credit Support Instrument"

               "Credit Support Provider"

               "Cut-off Date"

                                      6
<PAGE>

               "Eligible Expense"

               "Eligible Investments"

               "Exchange Rate Agent"

               "Fixed Pass-Through Rate"

               "Floating Pass-Through Rate"

               "Guaranteed Investment Contract"

               "Letter of Credit"

               "Limited Guarantor"

               "Limited Guaranty"

               "Minimum Wire Denomination"

               "Pass-Through Rate"

               "Place of Distribution"

               "Purchase Price"

               "Required Premium"

               "Required Principal"

               "Requisite Reserve Amount"

               "Retained Interest"

               "Sale Procedures"

               "Sub-Administration Account"

               "Sub-Administration Agreement"

               "Sub-Administration Agent"

               "Surety Bond"

               "Swap Agreement"

               "Swap Counterparty"

               "Swap Distribution Amount"

                                      7
<PAGE>

               "Swap Guarantee"

               "Swap Guarantor"

               "Swap Receipt Amount"

               "Swap Termination Payment"

     Section 3. Designation of Trust and Certificates. The Trust created
hereby shall be known as the "Corporate Backed Trust Certificates, Altria
Debenture-Backed Series 2003-8 Trust." The Certificates evidencing certain
undivided ownership interests therein shall be known as "Corporate Backed
Trust Certificates, Altria Debenture-Backed Series 2003-8." The Certificates
shall consist of the Class A-1 Certificates and the Class A-2 Certificates
(together, the "Certificates"). The Trust is also issuing call warrants with
respect to the Certificates ("Call Warrants").

     (a) The Class A-1 Certificates shall be held through the Depository in
book-entry form and shall be substantially in the form attached hereto as
Exhibit A-1. The Class A-2 Certificates shall initially be held through the
Depository in book-entry form and, as set forth in Section 3(e) below, shall
be held in physical form or through the Depository in book-entry form and
shall be substantially in the form attached hereto as Exhibit A-2. The Class
A-1 Certificates shall be issued in denominations of $25. The Class A-2
Certificates shall be issued in minimum notional denominations of $100,000 and
integral multiples of $1 in excess thereof; provided, however, that on any
Call Date on which a Warrant Holder shall concurrently exchange Called
Certificates for a distribution of Underlying Securities in accordance with
the provisions of Section 7 hereof, Called Certificates may be issued in other
denominations. Except as provided in the Standard Terms and in paragraph (d)
in this Section, the Trust shall not issue additional Certificates or
additional Call Warrants or incur any indebtedness.

     (b) The Class A-1 Certificates consist of 1,000,000 Certificates having
an initial aggregate certificate principal balance (the "Certificate Principal
Balance") of $25,000,000. The Class A-2 Certificates are interest-only
Certificates and shall have an initial aggregate notional amount equal to the
initial Certificate Principal Balance of the Class A-1 Certificates.

     (c) The holders of the Class A-1 Certificates will be entitled to receive
on each Distribution Date the interest, if any, received on the Underlying
Securities, to the extent necessary to pay interest at a rate of 6.25% per
annum on the outstanding Certificate Principal Balance of the Class A-1
Certificates. The holders of the Class A-2 Certificates will be entitled to
receive on each Distribution Date the interest, if any, received on the
Underlying Securities, to the extent necessary to pay interest at a rate of
1.50% per annum on the outstanding notional amount of the Class A-2
Certificates, which notional amount shall be equal to the Certificate
Principal Balance of the Class A-1 Certificates. On the Distribution Date
occurring in July 2003, the Trustee shall cause the Trust to pay to the
Depositor the amount of interest accrued and paid on the Underlying Securities
from January 15, 2003, to but not including the Closing Date; provided,
however, that in the event an Optional Exchange Date shall occur prior to the
Distribution Date in July 2003, a pro rata portion of such amount shall be
paid to the Depositor on the Optional Exchange Date in accordance with the
provisions of Section 7(b)(ix) hereof. If

                                      8
<PAGE>

the Depositor is not paid any such amount on such date, it shall have a claim
for such amount. If Available Funds are insufficient to pay such amount, the
Trustee will pay the Depositor its pro rata share, based on the ratio the
amount owed to the Depositor bears to all amounts owed on the Certificates in
respect of accrued interest, of any proceeds from the recovery on the
Underlying Securities.

     (d) The Depositor may sell to the Trustee additional Underlying
Securities on any date hereafter upon at least 3 Business Days' notice to the
Trustee (or such shorter period as shall be mutually satisfactory to the
Depositor and the Trustee) and upon (i) satisfaction of the Rating Agency
Condition and (ii) delivery of an Opinion of Counsel to the effect that the
sale of such additional Underlying Securities will not cause the Trust to be
taxed as an association or publicly traded partnership taxable as a
corporation for federal income tax purposes. Each condition to be satisfied
with respect to a sale of Underlying Securities on or prior to the Closing
Date shall be satisfied with respect to a sale of additional Underlying
Securities no later than the date of sale thereof, each representation and
warranty set forth in the Standard Terms to be made on the Closing Date shall
be made on such date of sale, and from and after such date of sale, all
Underlying Securities held by the Trustee shall be held on the same terms and
conditions. Upon such sale to the Trustee, the Trustee shall deposit such
additional Underlying Securities in the Certificate Account, and shall
authenticate and deliver to the Depositor, on its order, Class A-1
Certificates in a Certificate Principal Balance, and Class A-2 Certificates in
a notional amount, equal to the principal amount of such additional Underlying
Securities, and the Call Warrants related thereto. Any such additional Class
A-1 Certificates and Class A-2 Certificates authenticated and delivered shall
have the same terms and rank pari passu with the corresponding classes of
Certificates previously issued in accordance with this Series Supplement.

     (e) No Class A-2 Certificate may be offered, resold, assigned or
otherwise transferred (including by pledge or hypothecation) at any time prior
to (x) the date which is two years or such shorter period of time as permitted
by Rule 144(k) under the Securities Act after the later of the original issue
date of such Class A-2 Certificates and the last date on which the Depositor
or any "affiliate" (as defined in Rule 144 under the Securities Act) of the
Depositor was the owner of such Class A-2 Certificates (or any predecessor
thereto) or (y) such later date, if any, as may be required by a change in
applicable securities laws (the "Resale Restriction Termination Date") unless
such offer, resale, assignment or transfer is (i) to the Trust, (ii) pursuant
to an effective registration statement under the Securities Act, (iii) to a
qualified institutional buyer (a "QIB"), as such term is defined in Rule 144A
promulgated under the Securities Act ("Rule 144A"), in accordance with Rule
144A or (iv) pursuant to another available exemption from registration
provided under the Securities Act (including transfers to Accredited
Investors), and, in each of cases (i) through (iv), in accordance with any
applicable securities laws of any state of the United States and other
jurisdictions. Prior to any offer, resale, assignment or transfer of any Class
A-2 Certificates in the manner described in clause (iii) above, the
prospective transferee and the prospective transferor shall be required to
deliver to the Trustee an executed copy of an Investment Letter with respect
to the Class A-2 Certificates to be transferred substantially in the form of
Exhibit C hereto and in the event the resale, assignment or transfer shall
involve Class A-2 Certificates then being held in physical form, such A-2
Certificates shall be delivered to the Trustee for cancellation and the
Trustee shall instruct the Depository to increase the aggregate notional
amount of the Class A-2 Certificates held in book-entry form by an amount
equal to the aggregate notional amount of Class A-2 Certificates so resold,
assigned or

                                      9
<PAGE>

transferred and to issue a beneficial interest in such global Class A-2
Certificates to such transferee. Prior to any offer, resale, assignment or
transfer of any Class A-2 Certificates in the manner described in clause (iv)
above, the prospective transferee and the prospective transferor shall be
required to deliver to the Trustee documentation certifying that the offer,
resale, assignment or transfer complies with the provisions of said clause
(iv) and, in the event any such Class A-2 Certificate shall then be held in
book-entry form and such resale, assignment or transfer shall be to an
Accredited Investor that is not a QIB, the Trustee shall instruct the
Depository to decrease the aggregate notional amount of the Class A-2
Certificates held in book-entry form and the Trustee shall authenticate and
deliver one or more Class A-2 Certificates in physical form in an aggregate
notional amount equal to the amount of Class A-2 Certificates resold, assigned
or transferred. In addition to the foregoing, each prospective transferee of
any Class A-2 Certificates in the manner contemplated by clause (iii) above
shall acknowledge, represent and agree as follows:

     (1)  The transferee (x) is a QIB, (y) is aware that the sale to it is
          being made in reliance on Rule 144A and (z) is acquiring such Class
          A-2 Certificates for its own account or for the account of a QIB.

     (2)  The transferee understands that the Class A-2 Certificates are being
          offered in a transaction not involving any public offering in the
          United States within the meaning of the Securities Act, and that the
          Class A-2 Certificates have not been and will not be registered
          under the Securities Act.

     (3)  The transferee agrees that (A) if in the future it decides to offer,
          resell, pledge or otherwise transfer the Class A-2 Certificates
          prior to the Resale Restriction Termination Date, such Class A-2
          Certificates shall only be offered, resold, assigned or otherwise
          transferred (i) to the Trust, (ii) pursuant to an effective
          registration statement under the Securities Act, (iii) to a QIB, in
          accordance with Rule 144A or (iv) pursuant to another available
          exemption from registration provided under the Securities Act
          (including any transfer to an Accredited Investor), and, in each of
          cases (i) through (iv), in accordance with any applicable securities
          laws of any state of the United States and other jurisdictions and
          (B) the transferee will, and each subsequent holder is required to,
          notify any subsequent purchaser of such Class A-2 Certificates from
          it of the resale restrictions referred to in clause (A) above.

     (f) The Class A-2 Certificates will, unless otherwise agreed by the
Depositor and the Trustee, bear a legend substantially to the following
effect:

          "THIS CLASS A-2 CERTIFICATE (OR ITS PREDECESSOR) HAS NOT
          BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
          AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE
          DISPOSED OF EXCEPT WHILE A REGISTRATION UNDER SUCH ACT IS
          IN EFFECT OR PURSUANT TO AN EXEMPTION THEREFROM UNDER SUCH
          ACT. THE CLASS A-2 CERTIFICATE REPRESENTED HEREBY MAY BE

                                 10
<PAGE>

          TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF THE
          SERIES SUPPLEMENT.

          EACH PURCHASER OF THIS CLASS A-2 CERTIFICATE IS HEREBY
          NOTIFIED THAT THE SELLER OF THIS CLASS A-2 CERTIFICATE MAY
          BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION
          5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER."

     Section 4. Trust Certificates. The Trustee hereby acknowledges receipt,
on or prior to the Closing Date, of:

     (a) the Underlying Securities set forth on Schedule I hereto; and

     (b) all documents required to be delivered to the Trustee pursuant to
Section 2.01 of the Standard Terms.

     Section 5. Distributions.

     (a) Except as otherwise provided in Sections 3(c), 5(c), 5(d) and 5(i),
on each applicable Distribution Date (or such later date as specified in
Section 9(f)), the Trustee shall apply Available Funds in the Certificate
Account as follows:

          (i) The Trustee will pay the interest portion of Available Funds:

               (1) first, to the Trustee, as reimbursement for any
          remaining Extraordinary Trust Expenses incurred by the
          Trustee in accordance with Section 6(b) below and approved
          by 100% of the Certificateholders; and

               (2) second, to the holders of the Class A-1
          Certificates and the holders of the Class A-2
          Certificates, interest accrued and unpaid on each such
          Class, pro rata in proportion to their entitlements
          thereto.

          (ii) the Trustee will pay the principal portion of Available Funds:

               (1) first, to the Trustee, as reimbursement for any
          remaining Extraordinary Trust Expenses incurred by the
          Trustee in accordance with Section 6(b) below and approved
          by 100% of the Certificateholders; and

               (2) second, to the holders of the Class A-1
          Certificates, the Certificate Principal Balance of the
          Class A-1 Certificates (the Class A-2 Certificates are not
          entitled to distributions of principal).

          (iii) any Available Funds remaining in the Certificate Account after
     the payments set forth in clauses 5(a)(i) and 5(a)(ii) above shall be
     paid to the Trustee as reasonable compensation for services rendered to
     the Depositor, up to $1,000.

                                 11
<PAGE>

          (iv) the Trustee will pay any Available Funds remaining in the
     Certificate Account after the distributions in clauses 5(a)(i) through
     5(a)(iii) above to the holders of the Class A-1 Certificates and Class
     A-2 Certificates pro rata in proportion to the interest rate on each such
     class of Certificates.

Any portion of the Available Funds (i) that does not constitute principal of,
or interest on, the Underlying Securities, (ii) that is not received in
connection with a tender offer, redemption, prepayment or liquidation of the
Underlying Securities and (iii) for which allocation by the Trustee is not
otherwise contemplated by this Series Supplement, shall be remitted by the
Trustee to the Depositor.

     (b) [Reserved].

     (c) Notwithstanding the foregoing, if the Underlying Securities are
redeemed, prepaid or liquidated in whole or in part for any reason other than
due to the occurrence of an Event of Default, an SEC Reporting Failure, or at
the Final Scheduled Distribution Date, the Trustee shall apply Available Funds
in the manner described in Section 5(h) in the following order of priority:

          (i)    first, to the Trustee, as reimbursement for any Extraordinary
                 Trust Expenses incurred by the Trustee in accordance with
                 Section 6(b) below and approved by 100% of the
                 Certificateholders;

          (ii)   second, to the holders of the Class A-1 Certificates, an
                 amount equal to the principal amount of Underlying Securities
                 so redeemed, prepaid or liquidated plus accrued and unpaid
                 interest on the amount of Class A-1 Certificates so redeemed;

          (iii)  third, to the holders of the Class A-2 Certificates, an
                 amount not to exceed the present value of all amounts that
                 would otherwise have been payable on the Class A-2
                 Certificates for the period from the date of such redemption
                 or prepayment to the Final Scheduled Distribution Date using
                 a discount rate of 6.25% per annum, assuming no
                 delinquencies, deferrals, redemptions or prepayments on the
                 Underlying Securities;

          (iv)   fourth, to the Trustee, as reasonable compensation for
                 services rendered to the Depositor, any remainder up to
                 $1,000; and

          (v)    fifth, any remainder to the holders of the Class A-1
                 Certificates and the Class A-2 Certificates pro rata in
                 proportion to the ratio of the Class A-1 Allocation to the
                 Class A-2 Allocation.

     (d) Notwithstanding the foregoing, if the Underlying Securities are
redeemed, prepaid or liquidated in whole or in part due to the occurrence of
an Event of Default, the Trustee shall apply Available Funds to the holders of
the Class A-1 Certificates and the holders of the Class A-2 Certificates in
accordance with the ratio of the Class A-1 Allocation to the Class A-2
Allocation.

                                 12
<PAGE>

     (e) Unless otherwise instructed by holders of Certificates representing a
majority of the Voting Rights, thirty (30) days after giving notice pursuant
to Section 8 hereof, the Trustee shall sell the Underlying Securities pursuant
to Section 13 hereof and deposit the Liquidation Proceeds, if any, into the
Certificate Account for distribution not later than two (2) Business Days
after the receipt of immediately available funds in accordance with Section
5(d) hereof, provided, however, that if any Warrant Holder designates any day
on or prior to the proposed sale date as a Call Date and Optional Exchange
Date pursuant to Section 7, the portion of Underlying Securities related to
such Optional Exchange shall not be sold but shall be distributed to the
Warrant Holder pursuant to Section 7 and the Warrant Agent Agreement.

     (f) If the Trustee receives non-cash property in respect of the
Underlying Securities as a result of a payment default on the Underlying
Securities (including from the sale thereof), the Trustee will promptly give
notice to the Depository, or for any Certificates which are not then held by
DTC or any other depository, directly to the registered holders of the
Certificates then outstanding and unpaid and to the Warrant Agent. Such notice
shall state that the Trustee shall, and the Trustee shall, not later than 30
days after the receipt of such property, allocate and distribute such property
to the holders of Class A-1 Certificates and Class A-2 Certificates then
outstanding and unpaid (after deducting the costs incurred in connection
therewith) in accordance with Section 5(d) hereof. Property other than cash
will be liquidated by the Trustee, and the proceeds thereof distributed in
cash, only to the extent necessary to avoid distribution of fractional
securities to Certificateholders. In-kind distribution of such property to
Certificateholders, based on the market value of such property as of the date
of distribution to Certificateholders, will be deemed to reduce the
Certificate Principal Balance of the Class A-1 Certificates on a
dollar-for-dollar basis. The outstanding notional amounts of the Class A-2
Certificates shall be reduced, pro rata among all Class A-2
Certificateholders, by an amount equal to the amount by which the Certificate
Principal Balance of the Class A-1 Certificates is reduced.

     (g) Subject to Section 9(f) hereof, to the extent Available Funds are
insufficient to make any scheduled interest or principal payments on any class
of Certificates on any Distribution Date, any shortfall will be carried over
and will be distributed on the next Distribution Date (or date referred to in
Section 5(h) hereof) on which sufficient funds are available to pay such
shortfall.

     (h) If a payment with respect to the Underlying Securities is made to the
Trustee (i) after the payment date of the Underlying Securities on which such
payment was due or (ii) in connection with redemption, prepayment or
liquidation, in whole or in part, of the Underlying Securities for any reason
other than due to the occurrence of an Event of Default, an SEC Reporting
Failure or at their maturity, the Trustee will distribute any such amounts
received in accordance with the provisions of this Section 5 on the next
occurring Business Day (a "Special Distribution Date") as if the funds had
constituted Available Funds on the Distribution Date immediately preceding
such Special Distribution Date; provided, however, that the Record Date for
such Special Distribution Date shall be one Business Day prior to the day on
which the related payment was received with respect to the Underlying
Securities.

     (i) Notwithstanding Section 3.12 of the Standard Terms, upon the
occurrence of an SEC Reporting Failure, the Depositor shall within a
reasonable time instruct the Trustee to

                                 13
<PAGE>

     (i) notify the Warrant Agent that the Underlying Securities are proposed
to be sold and that any Call Warrants and related Optional Exchange rights
must be exercised no later than the date specified in the notice (which shall
be not less than ten Business Days after the date of such notice) and (ii) to
the extent that the Warrant Holders fail to exercise their Call Warrants and
related Optional Exchange rights on or prior to such date, to sell the
Underlying Securities and distribute the proceeds of such sale to the
Certificateholders in accordance with the following order of priority: first,
to the Trustee, as reimbursement for any Extraordinary Trust Expenses incurred
by the Trustee in accordance with Section 6(b) below and approved by 100% of
the Certificateholders; and second, any remainder to the holders of the Class
A-1 Certificates and the Class A-2 Certificates pro rata in proportion to the
ratio of the Class A-1 Allocation to the Class A-2 Allocation, as determined
by the Calculation Agent.

     (j) On any date on which Underlying Securities are redeemed, prepaid or
liquidated for any reason, the aggregate outstanding notional amount of the
Class A-2 Certificates shall be reduced by an amount equal to the principal
amount of the Underlying Securities so redeemed, prepaid or liquidated, the
reduction for the Class A-2 Certificates to be allocated pro rata among all
Class A-2 Certificates.

     Section 6. Trustee's Fees.

     (a) As compensation for its services hereunder, the Trustee shall be
entitled to the Trustee Fee and any amounts payable under clauses 5(a)(iii)
and 5(b)(iv) above. The Trustee Fee shall be paid by the Depositor and not
from Trust Property. The Trustee shall bear all Ordinary Expenses. Failure by
the Depositor to pay such amount shall not entitle the Trustee to any payment
or reimbursement from the Trust, nor shall such failure release the Trustee
from the duties it is required to perform under the Trust Agreement.

     (b) Extraordinary Expenses shall not be paid out of the Trust Property
unless all the holders of the Class A-1 Certificates and Class A-2
Certificates then outstanding have directed the Trustee to incur such
Extraordinary Expenses. The Trustee may incur other Extraordinary Expenses if
any lesser percentage of the Certificateholders requesting such action
pursuant hereto reimburse the Trustee for the cost thereof from their own
funds in advance. If Extraordinary Expenses are not approved unanimously as
set forth in the first sentence of this Section 6(b), such Extraordinary
Expenses shall not be an obligation of the Trust, and the Trustee shall not
file any claim against the Trust therefor notwithstanding failure of
Certificateholders to reimburse the Trustee.

     Section 7. Optional Call; Optional Exchange.

     (a) On (A) any Distribution Date, (B) any date on which a tender offer
for some or all of the Underlying Securities is consummated or (C) any date on
which the Underlying Securities are to be redeemed by the Underlying
Securities Issuer, any holder of Class A-1 Certificates, Class A-2
Certificates and the related Call Warrants, if Call Warrants related to such
Certificates are outstanding, may exchange such Certificates and, if
applicable, Call Warrants, for a distribution of Underlying Securities
representing the same percentage of the Underlying Securities as such
Certificates represent of all outstanding Certificates. On any Call Date, any
Warrant Holder may exchange Called Certificates for a distribution of
Underlying Securities

                                 14
<PAGE>

representing the same percentage of Underlying Securities as such Called
Certificates represent of all outstanding Certificates; provided that any such
exchange shall either (x) result from an exercise of all Call Warrants owned
by such Warrant Holder or (y) occur on a Call Date on which such Warrant
Holder, alone or together with one or more other Warrant Holders, shall
exchange Called Certificates relating to Underlying Securities having an
aggregate principal amount equal to or in excess of the product of (i) 0.1 and
(ii) the aggregate principal amount of the Underlying Securities deposited
into the Trust on the Closing Date.

     (b) The following conditions shall apply to any Optional Exchange.

          (i) A notice specifying the number of Certificates being surrendered
     and the Optional Exchange Date shall be delivered to the Trustee no less
     than 5 days (or such shorter period acceptable to the Trustee) but not
     more than 30 days before the Optional Exchange Date; provided that for an
     Optional Exchange to occur on a Call Date, unless otherwise specified
     therein, the Call Notice shall be deemed to be the notice required
     hereunder.

          (ii) Certificates and, if applicable, the Call Warrants, shall be
     surrendered to the Trustee no later than 10:00 a.m. (New York City time)
     on the Optional Exchange Date; provided that for an Optional Exchange to
     occur on a Call Date, payment of the Call Price to the Warrant Agent
     pursuant to Section 1.1(a)(iii) of the Warrant Agent Agreement shall
     satisfy the requirement to surrender Certificates.

          (iii) Class A-1 Certificates and Class A-2 Certificates representing
     a like percentage of all Class A-1 Certificates and Class A-2
     Certificates shall be surrendered.

          (iv) The Trustee shall have received an opinion of counsel stating
     that the Optional Exchange would not cause the Trust to be treated as an
     association or publicly traded partnership taxable as a corporation for
     federal income tax purposes.

          (v) If the Certificateholder is the Depositor or any Affiliate of
     the Depositor, (1) the Trustee shall have received a certification from
     the Certificateholder that any Certificates being surrendered have been
     held for at least six months, and (2) the Certificates being surrendered
     may represent no more than 5% (or 25% in the case of Certificates
     acquired by the Underwriters but never distributed to investors) of the
     then outstanding Certificates.

          (vi) The Trustee shall not be obligated to determine whether an
     Optional Exchange complies with the applicable provisions for exemption
     under Rule 3a-7 of the Investment Company Act of 1940, as amended, or the
     rules or regulations promulgated thereunder.

          (vii) The provisions of Section 4.07 of the Standard Terms shall not
     apply to an Optional Exchange pursuant to this Section 7(b). This Section
     7(b) shall not provide any person with a lien against, an interest in or
     a right to specific performance with respect to the Underlying
     Securities; provided that satisfaction of the conditions set forth in
     this Section 7(b) shall entitle the Certificateholder or Warrant Holder,
     as applicable, to a distribution thereof.

                                 15
<PAGE>

          (viii) The aggregate principal balance, or notional amount, as the
     case may be, of Certificates exchanged in connection with any Optional
     Exchange pursuant to this Section shall be in an amount that will entitle
     the Certificateholders thereof to Underlying Securities in an even
     multiple of the minimum denomination of such Underlying Securities.

          (ix) In the event such Optional Exchange shall occur prior to the
     Distribution Date in July 2003, the Certificateholders shall have paid to
     the Trustee, for distribution to the Depositor, on the Optional Exchange
     Date an amount equal to the sum obtained by multiplying the amount of
     accrued interest on the Underlying Securities from January 15, 2003
     through, but excluding, the Closing Date by a fraction, the numerator of
     which shall be the number of Certificates being exchanged on such
     Optional Exchange Date and the denominator of which shall be the total
     number of Certificates.

     (c) Concurrently with the execution of this Series Supplement, the
Trustee, on behalf of the Trust, shall execute the Warrant Agent Agreement and
the Call Warrants, dated as of the date hereof and substantially in the form
of Exhibit B hereto, initially evidencing all of the Call Warrants. The
Trustee shall perform the Trust's obligations under the Warrant Agent
Agreement and the Call Warrants in accordance with their respective terms.

     (d) Call Warrants may be exercised by the Warrant Holder in whole or in
part on any Call Date. In addition to the conditions set forth in Section 1.1
of the Warrant Agent Agreement, the following conditions shall apply to any
Optional Call.

          (i) An opinion of counsel to the Warrant Holder shall have been
     delivered to the Rating Agencies, in form satisfactory to the Rating
     Agencies, indicating that payment of the Call Price shall not be
     recoverable as a preferential transfer or fraudulent conveyance under the
     United States Bankruptcy Code. Such opinion may contain customary
     assumptions and qualifications.

          (ii) The Warrant Holder shall have provided a certificate of
     solvency to the Trustee.

          (iii) Upon receipt of a Call Notice, the Trustee shall provide a
     conditional call notice to the Depository not less than 3 Business Days
     prior to the Call Date.

          (iv) Delivery of a Call Notice does not give rise to an obligation
     on the part of the Warrant Holder to pay the Call Price. If, by 10:00
     a.m. (New York City time) on the Call Date, the Warrant Holder has not
     paid the Call Price, except in connection with a Call Notice relating to
     a tender offer for or redemption of the Underlying Securities, then the
     Call Notice shall automatically expire and none of the Warrant Holder,
     the Warrant Agent or the Trustee shall have any obligation with respect
     to the Call Notice. The expiration of a Call Notice shall in no way
     affect the Warrant Holder's right to deliver a Call Notice at a later
     date. The Call Price for a call in connection with a tender offer or
     redemption shall be deducted from the proceeds of a tender offer or
     redemption by the Trust pursuant to Section 7(g)(iii) or Section
     7(h)(iii), as applicable.

                                 16
<PAGE>

          (v) Subject to receipt of the Call Price, the Trustee shall pay the
     applicable portion of the Call Price to the Class A-1 and Class A-2
     Certificateholders on the Call Date. The Call Price for each Class of
     Certificates in respect of partial calls shall be allocated pro rata to
     the Certificateholders of such Class.

          (vi) The Trustee shall not consent to any amendment or modification
     of this Agreement (including the Standard Terms) which would adversely
     affect the Warrant Holders (including, without limitation, any alteration
     of the timing or amount of any payment of the Call Price or any other
     provision of this Agreement in a manner adverse to the Warrant Holders)
     without the prior written consent of 100% of the Warrant Holders. For
     purposes of this clause, no amendment, modification or supplement
     required to provide for any purchase by the Trustee of additional
     Underlying Securities and authentication and delivery by the Trustee of
     additional Certificates and Call Warrants pursuant to Section 3(d) shall
     be deemed to adversely affect the Warrant Holders.

          (vii) The Trustee shall not be obligated to determine whether an
     Optional Call complies with the applicable provisions for exemption under
     Rule 3a-7 of the Investment Company Act of 1940, as amended, or the rules
     or regulations promulgated thereunder.

     (e) This Section 7 shall not provide the Warrant Holder with a lien
against, an interest in or a right to specific performance with respect to the
Underlying Securities; provided that satisfaction of the conditions set forth
in Section 7(b) shall entitle the Certificateholders or the Warrant Holders,
as applicable, to a distribution of the Underlying Securities.

     (f) The rights of the Certificateholders under the Trust Agreement and
the Certificates are limited by the terms, provisions and conditions of the
Trust Agreement, the Warrant Agent Agreement and the Call Warrants with
respect to the exercise of the Call Warrants by the Warrant Holder. The
Certificateholders, by their acceptance of Certificates, covenant and agree to
tender any and all Called Certificates to the Trustee upon the Warrant
Holder's exercise of Call Warrants and payment of the Call Price for such
Certificates in accordance with the provisions hereof and of the Warrant Agent
Agreement.

     (g) (i) If the Trustee receives notice of a tender offer for some or all
of the Underlying Securities, the Trustee shall within one Business Day notify
the Warrant Agent and forward to the Warrant Agent copies of all materials
received by the Trustee in connection therewith. If the Trustee receives a
Call Notice from any Warrant Holder no later than five Business Days prior to
the expiration of the tender offer acceptance period that such Warrant Holder
desires to exercise all or a portion of its Call Warrants in connection with
the consummation of any such tender offer, then the Trustee shall tender, in
compliance with the tender offer requirements, an amount of Underlying
Securities equal to the amount of Underlying Securities that would be
distributable to the Warrant Holder with respect to an Optional Exchange of
the Called Certificates called by such Warrant Holder; provided that any
Optional Call or Optional Exchange undertaken in connection with any such
tender offer shall be subject to the provisions of Section 7 hereof.

                                 17
<PAGE>

          (ii) The Call Date and Optional Exchange Date for any exercise of
     Call Warrants in connection with a tender offer shall be deemed to be the
     Business Day on which such Underlying Securities are accepted for payment
     and paid for.

          (iii) The Call Price shall be deducted from the tender offer
     proceeds and paid to Certificateholders in connection with Section
     7(d)(v), and the excess of the tender offer proceeds over the Call Price
     shall be paid to the exercising Warrant Holders pro rata in respect to
     their proportionate exercises of Call Warrants or, if the Call Price
     exceeds the tender offer proceeds, the amount of such excess shall be
     paid by the exercising Warrant Holders pro rata in respect to their
     proportionate exercises of Call Warrants.

          (iv) If fewer than all tendered Underlying Securities are accepted
     for payment and paid for, (A) the amount of Call Warrants exercised shall
     be reduced to an amount that corresponds to a number of Certificates that
     could be exchanged in an Optional Exchange for the Underlying Securities
     accepted for payment and paid for (without regard to any restrictions on
     the amount to be exchanged, so long as such restrictions would have been
     satisfied had all tendered Underlying Securities been accepted for
     payment and paid for); (B) each Warrant Holder's exercise shall be
     reduced by its share (proportionate to the amount specified in its
     exercise notice) of the amount of Underlying Securities not accepted for
     payment and paid for; (C) the Call Price shall be determined after giving
     effect to the reduction specified in clause (B); (D) the Call Warrants
     that relate to the reduction specified in clause (B) shall remain
     outstanding; and (E) the excess of the tender offer proceeds over the
     Call Price shall be allocated in proportion to the amount of Call
     Warrants deemed exercised as set forth in clause (A) above or, if the
     Call Price exceeds the tender offer proceeds the amount of such excess
     shall be paid by the exercising Warrant Holders pro rata in respect to
     their proportionate exercises of Call Warrants.

          (v) If the tender offer is terminated by the Underlying Securities
     Issuer or any other tender offeror without consummation thereof or if all
     tenders by the Trust of Underlying Securities are otherwise rejected,
     then (1) the Call Notices will be of no further force and effect, and (2)
     any Call Warrants relating to such Call Notices will not be exercised and
     will remain outstanding.

     (h) (i) If the Trustee receives notice of a redemption by the Underlying
Securities Issuer for some or all of the Underlying Securities, the Trustee
shall, within three Business Days, notify the Warrant Agent and forward to the
Warrant Agent copies of all materials received by the Trustee in connection
therewith. Any Warrant Holder that desires to call Underlying Securities in
connection with a redemption by the Underlying Securities Issuer shall send a
Call Notice to the Trustee no later than seven Business Days prior to the date
such Underlying Securities are to be redeemed.

     (ii) The Call Date and Optional Exchange Date for any exercise of Call
Warrants in connection with a redemption by the Underlying Securities Issuer
shall be deemed to be the Business Day on which such Underlying Securities are
redeemed by the Underlying Securities Issuer.

                                      18
<PAGE>

          (iii) The Call Price shall be deducted from the redemption proceeds
and paid to the holders of the Class A-1 Certificates and Class A-2
Certificates pro rata in accordance with the provisions of Section 7(d)(v),
and the excess of the redemption proceeds over the Call Price shall be paid to
the exercising Warrant Holders pro rata in respect to their proportionate
exercises of Call Warrants.

          (iv) If fewer than all Underlying Securities are redeemed by the
Underlying Securities Issuer and the amount of Call Warrants exercised
corresponds to a number of Class A-1 and Class A-2 Certificates that could be
exchanged in an Optional Exchange for a principal amount of Underlying
Securities that exceeds the principal amount of Underlying Securities actually
redeemed, then, unless otherwise directed by any exercising Warrant Holder,
(A) the amount of Call Warrants exercised shall be reduced to an amount that
corresponds to a number of Class A-1 and Class A-2 Certificates that could be
exchanged in an Optional Exchange for the principal amount of Underlying
Securities redeemed by the Underlying Securities Issuer (without regard to any
restrictions on the amount to be exchanged); (B) each Warrant Holder's
exercise shall be reduced by its share (proportionate to the amount specified
in its exercise notice) of the amount of such excess; (C) the Call Price shall
be determined after giving effect to the reduction specified in clause (B);
(D) the Call Warrants that relate to the reduction specified in clause (B)
shall remain outstanding; and (E) the excess of the redemption proceeds over
the Call Price shall be allocated in proportion to the amount of Call Warrants
deemed exercised as set forth in clause (A) above.

          (v) If the Underlying Securities are not redeemed by the Underlying
Securities Issuer for any reason, then (1) the Call Notices will be of no
further force and effect, and (2) any Call Warrants relating to such Call
Notices will not be exercised and will remain outstanding.

     Section 8. Notices of Events of Default.

          As promptly as practicable after, and in any event within 30 days
after, the occurrence of any Event of Default actually known to the Trustee,
the Trustee shall give notice of such Event of Default to the Depository, or,
if any Certificates are not then held by DTC or any other depository, directly
to the registered holders of such Certificates, and to the Warrant Agent.
However, except in the case of an Event of Default relating to the payment of
principal of or interest on any of the Underlying Securities, the Trustee will
be protected in withholding such notice if in good faith it determines that
the withholding of such notice is in the interest of the Certificateholders.

     Section 9. Miscellaneous.

     (a) The provisions of Section 4.04, Advances, of the Standard Terms shall
not apply to the Altria Debenture-Backed Series 2003-8 Certificates.

     (b) The provisions of Section 4.07, Optional Exchange, of the Standard
Terms shall not apply to the Altria Debenture-Backed Series 2003-8
Certificates.

     (c) The Trustee shall simultaneously forward reports to
Certificateholders pursuant to Section 4.03 of the Standard Terms and to the
New York Stock Exchange.

                                      19
<PAGE>

     (d) Except as expressly provided herein, the Certificateholders shall not
be entitled to terminate the Trust or cause the sale or other disposition of
the Underlying Securities.

     (e) The provisions of Section 3.07(d) of the Standard Terms shall not
apply to the Altria Debenture-Backed Series 2003-8 Certificates.

     (f) If the Trustee has not received payment with respect to a Collection
Period on the Underlying Securities on or prior to the related Distribution
Date, such distribution will be made promptly upon receipt of such payment. No
additional amounts shall accrue on the Certificates or be owed to
Certificateholders as a result of such delay; provided, however, that any
additional interest owed and paid by the Underlying Securities Issuer as a
result of such delay shall be paid to the Class A-1 Certificateholders and
Class A-2 Certificateholders pro rata in proportion to their respective
entitlements to such delayed payments.

     (g) The outstanding principal balance, or notional amount, as the case
may be, of the Certificates shall not be reduced by the amount of any Realized
Losses (as defined in the Standard Terms).

     (h) The Trust may not engage in any business or activities other than in
connection with, or relating to, the holding, protecting and preserving of the
Trust Property and the issuance of the Certificates and the Call Warrants, and
other than those required or authorized by the Trust Agreement or incidental
and necessary to accomplish such activities. The Trust may not issue or sell
any certificates or other obligations other than the Certificates and the Call
Warrants or otherwise incur, assume or guarantee any indebtedness for money
borrowed. Notwithstanding Section 3.05 of the Standard Terms, funds on deposit
in the Certificate Account shall not be invested. Section 2.01(f) of the
Standard Terms shall be superseded by this provision.

     (i) Notwithstanding anything in the Trust Agreement to the contrary, the
Trustee may be removed upon 60 days prior written notice delivered by the
holders of Class A-1 Certificates and Class A-2 Certificates representing the
Required Percentage--Removal.

     (j) In the event that the Internal Revenue Service challenges the
characterization of the Trust as a grantor trust, the Trustee shall then file
such forms as the Depositor may specify to establish the Trust's election
pursuant to Section 761 of the Code to exclude the Trust from the application
of Subchapter K of the Code and is hereby empowered to execute such forms on
behalf of the Certificateholders.

     (k) Notwithstanding anything in the Standard Terms to the contrary, the
Trustee, upon written direction by the Depositor, will execute the
Certificates.

     (l) In relation to Section 7.01(f) of the Standard Terms, any periodic
reports filed by the Trustee pursuant to the Exchange Act in accordance with
the customary practices of the Depositor, need not contain any independent
reports.

     (m) Notwithstanding anything in the Trust Agreement to the contrary, the
Trustee will have no recourse to the Underlying Securities.

                                      20
<PAGE>

     (n) A Plan fiduciary, whether or not a Certificateholder at such time,
may request in writing that the Trustee provide such Plan fiduciary with such
information as shall be necessary for it to determine whether any of the Call
Warrant holders is (i) a "party in interest" (within the meaning of ERISA,
Section 3(14)); or (ii) a "disqualified person" within the meaning of Internal
Revenue Code ("Code") Section 4975(e)(2) with respect to any employee benefit
plan or Plan identified to the Trustee by such Plan fiduciary at the time such
request is made in order for the Plan fiduciary to determine whether an
investment in the Certificates by such Plan is or would be permissible under
ERISA or the Code. Any such written request of a Plan fiduciary shall be
accompanied by a certification of the Plan fiduciary, opinion of counsel
experienced in such issues, and such other documentation as the Trustee may
require, in order to establish that such disclosure is necessary for the Plan
fiduciary to determine compliance with ERISA and the Code, as well as a
confidentiality agreement, whereby the Plan fiduciary agrees not to disclose
the identity of any Call Warrant holders except to any legal or other experts
as necessary to make such determination. The holder of a Call Warrant shall
upon reasonable request of the Trustee, in order for the Trustee to satisfy
its obligations to a Plan fiduciary, provide the Trustee with any one or more
of the following, in the sole discretion of the Call Warrant holder: (i) a
certificate that each of the Call Warrant holders is not (x) a "party in
interest" (within the meaning of ERISA, Section 3(14)) with respect to any
"employee benefit plan" as defined in ERISA, Section 3(3); or (y) a
"disqualified person" within the meaning of Internal Revenue Code Section
4975(e)(2) with respect to a "Plan" as defined in Code Section 4975(e)(1)
except in each case with respect to plans sponsored by the Call Warrant holder
or its affiliates which cover employees of the Call Warrant holder and/or such
affiliates; (ii) a certificate that each of the Call Warrant holders is not
such a "party in interest" or "disqualified person" with respect to any
employee benefit plan or Plan identified to the Trustee by such Plan fiduciary
at the time such request is made; or (iii) a written consent to the limited
disclosure of the respective Call Warrant holder's identity to a specific Plan
fiduciary solely for purposes of allowing the Trustee to satisfy its
obligations to a Plan fiduciary.

     (o) The Trust will not merge or consolidate with any other entity without
confirmation from each Rating Agency that such merger or consolidation will
not result in the qualification, reduction or withdrawal of its then-current
rating on the Certificates.

     (p) All directions, demands and notices hereunder or under the Standard
Terms shall be in writing and shall be delivered as set forth below (unless
written notice is otherwise provided to the Trustee).

          If to the Depositor, to:

               Lehman ABS Corporation
               745 Seventh Avenue
               New York, New York  10019
               Attention:  Structured Credit Trading
               Telephone:  (212) 526-6575
               Facsimile:   (201) 508-4621

                                      21
<PAGE>

          If to the Trustee or the Warrant Agent, to:

               U.S. Bank Trust National Association
               100 Wall Street
               New York, New York 10005
               Attention: Corporate Trust
               Telephone: (646) 835-5500
               Facsimile: (212) 809-5459

               If to the Rating Agencies, to:

               Moody's Investors Service, Inc.
               99 Church Street
               New York, New York  10007
               Attention:  CBO/CLO Monitoring Department
               Telephone:  (212) 553-1494
               Facsimile:  (212) 553-0355

     and to:

               Standard & Poor's Ratings Services
               55 Water Street
               New York, New York  10041
               Attention:  Structured Finance Surveillance Group
               Telephone:  (212) 438-2482
               Facsimile:  (212) 438-2664

          If to the New York Stock Exchange, to:

               New York Stock Exchange, Inc.
               20 Broad Street
               New York, New York  10005
               Attention:  Jonathan M. Kiesel, Senior Listing Representative
               Telephone:  212-656-5090
               Facsimile:  (212) 656-5465

          Copies of all directions, demands and notices required to be given
to the Certificateholders hereunder or under the Standard Terms will also be
given to the Warrant Holders in writing as set forth in this Section 9, and
copies of all directions, demands and notices required to be given to the
Trustee hereunder or under the Standard Terms will also be given to the
Warrant Agent in writing as set forth in this Section 9(p).

     (q) Each of the representations, covenants and agreements made herein by
each of the Depositor and the Trustee are for the benefit of the
Certificateholders and the Warrant Holders.

     (r) The provisions of Section 2.01(d)(iii) of the Standard Terms shall
not apply to the Altria Debenture-Backed Series 2003-8 Certificates and the
following shall be deemed to be inserted in its place:

                                      22
<PAGE>

          "at the time of delivery of the Underlying Securities, the
Depositor owns such Underlying Securities, has the right to transfer its
interest in such Underlying Securities and such Underlying Securities are free
and clear of any lien, pledge, encumbrance, right, charge, claim or other
security interest; and"

     Section 10. Governing Law. THIS SERIES SUPPLEMENT AND THE TRANSACTIONS
DESCRIBED HEREIN SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED
WITHIN THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CHOICE OF LAWS
PROVISIONS THEREOF.

     Section 11. Counterparts. This Series Supplement may be executed in any
number of counterparts, each of which shall be deemed to be an original, and
all such counterparts shall constitute but one and the same instrument.

     Section 12. Termination of the Trust. The Trust shall terminate upon the
earliest to occur of (i) the payment in full at maturity or sale by the Trust
after a payment default or an acceleration or other early payment of the
Underlying Securities and the distribution in full of all amounts due to the
Class A-1 Certificateholders and Class A-2 Certificateholders; (ii) the
exercise of all outstanding Call Warrants by the Warrant Holder; (iii) the
Final Scheduled Distribution Date and (iv) the expiration of 21 years from the
death of the last survivor of the descendants of Joseph P. Kennedy, the late
Ambassador of the United States to the Court of St. James, living on the date
hereof.

     Section 13. Sale of Underlying Securities; Optional Exchange. In the
event of a sale of the Underlying Securities pursuant to Section 5(e) hereof
or pursuant to the instructions of the Warrant Agent under Section 1.2 of the
Warrant Agent Agreement, the Trustee shall solicit bids for the sale of the
Underlying Securities with settlement thereof on or before the third (3rd)
Business Day after such sale from three leading dealers in the relevant
market. Any of the following dealers (or their successors) shall be deemed to
qualify as leading dealers: (1) Credit Suisse First Boston Corporation, (2)
Goldman, Sachs & Co., (3) Merrill Lynch, Pierce, Fenner & Smith Incorporated,
(4) UBS Warburg LLC, (5) Salomon Smith Barney Inc., and (6) except in the case
of a sale related to the exercise of Call Warrants by the Depositor or any
Affiliate thereof, Lehman Brothers Inc. The Trustee shall not be responsible
for the failure to obtain a bid so long as it has made reasonable efforts to
obtain bids. If a bid for the sale of the Underlying Securities has been
accepted by the Trustee but the sale has failed to settle on the proposed
settlement date, the Trustee shall request new bids from such leading dealers.
In the event of an Optional Exchange, the Trustee shall only deliver the
Underlying Securities to the purchaser of such Underlying Securities or sell
the Underlying Securities pursuant to this Section 13, as the case may be,
against payment in same day funds deposited into the Certificate Account.

     Section 14. Amendments. Notwithstanding anything in the Trust Agreement
to the contrary, in addition to the other restrictions on modification and
amendment contained therein, the Trustee shall not enter into any amendment or
modification of the Trust Agreement which would adversely affect in any
material respect the interests of the holders of any class of Certificates
without the consent of the holders of 100% of such class of Certificates;
provided, however, that no such amendment or modification will be permitted
which would cause the Trust to be taxed as an association or publicly traded
partnership taxable as a corporation for federal

                                      23
<PAGE>

income tax purposes. Unless otherwise agreed, the Trustee shall provide five
Business Days written notice to each Rating Agency before entering into any
amendment or modification of the Trust Agreement pursuant to this Section 14.

     Section 15. Voting of Underlying Securities, Modification of Indenture.

     (a) The Trustee, as holder of the Underlying Securities, has the right to
vote and give consents and waivers in respect of the Underlying Securities as
permitted by the Depository and except as otherwise limited by the Trust
Agreement. In the event that the Trustee receives a request from the
Depository, the Underlying Securities Trustee or the Underlying Securities
Issuer for its consent to any amendment, modification or waiver of the
Underlying Securities, the Indenture or any other document thereunder or
relating thereto, or receives any other solicitation for any action with
respect to the Underlying Securities, the Trustee shall mail a notice of such
proposed amendment, modification, waiver or solicitation to each
Certificateholder of record as of such date. The Trustee shall request
instructions from the Certificateholders as to whether or not to consent to or
vote to accept such amendment, modification, waiver or solicitation. The
Trustee shall consent or vote, or refrain from consenting or voting, in the
same proportion (based on the relative outstanding Certificate Principal
Balances of the Class A-1 Certificates) as the Certificates of the Trust were
actually voted or not voted by the Certificateholders thereof as of a date
determined by the Trustee prior to the date on which such consent or vote is
required; provided, however, that, notwithstanding anything in the Trust
Agreement to the contrary, the Trustee shall at no time vote on or consent to
any matter (i) unless such vote or consent would not (based on an opinion of
counsel) cause the Trust to be taxed as an association or publicly traded
partnership taxable as a corporation under the Code, (ii) which would alter
the timing or amount of any payment on the Underlying Securities, including,
without limitation, any demand to accelerate the Underlying Securities, except
in the event of a default under the Underlying Securities or an event which
with the passage of time would become an event of default under the Underlying
Securities and with the unanimous consent of holders of all outstanding Class
A-1 Certificates, Class A-2 Certificates and all Warrant Holders, or (iii)
which would result in the exchange or substitution of any of the outstanding
Underlying Securities pursuant to a plan for the refunding or refinancing of
such Underlying Securities except in the event of a default under the
Indenture and only with the consent of Certificateholders representing 100% of
the Class A-1 Certificates, 100% of the Class A-2 Certificates and 100% of the
Warrant Holders. The Trustee shall have no liability for any failure to act
resulting from Certificateholders' late return of, or failure to return,
directions requested by the Trustee from the Certificateholders.

     (b) In the event that an offer is made by the Underlying Securities
Issuer to issue new obligations in exchange and substitution for any of the
Underlying Securities, pursuant to a plan for the refunding or refinancing of
the outstanding Underlying Securities or any other offer is made for the
Underlying Securities, the Trustee shall notify the Class A-1
Certificateholders, Class A-2 Certificateholders and the Warrant Holders of
such offer promptly. Subject to the rights of the Warrant Holders to exercise
Call Warrants in connection with a tender offer for the Underlying Securities,
the Trustee must reject any such offer unless an Underlying Securities event
of default has occurred and the Trustee is directed by the affirmative vote of
the holders of 100% of the Class A-1 Certificates, Class A-2 Certificates and
Call Warrants to accept such offer and the Trustee has received the tax
opinion described above. If pursuant to the preceding

                                      24
<PAGE>

sentence, the Trustee accepts any such offer the Trustee shall promptly notify
the Rating Agencies.

     (c) If an event of default under the Indenture occurs and is continuing,
and if directed by a majority of the outstanding Class A-1 Certificateholders
and Class A-2 Certificateholders, the Trustee shall vote the Underlying
Securities in favor of directing, or take such other action as may be
appropriate to direct, the Underlying Securities Trustee to declare the unpaid
principal amount of the Underlying Securities and any accrued and unpaid
interest thereon to be due and payable.

     Section 16. Additional Depositor Representation. It is the express intent
of the parties hereto that the conveyance of the Underlying Securities by the
Depositor to the Trustee be, and be construed as, a sale of the Underlying
Securities by the Depositor and not a pledge of any Underlying Securities by
the Depositor to secure a debt or other obligation of the Depositor. In the
event that, notwithstanding the aforementioned intent of the parties, any
Underlying Securities are held to be property of the Depositor, then, it is
the express intent of the parties that such conveyance be deemed a pledge of
such Underlying Securities and all proceeds thereof by the Depositor to the
Trustee to secure a debt or other obligation of the Depositor, pursuant to
Section 10.07 of the Standard Terms. In connection with any such grant of a
security interest in the Underlying Securities and all proceeds thereof
(including any such grant in connection with any sale of additional Underlying
Securities pursuant to Section 3(d)), the Depositor hereby represents and
warrants to Trustee as follows:

     (i)    In the event the Underlying Securities are held to be property of
            the Depositor, then the Trust Agreement creates a valid and
            continuing security interest (as defined in the Uniform Commercial
            Code as in effect in the applicable jurisdiction (the "UCC")) in
            the Underlying Securities in favor of the Trustee which security
            interest is prior to all other liens, and is enforceable as such
            as against creditors of, and purchasers from, the Depositor.

     (ii)   The Underlying Securities have been credited to a trust account
            (the "Securities Account") established in the name of the Trustee
            in accordance with Section 2.01 of the Standard Terms. U.S. Bank
            Trust National Association, as securities intermediary (the
            "Securities Intermediary") has established the Securities Account
            and has agreed to treat the Underlying Securities as "financial
            assets" within the meaning of the UCC.

     (iii)  Immediately prior to the transfer of the Underlying Securities to
            the Trust, the Depositor owned and had good and marketable title
            to the Underlying Securities free and clear of any lien, claim or
            encumbrance of any Person.

     (iv)   The Depositor has received all consents and approvals required by
            the terms of the Underlying Securities to the transfer to the
            Trustee all of its interest and rights in the Underlying
            Securities as contemplated by the Trust Agreement.

                                      25
<PAGE>

     (v)    The Depositor has taken all steps necessary to cause the
            Securities Intermediary to identify on its records that the
            Trustee is the Person owning the security entitlements credited to
            the Securities Account.

     (vi)   Other than the security interest granted to the Trust pursuant to
            this Agreement, the Depositor has not assigned, pledged, sold,
            granted a security interest in or otherwise conveyed any interest
            in the Underlying Securities (or, if any such interest has been
            assigned, pledged or otherwise encumbered, it has been released).
            The Depositor has not authorized the filing of and is not aware of
            any financing statements against the Depositor that includes a
            description of the Underlying Securities other than any financing
            statement relating to the security interest granted to the Trust
            hereunder. The Depositor is not aware of any judgment or tax lien
            filings against the Depositor.

     (vii)  The Securities Account is not in the name of any Person other than
            the Trustee. The Depositor has not consented to the compliance by
            the Securities Intermediary, with entitlement orders of any Person
            other than the Trustee.

                                      26
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused this Series
Supplement to be duly executed by their respective authorized officers as of
the date first written above.

                               LEHMAN ABS CORPORATION,
                                 as Depositor

                               By: ______________________
                                  Name:  Rene Canezin
                                  Title:    Senior Vice President

                               U.S. BANK TRUST NATIONAL ASSOCIATION,

                                 not in its individual capacity but solely as
                                 Trustee on behalf of the Corporate Backed
                                 Trust Certificates Altria Debenture-Backed
                                 Series 2003-8 Trust

                               By: ______________________
                                  Name: David J. Kolibachuk
                                  Title:   Vice President

                                      27
<PAGE>

                                                                    SCHEDULE I

                     ALTRIA DEBENTURE-BACKED SERIES 2003-8

                        UNDERLYING SECURITIES SCHEDULE

Underlying Securities:                 73/4% Debentures due 2027.

Issuer:                                Philip Morris Companies Inc.,
                                       predecessor to Altria Group, Inc.

CUSIP Number:                          718154 CF 2.

Principal Amount Deposited:            $25,000,000.

Original Issue Date:                   January 15, 1997.

Principal Amount of
Underlying Securities
Originally Issued:                     $750,000,000.

Maturity Date:                         January 15, 2027.

Interest Rate:                         7 3/4% per annum.

Interest Payment Dates:                January 15th and July 15th.

                                     I-1
<PAGE>

                                  EXHIBIT A-1
                      FORM OF TRUST CERTIFICATE CLASS A-1

                             CLASS A-1 CERTIFICATE

NUMBER 1                                        1,000,000 $25 PAR CERTIFICATES
                                                          CUSIP NO. 21988G 25 4

                      SEE REVERSE FOR CERTAIN DEFINITIONS

          UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER
NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

          THIS CERTIFICATE REPRESENTS A PROPORTIONATE UNDIVIDED BENEFICIAL
OWNERSHIP INTEREST IN THE TRUST AND DOES NOT EVIDENCE AN OBLIGATION OF, OR AN
INTEREST IN, AND IS NOT GUARANTEED BY THE DEPOSITOR OR THE TRUSTEE OR ANY OF
THEIR RESPECTIVE AFFILIATES. NEITHER THIS CERTIFICATE NOR THE TRUST ASSETS ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR ANY OTHER PERSON.

          THE CERTIFICATEHOLDERS, BY THEIR ACCEPTANCE OF CERTIFICATES,
COVENANT AND AGREE TO TENDER ANY AND ALL CALLED CERTIFICATES TO THE TRUSTEE
UPON THE WARRANT HOLDER'S EXERCISE OF CALL WARRANTS AND PAYMENT OF THE CALL
PRICE FOR SUCH CERTIFICATES IN ACCORDANCE WITH THE PROVISIONS HEREOF AND OF
THE WARRANT AGENT AGREEMENT.

                                    A-1-1
<PAGE>

                            LEHMAN ABS CORPORATION

                               1,000,000 $25 PAR

                     CORPORATE BACKED TRUST CERTIFICATES,

                     ALTRIA DEBENTURE-BACKED SERIES 2003-8

6.25% INTEREST RATE

          evidencing a proportionate undivided beneficial ownership interest
in the Trust, as defined below, the property of which consists principally of
$25,000,000 aggregate principal amount of 73/4% Debentures due 2027, issued by
Philip Morris Companies Inc., predecessor to Altria Group, Inc. (the
"Underlying Securities Issuer") and all payments received thereon (the "Trust
Property"), deposited in trust by Lehman ABS Corporation (the "Depositor").

          THIS CERTIFIES THAT CEDE & CO. is the registered owner of an
aggregate of $25,000,000 principal amount nonassessable, fully-paid,
proportionate undivided beneficial ownership interest in the Corporate Backed
Trust Certificates, Altria Debenture-Backed Series 2003-8 Trust, formed by the
Depositor.

                                    A-1-2
<PAGE>

          The Trust was created pursuant to a Standard Terms for Trust
Agreements, dated as of January 16, 2001 (the "Standard Terms"), between the
Depositor and U.S. Bank Trust National Association, a national banking
association, not in its individual capacity but solely as Trustee (the
"Trustee"), as supplemented by the Series Supplement in respect of the Altria
Debenture-Backed Series 2003-8, dated as of March 27, 2003 (the "Series
Supplement" and, together with the Standard Terms, the "Trust Agreement"),
between the Depositor and the Trustee. This Certificate does not purport to
summarize the Trust Agreement and reference is hereby made to the Trust
Agreement for information with respect to the interests, rights, benefits,
obligations, proceeds and duties evidenced hereby and the rights, duties and
obligations of the Trustee with respect hereto. A copy of the Trust Agreement
may be obtained from the Trustee by written request sent to the Corporate
Trust Office. Capitalized terms used but not defined herein have the meanings
assigned to them in the Trust Agreement.

          This Certificate is one of the duly authorized Certificates
designated as the "Corporate Backed Trust Certificates, Altria
Debenture-Backed Series 2003-8, Class A-1" (herein called the "Certificates").
This Certificate is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement, to which Trust Agreement the Holder of this
Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound. The Trust Property consists of: (i) Underlying Securities
described in the Trust Agreement, and (ii) all payments on or collections in
respect of the Underlying Securities accrued on or after March 27, 2003,
together with any and all income, proceeds and payments with respect thereto;
provided, however, that any income from the investment of Trust funds in
certain permitted investments ("Eligible Investments") does not constitute
Trust Property.

          Subject to the terms and conditions of the Trust Agreement
(including the availability of funds for distributions) and until the
obligation created by the Trust Agreement shall have terminated in accordance
therewith, distributions will be made on each Distribution Date, to the Person
in whose name this Certificate is registered on the applicable Record Date, in
an amount equal to such Certificateholder's proportionate undivided beneficial
ownership interest in the amount required to be distributed to the Holders of
the Certificates on such Distribution Date. The Record Date applicable to any
Distribution Date is the close of business on the day immediately preceding
such Distribution Date (whether or not a Business Day). If a payment with
respect to the Underlying Securities is made to the Trustee after the date on
which such payment was due, then the Trustee will distribute any such amounts
received on the next occurring Business Day.

          Each Certificateholder, by its acceptance of a Certificate,
covenants and agrees that such Certificateholder will not at any time
institute against the Trust, or join in any institution against the Trust of,
any bankruptcy proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Certificates
or the Trust Agreement.

          Distributions made on this Certificate will be made as provided in
the Trust Agreement by the Trustee by wire transfer in immediately available
funds, or check mailed to the Certificateholder of record in the Certificate
Register without the presentation or surrender of this Certificate or the
making of any notation hereon, except that with respect to Certificates
registered on the Record Date in the name of the nominee of the Clearing
Agency (initially, such

                                     A-1-3
<PAGE>

nominee shall be Cede & Co.), payments will be made by wire transfer in
immediately available funds to the account designated by such nominee. Except
as otherwise provided in the Trust Agreement and notwithstanding the above,
the final distribution on this Certificate will be made after due notice by
the Trustee of the pendency of such distribution and only upon presentation
and surrender of this Certificate at the Corporate Trust Office or such other
location as may be specified in such notice.

          Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall
for all purposes have the same effect as if set forth at this place.

          Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee, by manual signature, this Certificate shall
not entitle the Holder hereof to any benefit under the Trust Agreement or be
valid for any purpose.

          THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE HOLDER HEREOF SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.

                                    A-1-4
<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed as of the date set forth below.

                               CORPORATE BACKED TRUST
                               CERTIFICATES, ALTRIA
                               DEBENTURE-BACKED SERIES 2003-8 TRUST

                               By: U.S. BANK TRUST NATIONAL
                               ASSOCIATION

                               not in its individual capacity but
                                   solely as Trustee,

                               By:
                                  ----------------------------
                                  Authorized Signatory

Dated: March 27, 2003

              TRUSTEE'S CERTIFICATE OF AUTHENTICATION

          This is one of the Corporate Backed Trust Certificates, Altria
Debenture-Backed Series 2003-8, described in the Trust Agreement referred to
herein.

U.S. BANK TRUST NATIONAL ASSOCIATION
not in its individual capacity but solely
as Trustee,

By:
   ----------------------
   Authorized Signatory

                                    A-1-5
<PAGE>

                           (REVERSE OF CERTIFICATE)

          The Certificates are limited in right of distribution to certain
payments and collections respecting the Underlying Securities, all as more
specifically set forth herein and in the Trust Agreement. The registered
Holder hereof, by its acceptance hereof, agrees that it will look solely to
the Trust Property (to the extent of its rights therein) for distributions
hereunder.

          The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the Trustee and the rights of the
Certificateholders under the Trust Agreement at any time by the Depositor and
the Trustee with the consent of the Holders of Class A-1 Certificates in the
manner set forth in the Series Supplement and the Standard Terms. Any such
consent by the Holder of this Certificate (or any predecessor Certificate)
shall be conclusive and binding on such Holder and upon all future Holders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not a notation of such consent is
made upon this Certificate. The Trust Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders
of any of the Certificates.

          The Certificates are issuable in fully registered form only in
denominations of $25.

          As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is
registerable in the Certificate Register upon surrender of this Certificate
for registration of transfer at the offices or agencies of the Certificate
Registrar maintained by the Trustee in the Borough of Manhattan, the City of
New York, duly endorsed by or accompanied by an assignment in the form below
and by such other documents as required by the Trust Agreement, and thereupon
one or more new Certificates of the same class in authorized denominations
evidencing the same principal amount will be issued to the designated
transferee or transferees. The initial Certificate Registrar appointed under
the Trust Agreement is U.S. Bank Trust National Association.

          No service charge will be made for any registration of transfer or
exchange, but the Trustee may require exchange of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with
any transfer or exchange of Certificates.

          The Depositor and the Trustee and any agent of the Depositor or the
Trustee may treat the Person in whose name this Certificate is registered as
the owner hereof for all purposes, and neither the Depositor, the Trustee, nor
any such agent shall be affected by any notice to the contrary.

          It is the intention of the parties to the Trust Agreement that the
Trust created thereunder shall constitute a fixed investment trust for federal
income tax purposes under Treasury Regulation Section 301.7701-4, and the
Certificateholder agrees to treat the Trust, any distributions therefrom and
its beneficial interest in the Certificates consistently with such
characterization.

          The Trust and the obligations of the Depositor and the Trustee
created by the Trust Agreement with respect to the Certificates shall
terminate upon the earliest to occur of (i)

                                    A-1-6
<PAGE>

the payment in full at maturity or sale by the Trust after a payment default
on or an acceleration or other early payment of the Underlying Securities and
the distribution in full of all amounts due to the Class A-1
Certificateholders and Class A-2 Certificateholders; (ii) the exercise of all
outstanding Call Warrants by the Warrant Holders; (iii) the Final Scheduled
Distribution Date and (iv) the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of
the United States to the Court of St. James, living on the date hereof.

          An employee benefit plan subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), a plan described in Section
4975(e) of the Code, an entity whose underlying assets include plan assets by
reason of any such plan's investment in the entity, including an individual
retirement account or Keogh plan (any such, a "Plan") may purchase and hold
Certificates if the Plan can represent and warrant that its purchase and
holding of the Certificates would not be prohibited under ERISA or the Code.

                                    A-1-7
<PAGE>

                                  ASSIGNMENT

           FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto

PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE

(Please print or type name and address, including postal zip code, of
assignee) the within Certificate, and all rights thereunder, hereby
irrevocably constituting and appointing ______________________ Attorney to
transfer said Certificate on the books of the Certificate Register, with full
power of substitution in the premises.

Dated:

                                                    *

                                            Signature Guaranteed:

                                                    *

*NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Signatures must be guaranteed
by an "eligible guarantor institution" meeting the requirements of the
Certificate Registrar, which requirements include membership or participation
in the Security Transfer Agent Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the Certificate
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.

                                    A-1-8
<PAGE>

                                  EXHIBIT A-2
                      FORM OF TRUST CERTIFICATE CLASS A-2

                             CLASS A-2 CERTIFICATE

NUMBER 1                                                  CUSIP NO. 21988G CM 6

                      SEE REVERSE FOR CERTAIN DEFINITIONS

          THIS CLASS A-2 CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION UNDER
SUCH ACT IS IN EFFECT OR PURSUANT TO AN EXEMPTION THEREFROM UNDER SUCH ACT.
THE CLASS A-2 CERTIFICATE REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF THE SERIES SUPPLEMENT.

          EACH PURCHASER OF THIS CLASS A-2 CERTIFICATE IS HEREBY NOTIFIED
THAT THE SELLER OF THIS CLASS A-2 CERTIFICATE MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER.

          THE NOTIONAL AMOUNT OF THIS CLASS A-2 CERTIFICATE IS AS SET FORTH
HEREIN. ACCORDINGLY, THE OUTSTANDING NOTIONAL AMOUNT OF THIS CLASS A-2
CERTIFICATE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.

          UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR
IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

          THIS CERTIFICATE REPRESENTS A PROPORTIONATE UNDIVIDED BENEFICIAL
OWNERSHIP INTEREST IN THE TRUST AND DOES NOT EVIDENCE AN OBLIGATION OF, OR AN
INTEREST IN, AND IS NOT GUARANTEED BY THE DEPOSITOR OR THE TRUSTEE OR ANY OF
THEIR RESPECTIVE AFFILIATES. NEITHER THIS CERTIFICATE OR THE TRUST ASSETS ARE
INSURED OR GUARANTEED BY ANY GOVERNMENTAL AGENCY OR ANY OTHER PERSON.

                                    A-2-1
<PAGE>

          THE CERTIFICATEHOLDERS, BY THEIR ACCEPTANCE OF CERTIFICATES,
COVENANT AND AGREE TO TENDER ANY AND ALL CALLED CERTIFICATES TO THE TRUSTEE
UPON THE WARRANT HOLDER'S EXERCISE OF CALL WARRANTS AND PAYMENT OF THE CALL
PRICE FOR SUCH CERTIFICATES IN ACCORDANCE WITH THE PROVISIONS HEREOF AND OF
THE WARRANT AGENT AGREEMENT.

                                    A-2-2
<PAGE>

                            LEHMAN ABS CORPORATION

                     CORPORATE BACKED TRUST CERTIFICATES,

                     ALTRIA DEBENTURE-BACKED SERIES 2003-8

                          $25,000,000 NOTIONAL AMOUNT

1.50% INTEREST RATE

FINAL SCHEDULED DISTRIBUTION DATE:  January 15, 2027

     evidencing a proportionate undivided beneficial ownership interest in
the Trust, as defined below, the property of which consists principally of
$25,000,000 aggregate principal amount of 73/4% Debentures due 2027, issued by
Philip Morris Companies Inc., predecessor to Altria Group, Inc., and all
payments received thereon (the "Trust Property"), deposited in trust by Lehman
ABS Corporation (the "Depositor").

          THIS CERTIFIES THAT CEDE & CO. is the registered owner of an
aggregate amount of $25,000,000 notional amount nonassessable, fully-paid,
proportionate undivided beneficial ownership interest in the Corporate Backed
Trust Certificates, Altria Debenture-Backed Series 2003-8 Trust, formed by the
Depositor.

          The Trust was created pursuant to a Standard Terms for Trust
Agreements, dated as of January 16, 2001 (the "Standard Terms"), between the
Depositor and U.S. Bank Trust National Association , a national banking
association, not in its individual capacity but solely as Trustee (the
"Trustee"), as supplemented by the Series Supplement, Altria Debenture-Backed
Series 2003-8, dated as of March 27, 2003 (the "Series Supplement" and,
together with the Standard Terms, the "Trust Agreement"), between the
Depositor and the Trustee. This Certificate does not purport to summarize the
Trust Agreement and reference is hereby made to the Trust Agreement for
information with respect to the interests, rights, benefits, obligations,
proceeds and duties evidenced hereby and the rights, duties and obligations of
the Trustee with respect hereto. A copy of the Trust Agreement may be obtained
from the Trustee by written request sent to the Corporate Trust Office.
Capitalized terms used but not defined herein have the meanings assigned to
them in the Trust Agreement.

          This Certificate is one of the duly authorized Certificates
designated as the "Corporate Backed Trust Certificates, Altria
Debenture-Backed Series 2003-8, Class A-2" (herein called the "Certificates").
This Certificate is issued under and is subject to the terms, provisions and
conditions of the Trust Agreement, to which Trust Agreement the Holder of this
Certificate by virtue of the acceptance hereof assents and by which such
Holder is bound. The Trust Property consists of: (i) Underlying Securities
described in the Trust Agreement, and (ii) all payments on or collections in
respect of the Underlying Securities accrued on or after March 27, 2003,
together with any and all income, proceeds and payments with respect thereto;

                                    A-2-3
<PAGE>

provided, however, that any income from the investment of Trust funds in
certain permitted investments ("Eligible Investments") does not constitute
Trust Property.

          Subject to the terms and conditions of the Trust Agreement
(including the availability of funds for distributions) and until the
obligation created by the Trust Agreement shall have terminated in accordance
therewith, distributions of interest will be made on this Certificate on each
Distribution Date.

          Subject to the terms and conditions of the Trust Agreement
(including the availability of funds for distributions) and until the
obligation created by the Trust Agreement shall have terminated in accordance
therewith, distributions will be made on each Distribution Date, to the Person
in whose name this Certificate is registered on the applicable Record Date, in
an amount equal to such Certificateholder's proportionate undivided beneficial
ownership interest in the amount required to be distributed to the Holders of
the Certificates on such Distribution Date. The Record Date applicable to any
Distribution Date is the close of business on the day immediately preceding
such Distribution Date (whether or not a Business Day). If a payment with
respect to the Underlying Securities is made to the Trustee after the date on
which such payment was due, then the Trustee will distribute any such amounts
received on the next occurring Business Day.

          Each Certificateholder, by its acceptance of a Certificate,
covenants and agrees that such Certificateholder will not at any time
institute against the Trust, or join in any institution against the Trust of,
any bankruptcy proceedings under any United States Federal or state bankruptcy
or similar law in connection with any obligations relating to the Certificates
or the Trust Agreement.

          Distributions made on this Certificate will be made as provided in
the Trust Agreement by the Trustee by wire transfer in immediately available
funds, or check mailed to the Certificateholder of record in the Certificate
Register without the presentation or surrender of this Certificate or the
making of any notation hereon, except that with respect to Certificates
registered on the Record Date in the name of the nominee of the Clearing
Agency (initially, such nominee shall be Cede & Co.), payments will be made by
wire transfer in immediately available funds to the account designated by such
nominee. Except as otherwise provided in the Trust Agreement and
notwithstanding the above, the final distribution on this Certificate will be
made after due notice by the Trustee of the pendency of such distribution and
only upon presentation and surrender of this Certificate at the Corporate
Trust Office or such other location as may be specified in such notice.

          Reference is hereby made to the further provisions of this
Certificate set forth on the reverse hereof, which further provisions shall
for all purposes have the same effect as if set forth at this place.

          Unless the certificate of authentication hereon has been executed
by or on behalf of the Trustee, by manual signature, this Certificate shall
not entitle the Holder hereof to any benefit under the Trust Agreement or be
valid for any purpose.

                                    A-2-4
<PAGE>

          THIS CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS,
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE HOLDER HEREOF SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.

                                    A-2-5
<PAGE>

          IN WITNESS WHEREOF, the Trustee has caused this Certificate to be
duly executed as of the date set forth below.

                               CORPORATE BACKED TRUST
                               CERTIFICATES, ALTRIA
                               DEBENTURE-BACKED SERIES 2003-8 TRUST

                               By: U.S. BANK TRUST NATIONAL
                               ASSOCIATION

                               not in its individual capacity but
                                   solely as Trustee,

                               By:
                                  ----------------------------
                                  Authorized Signatory

Dated: March 27, 2003

              TRUSTEE'S CERTIFICATE OF AUTHENTICATION

          This is one of the Corporate Backed Trust Certificates, Altria
Debenture-Backed Series 2003-8, described in the Trust Agreement referred to
herein.

U.S. BANK TRUST NATIONAL ASSOCIATION
not in its individual capacity but solely
as Trustee,

By:
    ----------------------
    Authorized Signatory

                                    A-2-6
<PAGE>

                           (REVERSE OF CERTIFICATE)

          The Certificates are limited in right of distribution to certain
payments and collections respecting the Underlying Securities, all as more
specifically set forth herein and in the Trust Agreement. The registered
Holder hereof, by its acceptance hereof, agrees that it will look solely to
the Trust Property (to the extent of its rights therein) for distributions
hereunder.

          The Trust Agreement permits, with certain exceptions therein
provided, the amendment thereof and the modification of the rights and
obligations of the Depositor and the Trustee and the rights of the
Certificateholders under the Trust Agreement at any time by the Depositor and
the Trustee with the consent of the holders of Class A-2 Certificates in the
manner set forth in the Series Supplement and the Standard Terms. Any such
consent by the Holder of this Certificate (or any predecessor Certificate)
shall be conclusive and binding on such Holder and upon all future Holders of
this Certificate and of any Certificate issued upon the transfer hereof or in
exchange hereof or in lieu hereof whether or not notation of such consent is
made upon this Certificate. The Trust Agreement also permits the amendment
thereof, in certain limited circumstances, without the consent of the Holders
of any of the Certificates.

          The Certificates are issuable in fully registered form only in
denominations of $100,000 and in integral multiples of $1 in excess thereof.

          As provided in the Trust Agreement and subject to certain
limitations therein set forth, the transfer of this Certificate is
registerable in the Certificate Register upon surrender of this Certificate
for registration of transfer at the offices or agencies of the Certificate
Registrar maintained by the Trustee in the Borough of Manhattan, the City of
New York, duly endorsed by or accompanied by an assignment in the form below
and by such other documents as required by the Trust Agreement, and thereupon
one or more new Certificates of the same class in authorized denominations
evidencing the same notional amount will be issued to the designated
transferee or transferees. The initial Certificate Registrar appointed under
the Trust Agreement is U.S. Bank Trust National Association.

          No service charge will be made for any registration of transfer or
exchange, but the Trustee may require exchange of a sum sufficient to cover
any tax or other governmental charge that may be imposed in connection with
any transfer or exchange of Certificates.

          The Depositor and the Trustee and any agent of the Depositor or the
Trustee may treat the Person in whose name this Certificate is registered as
the owner hereof for all purposes, and neither the Depositor, the Trustee, nor
any such agent shall be affected by any notice to the contrary.

          It is the intention of the parties to the Trust Agreement that the
Trust created thereunder shall constitute a fixed investment trust for federal
income tax purposes under Treasury Regulation Section 301.7701-4, and the
Certificateholder agrees to treat the Trust, any distributions therefrom and
its beneficial interest in the Certificates consistently with such
characterization.

          The Trust and the obligations of the Depositor and the Trustee
created by the Trust Agreement with respect to the Certificates shall
terminate upon the earliest to occur of (i)

                                    A-2-7
<PAGE>

the payment in full at maturity or sale by the Trust after a payment default
on or an acceleration or other early payment of the Underlying Securities and
the distribution in full of all amounts due to the Class A-1
Certificateholders and Class A-2 Certificateholders; (ii) the exercise of all
outstanding Call Warrants by the Warrant Holders; (iii) the Final Scheduled
Distribution Date and (iv) the expiration of 21 years from the death of the
last survivor of the descendants of Joseph P. Kennedy, the late Ambassador of
the United States to the Court of St. James, living on the date hereof.

          An employee benefit plan subject to the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), a plan described in Section
4975(e) of the Code, an entity whose underlying assets include plan assets by
reason of any such plan's investment in the entity, including an individual
retirement account or Keogh plan (any such, a "Plan") may purchase and hold
Certificates if the Plan can represent and warrant that its purchase and
holding of the Certificates would not be prohibited under ERISA or the Code.

                                    A-2-8
<PAGE>

                                  ASSIGNMENT

          FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto

PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE

(Please print or type name and address, including postal zip code, of
assignee) the within Certificate, and all rights thereunder, hereby
irrevocably constituting and appointing ________________________ Attorney to
transfer said Certificate on the books of the Certificate Register, with full
power of substitution in the premises.

Dated:

                                                    *
                                         Signature Guaranteed:

                                                    *

*NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Certificate in every particular, without
alteration, enlargement or any change whatever. Signatures must be guaranteed
by an "eligible guarantor institution" meeting the requirements of the
Certificate Registrar, which requirements include membership or participation
in the Security Transfer Agent Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the Certificate
Registrar in addition to, or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as amended.

                                    A-2-9
<PAGE>

                                   EXHIBIT B

                        FORM OF WARRANT AGENT AGREEMENT

                      CORPORATE BACKED TRUST CERTIFICATES

                  ALTRIA DEBENTURE-BACKED SERIES 2003-8 TRUST

          WARRANT AGENT AGREEMENT, dated as of March 27, 2003 (the "Warrant
Agent Agreement"), by and between LEHMAN ABS CORPORATION, as Depositor (the
"Depositor"), U.S. BANK TRUST NATIONAL ASSOCIATION, as Trustee (the "Trustee")
and U.S. BANK TRUST NATIONAL ASSOCIATION, as Warrant Agent (the "Warrant
Agent").

                         W I T N E S S E T H:

          WHEREAS, the Depositor created Corporate Backed Trust Certificates,
Altria Debenture-Backed Series 2003-8 Trust (the "Trust"), a trust created
under the laws of the State of New York pursuant to a Standard Terms for Trust
Agreements, dated as of January 16, 2001 (the "Agreement"), between Lehman ABS
Corporation (the "Depositor") and U.S. Bank Trust National Association, a
national banking association, not in its individual capacity but solely as
Trustee (the "Trustee"), as supplemented by the Series Supplement 2003-8,
dated as of March 27, 2003 (the "Series Supplement" and, together with the
Agreement, the "Trust Agreement"), between the Depositor and the Trustee; and

          WHEREAS, in connection with the creation of the Trust and the
deposit therein of the Underlying Securities, it is desired to provide for the
issuance of trust certificates (the "Certificates") evidencing undivided
interests in the Trust and call warrants with respect to the Certificates
("Call Warrants").

          NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants expressed herein, it is hereby agreed by and between the
Depositor, the Warrant Agent and the Trustee that except as otherwise
specified herein or as the context may otherwise require, capitalized terms
used herein but not defined herein shall have the respective meanings set
forth below in the Series Supplement, and as follows:

                                  ARTICLE I

                           EXERCISE OF CALL WARRANTS

     Section 1.1. .Manner of Exercise. (a) Call Warrants may be exercised by
any holder thereof (each, a "Warrant Holder") in whole or in part on any Call
Date. The following conditions shall apply to any exercise of Call Warrants:

               (i) A notice (each, a "Call Notice") specifying the number of
          Call Warrants being exercised and the Call Date shall be delivered
          to the Warrant Agent and the Trustee at least 5 Business Days before
          such Call Date.

                                     B-1
<PAGE>

               (ii) The Warrant Holder shall surrender the Call Warrants to
          the Warrant Agent at its office specified in Section 6.3 hereof no
          later than 10:00 a.m. (New York City time) on such Call Date.

               (iii) The Warrant Holder shall have made payment to the Warrant
          Agent, by wire transfer or other immediately available funds
          acceptable to the Warrant Agent, in the amount of the Call Price, no
          later than 10:00 a.m. (New York City time) on the Call Date.

               (iv) The Warrant Holder shall exercise Call Warrants relating
          to Class A-1 Certificates, Call Warrants relating to the Class A-2
          Certificates which represent a like percentage of all Class A-1
          Certificates and Class A-2 Certificates, respectively.

               (v) The Warrant Holder may not exercise the Call Warrants at
          any time when such Warrant Holder is insolvent, and such Warrant
          Holder shall be required to certify that it is solvent at the time
          of exercise, by completing the Form of Subscription attached to the
          Call Warrants and delivering such completed Form of Subscription to
          the Trustee on or prior to the Call Date and by delivering to the
          Trustee a form reasonably satisfactory to the Trustee of the
          solvency certificate required pursuant to Section 7(d)(ii) of the
          Series Supplement.

               (vi) The Warrant Holder shall have satisfied any other
          conditions to the exercise of Call Warrants set forth in Section
          7(d) of the Series Supplement.

          (b) Upon exercise of Call Warrants, any Warrant Holder other than
     the Depositor or any Affiliate of the Depositor shall be entitled to
     delivery by the Trustee of the Called Certificates. The "Called
     Certificates" shall be, in the case of the Class A-1 Certificates, Class
     A-1 Certificates having a Certificate Principal Balance equal to $25 per
     Call Warrant, and in the case of the Class A-2 Certificates, Class A-2
     Certificates having a notional balance equal to $100,000 per Call
     Warrant. Unless otherwise specified therein, such Call Notice shall be
     deemed to be notice of an Optional Exchange pursuant to Section 7(b) of
     the Series Supplement. Any Warrant Holder which is the Depositor or any
     Affiliate of the Depositor shall receive the proceeds of the sale of the
     Called Underlying Securities and shall not be entitled to receive the
     related Called Certificates or Called Underlying Securities. "Called
     Underlying Securities" are Underlying Securities which represent the same
     percentage of the Underlying Securities as the Called Certificates
     represent of the Class A-1 Certificates and the Class A-2 Certificates.

          (c) The Warrant Agent shall notify the Trustee immediately upon its
     receipt of a Call Notice and upon receipt of payment of the Call Price.
     The Warrant Agent shall transfer the amount of any paid Call Price to the
     Trustee in immediately available funds, for deposit in the Certificate
     Account and application pursuant to the Trust Agreement on the applicable
     Call Date (and, pending such transfer, shall hold such amount for the
     benefit of the Warrant Holder in a segregated trust account).

                                     B-2
<PAGE>

          (d) Delivery of a Call Notice does not give rise to an obligation on
     the part of the Warrant Holder to pay the Call Price. If, by 10:00 a.m.
     (New York City time) on the Call Date, the Warrant Holder has not paid
     the Call Price, except in connection with a Call Notice relating to a
     tender offer for or redemption of Underlying Securities, then the Call
     Notice shall automatically expire and none of the Warrant Holder, the
     Warrant Agent or the Trustee shall have any obligation with respect to
     the Call Notice. The expiration of a Call Notice shall in no way affect
     the Warrant Holder's right to deliver a Call Notice at a later date. The
     Call Price for a call in connection with a tender offer or redemption
     shall be deducted from the proceeds of a tender offer or a redemption by
     the Trust pursuant to Section 7(g)(iii) or Section 7(h)(iii), as
     applicable, of the Series Supplement.

     Section 1.2. Transfer of Certificates. As soon as practicable after each
surrender of Call Warrants in whole or in part on the Call Date and upon
satisfaction of all other requirements described in the Call Warrants and in
Section 1.1 hereof, the Warrant Agent shall instruct the Trustee as follows:

          (a) if Call Warrants are being exercised by any Warrant Holder other
     than the Depositor or any Affiliate of the Depositor, to cause the Called
     Certificates to reflect the Warrant Holder's beneficial ownership of such
     Certificates and if such Call Notice is also deemed to be a notice of
     Optional Exchange, to cause a distribution of Underlying Securities to
     the Warrant Holder in accordance with Section 7(a) of the Series
     Supplement, provided, however, that if such a Call Notice and Optional
     Exchange is in connection with a tender offer or a redemption, the Warrant
     Agent shall instruct the Trustee to distribute to the exercising Warrant
     Holder the excess of the tender offer or redemption proceeds over the Call
     Price pursuant to Section 7(g)(iii) or Section 7(h)(iii), as applicable,
     of the Series Supplement, or

          (b) if the Call Warrants are being exercised by the Depositor or any
     Affiliate of the Depositor, to cause the Called Underlying Securities to
     be sold pursuant to Section 13 of the Series Supplement and to distribute
     the proceeds of such sale to the Warrant Holder.

     If such exercise is in part only, the Warrant Agent shall instruct the
Trustee to authenticate new Call Warrants of like tenor, representing the
outstanding Call Warrants of the Warrant Holder and the Warrant Agent shall
deliver such Call Warrants to the Warrant Holder.

          In each case, the Trustee shall act in accordance with such
instructions.

     Section 1.3. Cancellation and Destruction of Call Warrants. All Call
Warrants surrendered to the Warrant Agent for the purpose of exercise (in
whole or in part) pursuant to Section 1.1 and actually exercised, or for the
purpose of transfer or exchange pursuant to Article III, shall be cancelled by
the Warrant Agent, and no Call Warrant (other than that reflecting any such
transfer or exchange) shall be issued in lieu thereof. The Warrant Agent shall
destroy all cancelled Call Warrants.

                                     B-3
<PAGE>

     Section 1.4. No Rights as Holder of Certificates Conferred by Call
Warrants. Prior to the exercise thereof, Call Warrants shall not entitle the
Warrant Holder to any of the rights of a holder of the Certificates,
including, without limitation, the right to receive the payment of any amount
on or in respect of the Certificates or to enforce any of the covenants of the
Trust Agreement.

     Section 1.5. Pro Rata Reduction of Call Warrants if Partial Redemption of
Underlying Securities. If Underlying Securities are redeemed in part by the
Underlying Securities Issuer and the Warrant Holders do not exercise their
Call Rights in connection with such partial redemption, the number of Call
Warrants held by each Warrant Holder shall be reduced proportionately so that
the aggregate amount of Class A-1 Certificates callable by Call Warrants shall
equal the amount of outstanding Class A-1 Certificates after giving effect to
such partial redemption and the aggregate notional amount of Class A-2
Certificates callable by Call Warrants shall equal the outstanding notional
amount of Class A-2 Certificates after giving effect to such partial
redemption. The Warrant Agent shall make such adjustments to its records as
shall be necessary to reflect such reductions and shall notify each Warrant
Holder of such adjustments.

                                  ARTICLE II

                           RESTRICTIONS ON TRANSFER

     Section 2.1. Restrictive Legends. Except as otherwise permitted by this
Article II, each Call Warrant (including each Call Warrant issued upon the
transfer of any Call Warrant) shall be issued with a legend in substantially
the following form:

   "This Call Warrant has not been registered under the Securities Act of
   1933, as amended, and may not be transferred, sold or otherwise disposed of
   except while a registration under such Act is in effect or pursuant to an
   exemption therefrom under such Act. The Call Warrant represented hereby may
   be transferred only in compliance with the conditions specified in the Call
   Warrants."

     Section 2.2. Notice of Proposed Transfer. Prior to any transfer of any
Call Warrant or portion thereof, the Warrant Holder will give 5 Business Days
(or such lesser period acceptable to the Warrant Agent) prior written notice
to the Warrant Agent of such Warrant Holder's intention to effect such
transfer.

                                 ARTICLE III

               REGISTRATION AND TRANSFER OF CALL WARRANTS, ETC.

     Section 3.1. Warrant Register; Ownership of Call Warrants. The Warrant
Agent will keep a register in which the Warrant Agent will provide for the
registration of Call Warrants and the registration of transfers of Call
Warrants representing numbers of Call Warrants. The Trustee and the Warrant
Agent may treat the Person in whose name any Call Warrant is registered on
such register as the owner thereof for all purposes, and the Trustee and the
Warrant Agent shall not be affected by any notice to the contrary.

                                     B-4
<PAGE>

     Section 3.2. Transfer and Exchange of Call Warrants. (a) No Call Warrant
may be offered, resold, assigned or otherwise transferred (including by pledge
or hypothecation) at any time prior to (x) the date which is two years or such
shorter period of time as permitted by Rule 144(k) under the Securities Act
after the later of the original issue date of such Call Warrants and the last
date on which the Depositor or any "affiliate" (as defined in Rule 144 under
the Securities Act) of the Depositor was the owner of such Call Warrant (or
any predecessor thereto) or (y) such later date, if any, as may be required by
a change in applicable securities laws (the "Resale Restriction Termination
Date") unless such offer, resale, assignment or transfer is (i) to the Trust,
(ii) pursuant to an effective registration statement under the Securities Act,
(iii) to a qualified institutional buyer (a "QIB"), as such term is defined in
Rule 144A promulgated under the Securities Act ("Rule 144A"), in accordance
with Rule 144A or (iv) pursuant to another available exemption from
registration provided under the Securities Act, and, in each of cases (i)
through (iv), in accordance with any applicable securities laws of any state
of the United States and other jurisdictions. Prior to any offer, resale,
assignment or transfer of any Call Warrant in the manner described in clause
(iii) above, the prospective transferee and the prospective transferor shall
be required to deliver to the Trustee an executed copy of an Investment Letter
with respect to the Call Warrants to be transferred substantially in the form
of Exhibit A hereto. Prior to any offer, resale, assignment or transfer of any
Call Warrants in the manner described in clause (iv) above, the prospective
transferee and the prospective transferor shall be required to deliver to the
Trustee documentation certifying that the offer, resale, assignment or
transfer complies with the provisions of said clause (iv). In addition to the
foregoing, each prospective transferee of any Call Warrants in the manner
contemplated by clause (iii) above shall acknowledge, represent and agree as
follows:

     (1)  The transferee (x) is a QIB, (y) is aware that the sale to it is
          being made in reliance on Rule 144A and (z) is acquiring such Call
          Warrants for its own account or for the account of a QIB.

     (2)  The transferee understands that the Call Warrants are being offered
          in a transaction not involving any public offering in the United
          States within the meaning of the Securities Act, and that the Call
          Warrants have not been and will not be registered under the
          Securities Act.

     (3)  The transferee agrees that (A) if in the future it decides to
          offer, resell, pledge or otherwise transfer the Call Warrants prior
          to the Resale Restriction Termination Date, such Call Warrants
          shall only be offered, resold, assigned or otherwise transferred
          (i) to the Trust, (ii) pursuant to an effective registration
          statement under the Securities Act, (iii) to a QIB, in accordance
          with Rule 144A or (iv) pursuant to another available exemption from
          registration provided under the Securities Act, and, in each of
          cases (i) through (iv), in accordance with any applicable
          securities laws of any state of the United States and other
          jurisdictions and (B) the transferee will, and each subsequent
          holder is required to, notify any subsequent purchaser of such Call
          Warrants from it of the resale restrictions referred to in clause
          (A) above.

          (b) Upon surrender of any Call Warrant for registration of transfer
     or for exchange to the Warrant Agent, the Warrant Agent shall (subject to
     compliance with

<PAGE>

     Article II) promptly execute and deliver, and cause the Trustee, on
     behalf of the Trust, to execute and deliver, in exchange therefor, a new
     Call Warrant of like tenor and evidencing a like number of Call Warrants,
     in the name of such Warrant Holder or as such Warrant Holder (upon
     payment by such Warrant Holder of any applicable transfer taxes or
     government charges) may direct; provided that as a condition precedent
     for transferring the Call Warrants, the prospective transferee shall
     deliver to the Trustee and the Depositor an executed copy of the
     Investment Letter (set forth as Exhibit A hereto) if the same is required
     pursuant to the provisions of clause (a) above.

     Section 3.3. Replacement of Call Warrants. Upon receipt of evidence
reasonably satisfactory to the Warrant Agent of the loss, theft, destruction
or mutilation of any Call Warrant and, in the case of any such loss, theft or
destruction of any Call Warrant, upon delivery of an indemnity bond in such
reasonable amount as the Warrant Agent may determine, or, in the case of any
such mutilation, upon the surrender of such Call Warrant for cancellation to
the Warrant Agent, the Warrant Agent shall execute and deliver, and cause the
Trustee, on behalf of the Trust, to execute and deliver, in lieu thereof, a
new Call Warrant of like tenor bearing a number not contemporaneously
outstanding.

     Section 3.4. Execution and Delivery of Call Warrants by Trustee. The
Trustee, on behalf of the Trust, hereby agrees (subject to compliance with
Article II) to execute and deliver such new Call Warrants issued in accordance
with Section 1.2 or this Article III as the Warrant Agent shall request in
accordance herewith.

     Section 3.5. Additional Call Warrants. The Trustee shall execute and
deliver additional Call Warrants on behalf of the Trust with respect to any
additional Certificates issued by the Trust following the sale of additional
Underlying Securities to the Trust, in accordance with the provisions of
Section 3(d) of the Series Supplement.

                                  ARTICLE IV

                                  DEFINITIONS

          As used herein, unless the context otherwise requires, the following
terms have the following respective meanings:

          "Business Day": As defined in the Trust Agreement.

          "Call Date": Any Business Day (i) on or after March 27, 2008, (ii)
after the Underlying Securities Issuer announces that it will redeem, prepay
or otherwise make an unscheduled payment on the Underlying Securities, (iii)
after the Trustee notifies the Certificateholders of any proposed sale of the
Underlying Securities pursuant to the provisions of the Series Supplement or
(iv) on which a tender offer for some or all of the Underlying Securities is
consummated.

          "Call Notice": As defined in Section 1.1(a)(i) hereof.

          "Call Price": For each related Call Date, (i) in the case of the
Class A-1 Certificates, 100% of the outstanding Certificate Principal Balance
of the Class A-1 Certificates

                                     B-6
<PAGE>

being purchased pursuant to the exercise of the Call Warrants, plus any
accrued and unpaid interest on such amount to but excluding the Call Date and,
(ii) in the case of the Class A-2 Certificates, the present value of all
amounts that would otherwise have been payable on the Class A-2 Certificates
being purchased pursuant to the exercise of the Call Warrants for the period
from the related Call Date to the Final Scheduled Distribution Date using a
discount rate of 7.75% per annum assuming, no delinquencies, deferrals,
redemptions or prepayments on the Underlying Securities shall occur after the
related Call Date.

          "Call Warrant": As defined in the recitals.

          "Called Certificates": As defined in Section 1.1(b) hereof.

          "Called Underlying Securities": As defined in Section 1.1(b) hereof.

          "Closing Date": March 27, 2003.

          "Depositor": As defined in the recitals.

          "Depositor Order": As defined in the Trust Agreement.

          "Person": Any individual, corporation, partnership, joint venture,
association, joint stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or political
subdivision thereof.

          "QIB": As defined in Section 3.2 hereof.

          "Rating Agencies": Standard & Poor's Ratings Services, a division of
The McGraw-Hill Companies, Inc. and Moody's Investors Service, Inc. and any
successor thereto.

          "Resale Restriction Termination Date": As defined in Section 3.2
hereof.

          "Responsible Officer": As defined in the Trust Agreement.

          "Rule 144A": As defined in Section 3.2.

          "Securities Act": The Securities Act of 1933, or any similar federal
statute, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time.

          "Trust": As defined in the recitals.

          "Trust Agreement": As defined in the recitals.

          "Trustee": As defined in the recitals, or any successor thereto
under the Trust Agreement.

          "Warrant Agent": As defined in the recitals, or any successor
thereto under this Warrant Agent Agreement.

                                     B-7
<PAGE>

          "Warrant Agent Agreement": As defined in the recitals.

          "Warrant Holder": As defined in Section 1.1(a) hereof.

                                  ARTICLE V

                                 WARRANT AGENT

     Section 5.1. Limitation on Liability. The Warrant Agent shall be
protected and shall incur no liability for or in respect of any action taken,
suffered or omitted by it in connection with its administration of the Call
Warrants in reliance upon any instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document in good faith believed by it
to be genuine and to be signed, executed and, where necessary, verified and
acknowledged, by the proper Person or Persons.

     Section 5.2. Duties of Warrant Agent. The Warrant Agent undertakes
only the specific duties and obligations imposed hereunder upon the following
terms and conditions, by all of which the Depositor, the Trust, the Trustee
and each Warrant Holder shall be bound:

          (a) The Warrant Agent may consult with legal counsel (who may be
     legal counsel for the Depositor), and the opinion of such counsel shall
     be full and complete authorization and protection to the Warrant Agent as
     to any action taken or omitted by it in good faith and in accordance with
     such opinion, provided the Warrant Agent shall have exercised reasonable
     care in the selection by it of such counsel.

          (b) Whenever in the performance of its duties hereunder, the Warrant
     Agent shall deem it necessary or desirable that any fact or matter be
     proved or established by the Depositor or the Trustee prior to taking or
     suffering any action hereunder, such fact or matter may be deemed to be
     conclusively proved and established by a Depositor Order or a certificate
     signed by a Responsible Officer of the Trustee and delivered to the
     Warrant Agent; and such certificate shall be full authorization to the
     Warrant Agent for any action taken or suffered in good faith by it
     hereunder in reliance upon such certificate.

          (c) The Warrant Agent shall be liable hereunder only for its own
     negligence, willful misconduct or bad faith.

          (d) The Warrant Agent shall not be liable for or by reason of any of
     the statements of fact or recitals contained herein or be required to
     verify the same, but all such statements and recitals are and shall be
     deemed to have been made by the Trust and the Depositor only.

          (e) The Warrant Agent shall not have any responsibility in respect
     of and makes no representation as to the validity of the Call Warrants or
     the execution and delivery thereof (except the due execution hereof by
     the Warrant Agent); nor shall it be responsible for any breach by the
     Trust of any covenant or condition contained in the Call Warrants; nor
     shall it by any act thereunder be deemed to make any representation or
     warranty as to the Certificates to be purchased thereunder.

                                     B-8
<PAGE>

          (f) The Warrant Agent is hereby authorized and directed to accept
     instructions with respect to the performance of its duties hereunder from
     the Chairman of the Board, the Chief Executive Officer, Chief Financial
     Officer, Chief Operating Officer, President, a Vice President, a Senior
     Vice President, a Managing Director, its Treasurer, an Assistant
     Treasurer, its Secretary or an Assistant Secretary of the Depositor, and
     any Responsible Officer of the Trustee, and to apply to such officers for
     advice or instructions in connection with its duties, and it shall not be
     liable for any action taken or suffered to be taken by it in good faith
     in accordance with instructions of any such officer.

          (g) The Warrant Agent and any shareholder, director, officer or
     employee of the Warrant Agent may buy, sell or deal in any of the Call
     Warrants or other securities of the Trust or otherwise act as fully and
     freely as though it were not Warrant Agent hereunder, so long as such
     persons do so in full compliance with all applicable laws. Nothing herein
     shall preclude the Warrant Agent from acting in any other capacity for
     the Trust, the Depositor or for any other legal entity.

          (h) The Warrant Agent may execute and exercise any of the rights or
     powers hereby vested in it or perform any duty hereunder either itself or
     by or through its attorneys or agents.

          (i) The Warrant Agent shall act solely as the agent of the Trust
     hereunder. The Warrant Agent shall not be liable except for the failure
     to perform such duties as are specifically set forth herein, and no
     implied covenants or obligations shall be read into the Call Warrants
     against the Warrant Agent, whose duties shall be determined solely by the
     express provisions thereof. The Warrant Agent shall not be deemed to be a
     fiduciary.

          (j) The Warrant Agent shall not be responsible for any failure on
     the part of the Trustee to comply with any of its covenants and
     obligations contained herein.

          (k) The Warrant Agent shall not be under any obligation or duty to
     institute, appear in or defend any action, suit or legal proceeding in
     respect hereof, unless first indemnified to its satisfaction, but this
     provision shall not affect the power of the Warrant Agent to take such
     action as the Warrant Agent may consider proper, whether with or without
     such indemnity. The Warrant Agent shall promptly notify the Depositor and
     the Trustee in writing of any claim made or action, suit or proceeding
     instituted against it arising out of or in connection with the Call
     Warrants.

          (l) The Trustee will perform, execute, acknowledge and deliver or
     cause to be performed, executed, acknowledged and delivered all such
     further acts, instruments and assurances as may be required by the
     Warrant Agent in order to enable it to carry out or perform its duties
     hereunder.

     Section 5.3. Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties hereunder upon thirty (30) days notice in writing
mailed to the Depositor and the Trustee by registered or certified mail, and
to the Warrant Holders by first-class mail at the expense of the Depositor;
provided that no such resignation or discharge shall become effective until a
successor Warrant Agent shall have been appointed hereunder. The

                                     B-9
<PAGE>

Depositor may remove the Warrant Agent or any successor Warrant Agent upon
thirty (30) days notice in writing, mailed to the Warrant Agent or successor
Warrant Agent, as the case may be, and to the Warrant Holders by first-class
mail; provided further that no such removal shall become effective until a
successor Warrant Agent shall have been appointed hereunder. If the Warrant
Agent shall resign or be removed or shall otherwise become incapable of
acting, the Depositor shall promptly appoint a successor to the Warrant Agent,
which may be designated as an interim Warrant Agent. If an interim Warrant
Agent is designated, the Depositor shall then appoint a permanent successor to
the Warrant Agent, which may be the interim Warrant Agent. If the Depositor
shall fail to make such appointment of a permanent successor within a period
of thirty (30) days after such removal or within sixty (60) days after
notification in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent or by the Warrant Holder, then the Warrant Agent
or registered Warrant Holder may apply to any court of competent jurisdiction
for the appointment of such a successor. Any successor to the Warrant Agent
appointed hereunder must be rated in one of the four highest rating categories
by the Rating Agencies. Any entity which may be merged or consolidated with or
which shall otherwise succeed to substantially all of the trust or agency
business of the Warrant Agent shall be deemed to be the successor Warrant
Agent without any further action.

     Section 5.4. Warrant Agent Transfer Fee. The Warrant Agent will assess a
fee of $50.00 upon the issue of any new Call Warrant, such fee to be assessed
upon the new Call Warrant Holder.

                                  ARTICLE VI

                                 MISCELLANEOUS

     Section 6.1. Remedies. The remedies at law of the Warrant Holder in the
event of any default or threatened default by the Warrant Agent in the
performance of or compliance with any of the terms of the Call Warrants are
not and will not be adequate and, to the full extent permitted by law, such
terms may be specifically enforced by a decree for the specific performance of
any agreement contained herein or by an injunction against a violation of any
of the terms thereof or otherwise.

     Section 6.2. Limitation on Liabilities of Warrant Holder. Nothing
contained in this Warrant Agent Agreement shall be construed as imposing any
obligation on the Warrant Holder to purchase any of the Certificates except in
accordance with the terms thereof.

     Section 6.3. Notices. All notices and other communications under this
Warrant Agent Agreement shall be in writing and shall be delivered, or mailed
by registered or certified mail, return receipt requested, by a nationally
recognized overnight courier, postage prepaid, addressed (a) if to any Warrant
Holder, at the registered address of such Warrant Holder as set forth in the
register kept by the Warrant Agent or (b) if to the Warrant Agent, to 100 Wall
Street, Suite 1600, New York, New York 10005, Attention: Corporate Trust or to
such other address notice of which the Warrant Agent shall have given to the
Warrant Holder and the Trustee or (c) if to the Trust or the Trustee, to the
Corporate Trust Office (as set forth in the Trust Agreement); provided that
the exercise of any Call Warrants shall be effective in the manner provided in
Article I. The Warrant Agent shall forward to the Warrant Holder any notices
received by it

                                     B-10
<PAGE>

hereunder or pursuant to the Trust Agreement or this Agreement by facsimile
within one Business Day of receipt thereof.

     Section 6.4. Amendment. (a) This Warrant Agent Agreement may be amended
from time to time by the Depositor, the Trustee and the Warrant Agent without
the consent of any Warrant Holder, upon receipt of an opinion of counsel
satisfactory to the Warrant Agent that the provisions hereof have been
satisfied and that such amendment would not cause the Trust to be taxed as an
association or publicly traded partnership taxable as a Corporation under the
Code, for any of the following purposes: (i) to cure any ambiguity or to
correct or supplement any provision herein which may be defective or
inconsistent with any other provision herein or to provide for any other terms
or modify any other provisions with respect to matters or questions arising
under the Call Warrant which shall not adversely affect in any material
respect the interests of the Warrant Holder or any holder of a Certificate;
provided, however that no amendment altering the timing or amount of any
payment of the Call Price shall be effected without the consent of each
Warrant Holder; or (ii) to evidence and provide for the acceptance of
appointment hereunder of a Warrant Agent other than U.S. Bank Trust National
Association.

          (b) Without limiting the generality of the foregoing, the Call
     Warrants may also be modified or amended from time to time by the
     Depositor, the Trustee and the Warrant Agent with the consent of Warrant
     Holders of 66-2/3% of each of the Call Warrants related to the Class A-1
     Certificates and the Call Warrants related to the Class A-2 Certificates,
     upon receipt of an opinion of counsel satisfactory to the Warrant Agent
     that the provisions hereof (including, without limitation, the following
     proviso) have been satisfied, for the purpose of adding any provisions to
     or changing in any manner or eliminating any of the provisions of the
     Call Warrants or of modifying in any manner the rights of the Warrant
     Holders; provided, however, that no such amendment shall (i) adversely
     affect in any material respect the interests of holders of Certificates
     without the consent of the holders of Certificates evidencing not less
     than the Required Percentage--Amendment of the aggregate Voting Rights of
     such affected Certificates (as such terms are defined in the Trust
     Agreement) and without written confirmation from the Rating Agencies that
     such amendment will not result in a downgrading or withdrawal of its
     rating of the Certificates; (ii) alter the terms on which Call Warrants
     are exercisable or the amounts payable upon exercise of a Warrant without
     the consent of the holders of Certificates evidencing not less than 100%
     of the aggregate Voting Rights of such affected Certificates and 100% of
     the affected Warrant Holders or (iii) reduce the percentage of aggregate
     Voting Rights required by (i) or (ii) without the consent of the holders
     of all such affected Certificates. Notwithstanding any other provision of
     this Warrant Agent Agreement, this Section 6.4(b) shall not be amended
     without the consent of 100% of the affected Warrant Holders.

          (c) Promptly after the execution of any such amendment or
     modification, the Warrant Agent shall furnish a copy of such amendment or
     modification to each Warrant Holder, to the Trustee and to the Rating
     Agencies. It shall not be necessary for the consent of Warrant Holders or
     holders of Certificates under this Section to approve the particular form
     of any proposed amendment, but it shall be sufficient if such consent
     shall approve the substance thereof. The manner of obtaining such
     consents and of evidencing

                                     B-11
<PAGE>

     the authorization of the execution thereof shall be subject to such
     reasonable regulations as the Warrant Agent may prescribe.

     Section 6.5. Expiration. The right to exercise the Call Warrants shall
expire on the earliest to occur of (a) the cancellation thereof, (b) the
termination of the Trust Agreement, or (c) the liquidation, disposition, or
maturity of all of the Underlying Securities.

     Section 6.6. Descriptive Headings. The headings in this Warrant Agent
Agreement are for purposes of reference only and shall not limit or otherwise
affect the meaning hereof.

     Section 6.7. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED
BY, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT
OF LAWS.

     Section 6.8. Judicial Proceedings; Waiver of Jury. Any judicial
proceeding brought against the Trust, the Trustee or the Warrant Agent with
respect to this Warrant Agent Agreement may be brought in any court of
competent jurisdiction in the County of New York, State of New York or of the
United States of America for the Southern District of New York and, by
execution and delivery of the Call Warrants, the Trustee on behalf of the
Trust and the Warrant Agent (a) accept, generally and unconditionally, the
nonexclusive jurisdiction of such courts and any related appellate court, and
irrevocably agree that the Trust, the Trustee and the Warrant Agent shall be
bound by any judgment rendered thereby in connection with this Warrant Agent
Agreement or the Call Warrants, subject to any rights of appeal, and (b)
irrevocably waive any objection that the Trust, the Trustee or the Warrant
Agent may now or hereafter have as to the venue of any such suit, action or
proceeding brought in such a court or that such court is an inconvenient
forum.

     Section 6.9. Nonpetition Covenant; No Recourse. Each of (i) the Warrant
Holder by its acceptance thereof, and (ii) the Warrant Agent agrees, that it
shall not (and, in the case of the Warrant Holder, that it shall not direct
the Warrant Agent to), until the date which is one year and one day after the
payment in full of the Certificates and all other securities issued by the
Trust, the Depositor or entities formed, established or settled by the
Depositor, acquiesce, petition or otherwise invoke or cause the Trust, the
Depositor, or any such other entity to invoke the process of the United States
of America, any State or other political subdivision thereof or any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government for the purpose of commencing or
sustaining a case by or against the Trust, the Depositor or any such other
entity under a federal or state bankruptcy, insolvency or similar law or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator
or other similar official of the Trust, the Depositor or any such other entity
or all or any part of the property or assets of Trust, the Depositor or any
such other entity or ordering the winding up or liquidation of the affairs of
the Trust, the Depositor or any such other entity.

                                     B-12
<PAGE>

          IN WITNESS WHEREOF, the parties hereto have caused their names to
be signed hereto by their respective duly authorized officers as of the date
first above written.

                               LEHMAN ABS CORPORATION,
                               as Depositor

                               By:
                                  --------------------------------------
                                  Name:
                                  Title:

                               U.S. BANK TRUST NATIONAL ASSOCIATION, not in
                               its individual capacity but solely as Trustee
                               and Authenticating Agent

                               By:
                                  --------------------------------------
                                  Name:
                                  Title:

                               U.S. BANK TRUST NATIONAL ASSOCIATION, as
                               Warrant Agent

                               By:
                               Name:
                               Title:

                                     B-13
<PAGE>

                     EXHIBIT A TO WARRANT AGENT AGREEMENT

                           FORM OF INVESTMENT LETTER

                         QUALIFIED INSTITUTIONAL BUYER

                                                  Dated: ___________ __, _____

U.S. Bank Trust National Association,
as Trustee
100 Wall Street
New York, New York 10005

Lehman ABS Corporation,
as Depositor
745 Seventh Avenue
New York, New York  10019

      Re:  Corporate Backed Trust Certificates,
           Altria Debenture-Backed Series 2003-8
           -------------------------------------

Ladies and Gentlemen:

          In connection with its proposed purchase of Call Warrants (the
"Call Warrants") which represent the right to call $______________ aggregate
certificate principal balance of Corporate Backed Trust Certificates, Altria
Debenture-Backed Series 2003-8 Class A-1 Certificates and $_______________
aggregate notional amount of Corporate Backed Trust Certificates, Altria
Debenture-Backed Series 2003-8 Class A-2 Certificates, the undersigned
purchaser (the "Purchaser") confirms that:

     1. The Purchaser understands that substantial risks are involved in an
investment in the Call Warrants. The Purchaser represents that in making its
investment decision to acquire the Call Warrants, the Purchaser has not relied
on representations, warranties, opinions, projections, financial or other
information or analysis, if any, supplied to it by any person, including you,
Lehman ABS Corporation, as depositor (the "Depositor"), or U.S. Bank Trust
National Association, as trustee (the "Trustee"), or any of your or their
affiliates, except as expressly contained in written information, if any. The
Purchaser has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of an investment in the
Call Warrants, and the Purchaser is able to bear the substantial economic
risks of such an investment. The Purchaser has relied upon its own tax, legal
and financial advisors in connection with its decision to purchase the Call
Warrants.

     2. The Purchaser (A) is a "Qualified Institutional Buyer" (as defined in
Rule 144A under the Securities Act of 1933, as amended (the "1933 Act")) and
(B) is acquiring the Call Warrants for its own account or for the account of
an investor of the type described in clause (A) above as to each of which the
Purchaser exercises sole investment discretion. The Purchaser is purchasing
the Call Warrants for investment purposes and not with a view to, or for, the
offer or sale in connection with, a public distribution or in any other manner
that would violate the 1933 Act or the securities or blue sky laws of any
state.

                                    B-14
<PAGE>

     3. The Purchaser understands that the Call Warrants have not been and
will not be registered under the 1933 Act or under the securities or blue sky
laws of any state, and that (i) if it decides to resell, pledge or otherwise
transfer any Security, such resale, pledge or other transfer must comply with
the provisions of the Warrant Agent Agreement relating to the Call Warrants
(including, without limitation, the provisions of Section 3.2 thereof) and
(ii) it will, and each subsequent holder will be required to, notify any
purchaser of any Security from it of the resale restrictions referred to in
clause (i) above.

     4. The Purchaser understands that each of the Call Warrants will bear a
legend substantially to the following effect, unless otherwise agreed by the
Depositor and the Trustee:

          "THIS CALL WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES
          ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED, SOLD OR
          OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION UNDER SUCH ACT
          IS IN EFFECT OR PURSUANT TO AN EXEMPTION THEREFROM UNDER SUCH ACT.
          THE CALL WARRANT REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN
          COMPLIANCE WITH THE CONDITIONS SPECIFIED HEREIN OR IN THE SERIES
          SUPPLEMENT."

     5. The Purchaser understands that no subsequent transfer of the Call
Warrants is permitted unless (A) such transfer is of a Call Warrant with the
applicable minimum denomination and (B) the Purchaser causes the proposed
transferee to provide to the Depositor and the Trustee such documentation as
may be required pursuant to Section 3.2 of the Warrant Agent Agreement,
including, if required, a letter substantially in the form hereof, or such
other written statement as the Depositor shall reasonably prescribe.

     6. The Purchaser is a person or entity (a "Person") who is either

          A. (1) a citizen or resident of the United States, (2) a
     corporation, partnership or other entity organized in or under the laws
     of the United States or any political subdivision thereof, or (3) an
     estate the income of which is includible in gross income for federal
     income tax purposes regardless of source, or (4) a trust if a court
     within the United States is able to exercise primary supervision of the
     administration of the trust and one or more United States persons have
     the authority to control all substantial decisions of the trust, or

          B. a Person not described in (A), whose ownership of such Call
     Warrant is effectively connected with such Person's conduct of a trade
     or business within the United States within the meaning of the Internal
     Revenue Code of 1986, as amended (the "Code"), and its ownership of any
     interest in such Call Warrant will not result in any withholding
     obligation with respect to any payments with respect to the Call
     Warrants by any Person (other than withholding, if any, under Section
     1446 of the Code), or

                                     B-15
<PAGE>

          C. a Person not described in (A) or (B) above, who is not a Person:
     (1) that owns, directly or indirectly, 10% or more of the total combined
     voting power of all classes of stock in the Underlying Securities Issuer
     (as defined in the Prospectus Supplement) entitled to vote, (2) that is
     a controlled foreign corporation related to the Underlying Securities
     Issuer within the meaning of Section 864(d)(4) of the Code, or (3) that
     is a bank extending credit pursuant to a loan agreement entered into in
     the ordinary course of its trade or business.

     7. The Purchaser agrees that (I) if it is a Person described in clause
(A) above, it will furnish to the Depositor and the Trustee a properly
executed IRS Form W-9, and (II) if it is a Person described in clause (B)
above, it will furnish to the Depositor and the Trustee a properly executed
IRS Form W-8ECI, and (III) if it is a Person described in clause (C) above, it
will furnish to the Depositor and the Trustee a properly executed IRS Form
W-8BEN (or, if the Purchaser is treated as a partnership for federal income
tax purposes, a properly executed IRS Form W-8IMY with appropriate
certification for all partners or members attached). The Purchaser also agrees
that it will provide a new IRS form upon the expiration or obsolescence of any
previously delivered form, and that it will provide such other certifications,
representations or Opinions of Counsel as may be requested by the Depositor
and the Trustee.

     8. The Purchaser agrees that if at some time in the future it wishes to
transfer or exchange any of the Call Warrants, it will not transfer or
exchange any of the Call Warrants unless such transfer or exchange is in
accordance with the terms of the Warrant Agent Agreement, Series Supplement
and other documents applicable to the Call Warrant. The Purchaser understands
that any purported transfer of the Call Warrants (or any interest therein) in
contravention of any of the restrictions and conditions in the agreements, as
applicable, shall be void, and the purported transferee in such transfer shall
not be recognized by any Person as a holder of such Call Warrants, for any
purpose.

                                     B-16
<PAGE>

          You and the Trustee are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby.

                               Very truly yours,

                              [Name of Purchaser]

                                  By:  ____________________________________
                                  Name:  __________________________________
                                  Title:  _________________________________

                                     B-17
<PAGE>

                                   EXHIBIT C

                           FORM OF INVESTMENT LETTER
             QUALIFIED INSTITUTIONAL BUYER AND ACCREDITED INVESTOR

                                       Dated:

U.S. Bank Trust National Association,
  as Trustee
100 Wall Street
New York, New York 10005

Lehman Brothers Inc.,
  as Initial Purchaser
745 Seventh Avenue
New York, New York 10019

Lehman ABS Corporation,
  as Depositor
745 Seventh Avenue
New York, New York 10019

Ladies and Gentlemen:

     In connection with our proposed purchase of $___________ aggregate
notional amount of Class A-2 Certificates (the "Class A-2 Certificates")
representing an interest in the Corporate Backed Trust Certificates, Altria
Debenture-Backed Series 2003-8 Trust (the "Trust"), the undersigned, by
executing this letter (the "Purchaser") confirms that:

     1. Reference is made to the private placement memorandum, dated
_______________, 200__, including the schedules, exhibits and annexes, if any,
thereto, as supplemented or amended to the date hereof (the "Memorandum"),
relating to the Class A-2 Certificates. Capitalized terms used herein that are
not otherwise defined shall have the meanings ascribed thereto in the
Memorandum. The Purchaser has received a copy of the Memorandum and such other
information as the Purchaser deems necessary in order to make its investment
decision and the Purchaser has been provided the opportunity to ask questions
of, and receive answers from, the Depositor and the Initial Purchaser,
concerning the terms and conditions of the offering described in the
Memorandum. The Purchaser has received and understands the information
discussed above and understands that substantial risks are involved in an
investment in the Class A-2 Certificates. The Purchaser represents that, in
making its investment decision to acquire the Class A-2 Certificates, the
Purchaser has not relied on representations, warranties, opinions,
projections, financial or other information or analysis, if any, supplied to
it by any person or entity, including the Initial Purchaser, the Depositor or
the Trustee or any of their affiliates, except as expressly contained in the
Memorandum and in the other written information, if any, discussed above. The
Purchaser acknowledges that it has read and agreed to the matters stated on
pages 2 through 4 of such Memorandum and the information under the heading
"Transfer Restrictions." The Purchaser is purchasing the Class A-2
Certificates for investment purposes

                                     C-1
<PAGE>

and not with a view to, or for, the offer or sale in connection with a public
distribution or in any other manner that would violate the 1933 Act or the
securities or blue sky laws of any state of the United States. The Purchaser
has such knowledge and experience in financial and business matters as to be
capable of evaluating the merits and risks of purchasing any of the Class A-2
Certificates. The Purchaser is aware that it may be required to bear the
substantial economic risk of an investment in the Class A-2 Certificates for
an indefinite period of time and such Purchaser is able to bear such risk for
an indefinite period. The Purchaser has relied upon its own tax, legal and
financial advisors in connection with its decision to purchase the Class A-2
Certificates.

     2. The Purchaser is not an not an "affiliate" (as defined in Rule 144
under the Securities Act) of the Depositor and is either:

          (i) (A) a "Qualified Institutional Buyer" (a "QIB") (as defined in
     Rule 144A under the Securities Act of 1933, as amended (the "1933 Act"
     and "Rule 144A")) and has delivered to you the certification contained
     herein as to the fact that it is a QIB and (B) acquiring the Class A-2
     Certificates for its own account, or for the account of an Accredited
     Investor (as defined in Rule 501(a) under the 1933 Act), or for the
     account of a QIB as to each of which the Purchaser exercises sole
     investment discretion. The Purchaser is aware that the Class A-2
     Certificates are being sold to it in reliance on the exemption from the
     provisions of Section 5 of the 1933 Act provided by Rule 144A; or

          (ii) an Accredited Investor and, if the Class A-2 Certificates are
     to be purchased for one or more accounts ("investor accounts") for which
     it is acting as fiduciary or agent, each such investor account is an
     Accredited Investor on a like basis or a QIB; in the normal course of its
     business, such Purchaser invests in or purchases securities similar to
     the Class A-2 Certificates.

     3. The Purchaser acknowledges that neither the Depositor nor the Initial
Purchaser, or any person representing the Depositor or the Initial Purchaser,
has made any representation to such purchaser with respect to the Trust, the
Underlying Securities or the offering or sale of any Class A-2 Certificates,
other than the information contained in the Memorandum, which has been
delivered to the Purchaser and upon which the Purchaser is relying in making
an investment decision with respect to the Class A-2 Certificates.
Accordingly, the Purchaser acknowledges that no representation or warranty is
made by the Depositor or the Initial Purchaser as to the accuracy or
completeness of such materials.

     4. The Purchaser understands that the Class A-2 Certificates are being
offered in a transaction not involving any public offering in the United
States within the meaning of the 1933 Act, that the Class A-2 Certificates
have not been and will not be registered under the 1933 Act or under the
securities or blue sky laws of any state, and that (i) if in the future it
decides to offer, resell, pledge or otherwise transfer the Class A-2
Certificates, such Class A-2 Certificates shall only be offered, resold,
assigned or otherwise transferred (A) to the Trust, (B) pursuant to an
effective registration statement under the Securities Act, (C) to a QIB, in
accordance with Rule 144A, (D) to any person or entity (including an
Accredited Investor within the meaning of Rule 501(a) under the Securities
Act) pursuant to another available exemption from registration provided under
the Securities Act, and, in each of cases (A) through (D), in accordance with
any applicable securities laws of any state of the United States and other
jurisdictions and (ii) the

                                     C-2
<PAGE>

purchaser will, and each subsequent holder is required to, notify any
subsequent purchaser of such Class A-2 Certificates from it of the resale
restrictions referred to in clause (i) above. Upon the transfer of Class A-2
Certificates held in the form of global certificates to an Accredited
Investor, the transferor's interest in such global certificates shall be
exchanged for a Class A-2 Certificate in definitive form. Thereafter, upon
transfer of a definitive Class A-2 Certificate to a QIB, such Class A-2
Certificate may be exchanged for a beneficial interest in a global
certificate.

     5. The Purchaser understands that each Class A-2 Certificate will, unless
otherwise agreed to by the Depositor and the Trustee, bear a legend
substantially to the following effect:

          "THIS CLASS A-2 CERTIFICATE (OR ITS PREDECESSOR) HAS NOT BEEN
          REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
          MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT
          WHILE A REGISTRATION UNDER SUCH ACT IS IN EFFECT OR PURSUANT
          TO AN EXEMPTION THEREFROM UNDER SUCH ACT. THE CLASS A-2
          CERTIFICATE REPRESENTED HEREBY MAY BE TRANSFERRED ONLY IN
          ACCORDANCE WITH THE TERMS OF THE SERIES SUPPLEMENT.

          EACH PURCHASER OF THIS CLASS A-2 CERTIFICATE IS HEREBY NOTIFIED
          THAT THE SELLER OF THIS CLASS A-2 CERTIFICATE MAY BE RELYING ON
          THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
          ACT PROVIDED BY RULE 144A THEREUNDER."

     6. The Purchaser understands that no subsequent transfer of the Class A-2
Certificates is permitted unless (A) such transfer is of a Class A-2
Certificate with a denomination of at least $100,000 and (B) it causes its
proposed transferee to provide to the Trustee and the Initial Purchaser a
letter substantially in the form of Exhibit C to the Series Supplement and
otherwise satisfactory to the Trustee and Initial Purchaser, as applicable, or
such other written statement as the Depositor shall prescribe.

     7. The Purchaser agrees that, if at some time in the future it wishes to
transfer or exchange any of the Class A-2 Certificates, it will not transfer
or exchange any of the Class A-2 Certificates unless such transfer or exchange
is in accordance with Section 5.04 of the Trust Agreement. The Purchaser
understands that any purported transfer of the Class A-2 Certificates (or any
interest therein) in contravention of any of the restrictions and conditions
in the Trust Agreement, as applicable, shall be void, and the purported
transferee in such transfer shall not be recognized by the Trust or any other
Person as a Certificateholder, as the case may be, for any purpose.

     8. The purchaser (i) acknowledges that the Depositor, the Initial
Purchaser, the Trustee and others will rely upon the truth and accuracy of the
foregoing acknowledgments, representations and agreements and agrees that the
Depositor, the Initial Purchaser, the Trustee

                                     C-3
<PAGE>

are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official inquiry
with respect to the matters covered hereby, and (ii) agrees that, if any of
the acknowledgments, representations, warranties and agreements made or deemed
to have been made by such purchaser's purchase of the Class A-2 Certificates
are no longer accurate, such purchaser shall promptly notify the Depositor and
the Initial Purchaser. If the purchaser is acquiring any Class A-2
Certificates as a fiduciary or agent for one or more investor accounts, it
represents that it has sole investment discretion with respect to each such
account and it has full power to make the foregoing acknowledgments,
representations and agreements on behalf of each such account and that each
such investor account is eligible to purchase the Class A-2 Certificates.

                               Very truly yours,

                               By:
                                   ------------------------------
                                   Name:
                                   Title:

                                     C-4

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