MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

           You should read the following discussion in conjunction with "Risk Factors," "Selected Consolidated Historical Financial and Operating Data" and our consolidated financial statements and the related notes included elsewhere in this prospectus.

General

           We generate revenues through leasing transportation equipment, primarily intermodal chassis and dry freight standard containers. Most of our revenues are derived from payments received under operating leases. The utilization of our operating lease fleet of chassis for the nine months ended September 30, 2002 has declined from the same period in 2001 as economic activity in North America has declined. This has brought about reduced operating lease revenue accompanied by increased costs, in particular for storage of the idle equipment. In recent weeks, our chassis utilization has increased primarily because shippers have attempted to alleviate the congestion in West Coast ports brought about by the longshoreman strike in September 2002. This trend is continuing in the fourth quarter of 2002. Short-term utilization of CAI's container fleet has increased since April 2002 and this trend is expected to continue through the fourth quarter of 2002. Our long-term international container utilization has remained steady. We also enter into finance leases, under which the lessee has the right to purchase the equipment at the end of the lease term. Our finance lease portfolio has remained relatively unchanged since December 31, 2001. For the nine months ended September 30, 2002 revenues from direct finance leases accounted for 8% of our leasing revenues.

           Revenue derived from an operating lease generally consists of the total lease payment from the customer. In 1999, 2000 and 2001, revenues derived from operating leases were $173.9 million (92% of revenues), $226.3 million (93% of revenues) and $283.9 million (93% of revenues), respectively.

           Revenue derived from a direct finance lease consists only of income recognized over the term of the lease using the effective interest method. The principal component of the direct finance lease payment is reflected as a reduction to the net investment in the direct finance lease. In 1999, 2000 and 2001, total payments from direct finance leases were $68.9 million, $65.0 million and $63.9 million, respectively. In 1999, 2000 and 2001, the revenue component of total lease payments totaled $15.9 million (8% of revenues), $15.9 million (7% of revenues) and $21.2 million (7% of revenues). For the nine months ended September 30, 2002 and September 30, 2001, total payments from direct financing leases were $56.5 million and $43.9 million, respectively, and the revenue component of the total lease payments totaled $19.3 million (8% of revenues) and $14.8 million (6% of revenues), respectively.

           Our mix of operating and direct finance leases is a function of customer preference and demand and our success in meeting those customer requirements. During the initial two years of either an operating lease or a direct finance lease, the contribution to our earnings before interest and taxes is very similar. In subsequent periods, however, the operating lease will generally be more profitable than a direct finance lease, primarily due to the return of principal inherent in a direct finance lease. However, after the long-term portion (and any renewal) of an operating lease expires, the operating lease will have redeployment costs and related risks which are avoided under a direct finance lease.

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

           Our container leasing operations are conducted through our subsidiary, Interpool Limited, a Barbados corporation. Our effective tax rate benefits substantially from the application of an income tax convention, pursuant to which the profits of Interpool Limited from container leasing operations are exempt from federal taxation in the United States. These profits are subject to Barbados tax at rates which are significantly lower than the applicable rates in the United States. See "- United States Federal Income Tax." Our chassis leasing operations are conducted primarily through Trac Lease and Interpool. The short-term portion of our container leasing operations is conducted through our 50%-owned consolidated subsidiary, CAI. A portion of our other United States equipment leasing activities are conducted through Interpool itself.

           On June 27, 2002, our 50% owned subsidiary, Container Applications International, Inc. (CAI), which concentrates on short-term container leasing, entered into a new senior credit agreement with a group of financial institutions. To facilitate the closing of this new credit facility, we agreed to extend the repayment terms of an outstanding subordinated note (Note) of CAI held by Interpool and modified certain financial covenants of the Note. At the same time, we were provided a majority position on CAI's board of directors. We have determined that as a result of these transactions and gaining a majority position on CAI's board, our financial statements for the quarter ended June 30, 2002 must include CAI as a consolidated subsidiary commencing June 27, 2002. Previously, CAI was accounted for under the equity method of accounting. Our share of the equity earnings (losses) of CAI for the periods from January 1, 2002 through June 27, 2002 have been recorded in "(Income)/Loss for Investments Accounted for Under the Equity Method" in the accompanying Condensed Consolidated Statements of Income. For the period from June 27 through September 30, 2002, CAI's results of operations have been included in the appropriate captions on the accompanying Condensed Consolidated Statements of Income. The assets and liabilities of CAI at September 30, 2002 have been included on the accompanying Condensed Consolidated Balance Sheets.

           During the three months ended September 30, 2001, we initiated a plan to dispose of PCR, a 51%-owned subsidiary engaged in leasing computers and related equipment, and to discontinue the operations of Microtech, a 75.5%-owned subsidiary, also engaged in computer leasing. As a result, PCR and Microtech have been classified as discontinued operations in the condensed consolidated financial statements.

Significant Accounting Policies

           The significant accounting policies used by Interpool and its subsidiaries in the preparation of the accompanying consolidated financial statements are summarized below. Our accounting records are maintained in United States dollars and the consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States.

           Basis of consolidation. The consolidated financial statements include the accounts of Interpool and Interpool's subsidiaries more than 50% owned or otherwise controlled by the Company. All significant intercompany transactions have been eliminated. Minority interest in equity of subsidiaries represents the minority stockholders' proportionate share of the equity in the income of the subsidiaries. In connection with acquisitions in 1988 and 1993 of certain consolidated subsidiaries, the excess of fair value of assets acquired over the acquisition cost was allocated proportionately to certain assets to reduce the value assigned to those assets. For accounting purposes this allocation has only been recorded in the consolidation of Interpool and its subsidiaries.

           In connection with certain investments in which we do not own a majority interest, these investments are accounted for using the equity method of accounting. The excess of costs over the fair value of net assets acquired is being amortized on a straight-line basis over twenty years. In addition, our equity in the income and/or loss from such equity investments is included in other (income)/expense, net. Our investment in its equity method investees is included in other assets.

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

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

          Dry freight standard containers...............     12-1/2 years
          Chassis.......................................     17.5 years
          Other.........................................     3 to 25 years

           Gains or losses resulting from the disposition of leasing equipment are recorded in the year of disposition.

           The residual value of leasing equipment is estimated based on the projections for the economic value and market value of intermodal equipment as well as our experience in leasing and selling similarly aged equipment. Such projected values are reviewed and updated when market and/or economic conditions change. We continually review leasing equipment and other long-lived assets to evaluate whether changes have occurred that would suggest these assets may be impaired based on the estimated cash flows of the assets over the remaining amortization period. If this review indicates that the remaining estimated useful life requires revision or that the asset is not recoverable, the carrying amount of the asset is reduced to its fair value.

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

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

           We classified the retained interest in securitized direct finance lease receivables as an available for sale security, which is included in "Other Investment Securities" in the accompanying consolidated balance sheets.

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

Results of Operations

Nine Months Ended September 30, 2002 compared to Nine Months Ended September 30, 2001

           Revenues. Our revenues increased to $233.4 million for the nine months ended September 30, 2002, from $229.1 million in the nine months ended September 30, 2001, an increase of $4.3 million or 2%. The increase was attributable to $10.8 million of incremental leasing revenues as a result of consolidating CAI, increased finance lease revenues of $4.4 million, partially offset by reduced operating lease revenues of $10.9 million. Although our container and chassis fleets increased in size by 13% and 8%, respectively as compared to the nine months ended September 30, 2001, the operating lease revenue for the nine months ended September 30, 2002 declined when compared to the nine months ended September 30, 2001 as a result of reductions in the daily rental rates of 11% for containers and 8% for chassis for the nine months ended September 30, 2002 as compared to the nine months ended September 30, 2001. The decrease in container rates resulted from the termination of leases with higher rates that were written when the cost of equipment was higher than it is currently. These leases are being replaced by leases with lower rates reflecting the current cost of equipment. Our chassis rates declined as a result of the acquisition, in December 2001, of 20,700 used chassis on hire at per diem rates lower than our existing fleet. In addition, a change to California law, which made the lessee of the equipment responsible for the payment of licensing costs, lowered the rates since these costs were previously recovered through per diem rates. Utilization rates of our container fleet and its domestic intermodal chassis operating fleets at September 30, 2002 were 98% and 92%, respectively, as compared to 95% and 93%, respectively, at September 30, 2001. Our containers managed by CAI are considered to be on hire for utilization purposes, although, revenues from these containers depend on the overall utilization of CAI's fleet. The yield (per diem revenue net of operating costs) on the CAI managed assets was $0.41 and $0.55 per unit per day for the nine months ended September 30, 2002 and 2001, respectively. The reduction in yield was the result of lower utilization of the equipment in the short term leasing market.

           Lease Operating and Administrative Expenses. Our lease operating and administrative expenses increased to $65.4 million for the nine months ended September 30, 2002 from $65.6 million in the nine months ended September 30, 2001, a decrease of $0.2 million.

           The increase was primarily due to:

           Provision for Doubtful Accounts. Our provision for doubtful accounts increased to $2.9 million for the nine months ended September 30, 2002 from $1.9 million in the nine months ended September 30, 2001. The increase was primarily attributable to additional reserves provided for a specific customer in default under its lease obligations within the domestic intermodal division. Our provision for doubtful accounts is provided based upon a review of the outstanding receivables and an evaluation of the adequacy of the allowance for doubtful accounts which we consider to be adequate based upon the risk profile of the receivables.

           Market Value Adjustment for Derivative Instruments. Our non-cash market value adjustment for derivative instruments expense increased to $5.8 million for the nine months ended September 30, 2002 from $2.1 million in the nine months ended September 30, 2001, an increase of $3.7 million. This increase primarily resulted from the change in the fair value of an interest rate swap entered into in March 2002 with a notional amount of $250.0 million which did not qualify for hedge accounting treatment under SFAS 133. This swap converts the variable rate payments of certain of our debt to fixed payments.

           Depreciation and Amortization of Leasing Equipment. Our depreciation and amortization expenses increased to $61.0 million for the nine months ended September 30, 2002 from $55.5 million for the nine months ended September 30, 2001, an increase of $5.5 million or 10%. The increase was primarily the result of $4.5 million of incremental depreciation expense as a result of consolidating CAI, as well as an expanded fleet size, partially offset by a decrease in depreciation expense as a result of the changes to our depreciation policy for chassis amounting to a depreciation savings of $4.6 million and a change to the depreciation policy of our containers amounting to a depreciation savings of $0.2 million, as well as reduced depreciation expense of $1.3 million as a result of our sale of our rail trailers and domestic containers to GE Capital in March 2001. See Note 1 to the condensed consolidated financial statements for further information regarding the depreciation policy changes for chassis and containers, which were effective April 1, 2002.

           Minority Interest (Income)/Expense, Net. The change in minority interest (income)/expense, net of $1.0 million for the nine months ended September 30, 2002 as compared to the prior year period resulted primarily from an increase in dividends and distributions paid by Chassis Holdings of $1.8 million, partially offset by minority interest income of $0.8 million as a result of the consolidation of CAI effective June 27, 2002.

           Income/Loss for Investments Accounted for Under the Equity Method. Losses for investments accounted for under the equity method of accounting increased from $0.1 million for the nine months ended September 30, 2001 to $3.6 million for the nine months ended September 30, 2002. We recorded its equity in the losses of CAI through June 26, 2002, at which time CAI became a consolidated subsidiary of Interpool. The increase was primarily the result of CAI recording an impairment loss of $5.4 million related to damaged and held for sale equipment, as well as a change in the container depreciation policy effective April 1, 2002 which resulted in an increase in CAI's depreciation for the three months ended June 30, 2002 of $0.6 million. These two items increased our recorded losses by $2.0 million, net of CAI's tax benefit, during the three months ended June 30, 2002. The remaining increase in losses resulted from reduced operating performance of the CAI fleet.

           Other (Income)/Expense, Net. We had other income of $4.7 million during the nine months ended September 30, 2002. The change in other (income)/expense, net of $3.5 million from the nine months ended September 30, 2001 was due to:

           Interest Expense. Our interest expense increased to $81.2 million in the nine months ended September 30, 2002 from $71.5 million in the nine months ended September 30, 2001, an increase of $9.7 million or 14%. The increase in interest expense was primarily attributable to $2.2 million of incremental interest expense as a result of consolidating CAI, deferred financing fees of $3.7 million which were written off when we refinanced certain of our debt instruments, and increased borrowings to fund capital expenditures, resulting in incremental interest expense of $4.5 million, partially offset by reduced borrowing costs resulting in reduced interest expense of $0.7 million.

           Interest Income. Our interest income decreased to $4.1 million in the nine months ended September 30, 2002 from $6.6 million in the nine months ended September 30, 2001, a decrease of $2.5 million or 38%. The decrease in interest income was primarily due to reduced earnings on invested cash balances, as well as reduced cash balances on hand during 2002.

           (Benefit)/Provision for Income Taxes. We recorded an income tax benefit of $0.4 million for the nine months ended September 30, 2002 as compared to a tax provision of $6.3 million for the nine months ended September 30, 2001. A portion of this change resulted from an overall decrease in income from continuing operations. In addition, pre-tax income from continuing operations of $25.8 million was generated by our international container operations which is subject to a lower tax rate (approximately 3.4%) than the domestic intermodal and container divisions (approximately 39.6%), which generated a pre-tax loss of $5.1 million from continuing operations. Partially offsetting the decrease was a tax law change in New Jersey which prevented current utilization of our NOL's in that jurisdiction resulting in an increased tax provision of $0.8 million, net of U.S. Federal tax benefit.

           Income from Continuing Operations Before Discontinued Operations, Cumulative Effect of Change in Accounting Principle and Extraordinary Gain. As a result of the factors described above, our income from continuing operations before discontinued operations, the cumulative effect of change in accounting principle and extraordinary gain was $21.1 million in the nine months ended September 30, 2002 versus $33.3 million in the nine months ended September 30, 2001.

           (Loss) Gain from Discontinued Operations. Our loss from the discontinued operations of Microtech was $0.7 million for the nine months ended September 30, 2002, as compared to a loss from discontinued operations of $1.7 million for the nine months ended September 30, 2001. We, along with the management of Microtech, believes all future losses expected to be incurred by Microtech during the liquidation of its lease portfolio have been properly accrued as of September 30, 2002. We, along with the management of Microtech, will continue to assess whether additional accruals for losses are necessary, as additional information becomes available during the liquidation of Microtech's lease portfolio.

           Cumulative Effect of Change in Accounting Principle. We recorded the cumulative effect of a change in accounting principle of $0.8 million in the three months ended March 31, 2001. This represents the cumulative effect through December 31, 2000 regarding our accounting for swap transactions not accounted for as hedges in accordance with the Financial Accounting Standards Board issued statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. The adoption of Statement 133 on January 1, 2001 increased liabilities by approximately $9.0 million, with offsetting amounts recorded as decreases to deferred tax liabilities of $2.4 million and accumulated other comprehensive income of $7.4 million.

           Extraordinary Gain. We recorded an extraordinary gain on the retirement of debt of $0.6 million in the nine months ended September 30, 2001.

           Net Income. As a result of the factors described above, our net income decreased to $20.4 million in the nine months ended September 30, 2002 from $33.0 million in the nine months ended September 30, 2001.

Three Months Ended September 30, 2002 Compared to Three Months Ended September 30, 2001

           Revenues. Our revenues increased to $86.1 million for the three months ended September 30, 2002, from $74.9 million in the three months ended September 30, 2001, an increase of $11.2 million or 15%. The increase was attributable to increased finance lease revenues of $0.9 million, as well as $10.4 million of incremental leasing revenues as a result of consolidating CAI, partially offset by $0.1 million in reduced operating lease revenues. Although our container and chassis fleets increased in size by 14% and 11%, respectively as compared to the three months ended September 30, 2001, the operating lease revenue for the three months ended September 30, 2002 declined when compared to the three months ended September 30, 2001 as a result of reductions in the daily rental rates of 12% for containers and 10% for chassis for the three months ended September 30, 2002 as compared to the three months ended September 30, 2001. The decrease in container rates resulted from the termination of leases with higher rates that were written when the cost of equipment was higher than it is currently. These leases are being replaced by leases with lower rates reflecting the current cost of equipment. Our chassis rates declined as a result of the acquisition, in December 2001, of 20,700 used chassis on hire at per diem rates lower than our existing fleet. In addition, a change to California law, which made the lessee of the equipment responsible for the payment of licensing costs, lowered the rates since these costs were previously recovered through per diem rates. Utilization rates of our container fleet and its domestic intermodal chassis operating fleets at September 30, 2002 were 98% and 92%, respectively, as compared to 95% and 93%, respectively, at September 30, 2001. Our containers managed by CAI are considered to be on hire for utilization purposes, although, revenues from these containers depend on the overall utilization of CAI's fleet. The yield (per diem revenue net of operating costs) on the CAI managed assets was $0.44 and $0.52 per unit per day for the three months ended September 30, 2002 and 2001, respectively. The reduction in yield was the result of lower utilization of the equipment in the short term leasing market.

           Lease Operating and Administrative Expenses. Our lease operating and administrative expenses increased to $26.6 million for the three months ended September 30, 2002 from $20.6 million in the three months ended September 30, 2001, an increase of $6.0 million or 29%.

           The increase was primarily due to:

           Provision for Doubtful Accounts. Our provision for doubtful accounts increased to $1.3 million for the three months ended September 30, 2002 from $0.5 million in the three months ended September 30, 2001. The increase was primarily attributable to additional reserves provided for a specific customer in default under its lease obligations within the domestic intermodal division. Our provision for doubtful accounts is provided based upon a review of the outstanding receivables and an evaluation of the adequacy of the allowance for doubtful accounts which we consider to be adequate based upon the risk profile of the receivables.

           Market Value Adjustment for Derivative Instruments. The increase in the non-cash market value adjustment for derivative instruments of $2.5 million for the three months ended September 30, 2002 as compared to the prior year period primarily resulted from the change in the fair value of an interest rate swap entered into in March 2002 with a notional amount of $250.0 million which did not qualify for hedge accounting treatment under SFAS 133. This swap converts the variable rate payments of certain of our debt to fixed payments.

           Depreciation and Amortization of Leasing Equipment. Our depreciation and amortization expenses increased to $23.2 million for the three months ended September 30, 2002 from $18.8 million for the three months ended September 30, 2001, an increase of $4.4 million or 23%. The increase was primarily the result of $4.3 million of incremental depreciation expense as a result of consolidating CAI, partially offset by changes to our depreciation policy for chassis amounting to a depreciation savings of $2.3 million and a change to the depreciation policy of our containers amounting to a depreciation savings of $0.1 million. These reductions to depreciation expense were partially offset by an increase in depreciation resulting from an expanded fleet size. See Note 1 to the condensed consolidated financial statements for further information regarding the depreciation policy changes for chassis and containers, which were effective April 1, 2002.

           Minority Interest (Income)/Expense, Net. The change in minority interest (income)/expense, net of $0.6 million for the three months ended September 30, 2002 as compared to the prior year period resulted primarily from minority interest income of $0.8 million as a result of the consolidation of CAI effective June 27, 2002, partially offset by an increase in dividends and distributions paid by Chassis Holdings of $0.2 million.

           Income/Loss for Investments Accounted for Under the Equity Method. The change in (income)/loss for investments accounted for under the equity method during the three months ended September 30, 2002 is nominal as compared to the three months ended September 30, 2001. We recorded our equity in the earnings/(losses) of CAI through June 26, 2002, at which time CAI became a consolidated subsidiary of Interpool. For the three months ended September 30, 2001, our share of our equity earnings of CAI was $0.1 million. For the three months ended September 30, 2002, we recorded $0.1 million as a result of certain other investments accounted for under the equity method of accounting.

           Other (Income)/Expense, Net. We had other expense of $0.6 million during the three months ended September 30, 2002. The change in other (income)/expense, net of $0.3 million from the three months ended September 30, 2001 was due to:

           Interest Expense. Our interest expense increased to $29.5 million in the three months ended September 30, 2002 from $23.2 million in the three months ended September 30, 2001, an increase of $6.3 million or 27%. The increase in interest expense was primarily attributable to $2.1 million of incremental interest expense as a result of consolidating CAI, deferred financing fees of $2.5 million which were written off when we refinanced certain of our debt instruments, and increased borrowings to fund capital expenditures, resulting in incremental interest expense of $5.4 million, partially offset by reduced borrowing costs resulting in reduced interest expense of $3.7 million.

           Interest Income. Our interest income decreased to $0.6 million in the three months ended September 30, 2002 from $1.3 million in the three months ended September 30, 2001, a decrease of $0.7 million or 54%. The decrease in interest income was primarily due to reduced earnings on invested cash balances.

           (Benefit)/Provision for Income Taxes. We recorded an income tax benefit of $1.5 million for the three months ended September 30, 2002 as compared to a tax provision of $1.2 million for the three months ended September 30, 2001. A portion of this change resulted from an overall decrease in income from continuing operations. In addition, pre-tax income from continuing operations of $8.7 million was generated by our international container operations which is subject to a lower tax rate (approximately 3.4%) than the domestic intermodal and container divisions (approximately 38.7%), which generated a pre-tax loss of $6.7 million from continuing operations. Partially offsetting the decrease was a tax law change in New Jersey which prevented current utilization of our NOL's in that jurisdiction resulting in an increased tax provision of $0.8 million, net of U.S. Federal tax benefit.

           Income from Continuing Operations Before Discontinued Operations and Extraordinary Gain. As a result of the factors described above, our income from continuing operations before discontinued operations, the cumulative effect of change in accounting principle and extraordinary gain was $3.5 million in the three months ended September 30, 2002 versus $10.0 million in the three months ended September 30, 2001.

           (Loss) Gain from Discontinued Operations. We recorded break-even results relating to the discontinued operations of Microtech for the three months ended September 30, 2002, as compared to a loss from discontinued operations of $0.9 million for the three months ended September 30, 2001. We, along with the management of Microtech, believes all future losses expected to be incurred by Microtech during the liquidation of its lease portfolio have been properly accrued as of September 30, 2002. We, along with the management of Microtech, will continue to assess whether additional accruals for losses are necessary, as additional information becomes available during the liquidation of Microtech's lease portfolio.

           Extraordinary Gain. We recorded an extraordinary gain on the retirement of debt of $0.3 million in the three months ended September 30, 2001.

           Net Income. As a result of the factors described above, our net income decreased to $3.5 million in the three months ended September 30, 2002 from $9.5 million in the three months ended September 30, 2001.

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

           Revenues. Our revenues increased to $305.1 million for the year ended December 31, 2001, from $242.3 million in the year ended December 31, 2000, an increase of $62.8 million or 26%. The increase was primarily attributable to our October 2000 acquisition of assets from Transamerica which resulted in $58.2 million of additional leasing revenues generated from the assets acquired which were not included as assets held for sale. In addition, finance lease revenues increased $5.3 million, which includes the favorable impact of an adjustment to income earned on finance lease receivables of $1.1 million related to prior periods, partially offset by decreased operating lease revenues of $0.7 million. Our revenue includes $6.8 million due from a bankrupt customer recoverable from insurance. Utilization rates of the chassis and container operating lease fleet at December 31, 2001 were 92% and 96%, respectively, and at December 31, 2000 were 97% and 99%, respectively.

           Lease Operating and Administrative Expenses. Our lease operating and administrative expenses increased to $90.0 million for the year ended December 31, 2001 from $58.7 million in the year ended December 31, 2000, an increase of $31.3 million or 53%. The increase was primarily due to our October 2000 acquisition of assets from Transamerica which resulted in $21.1 million of additional lease operating and administrative expenses. In addition we had expanded operations generating increased equipment rental of $7.7 million, minority interest expense of 1.6 million, storage expense of $1.3 million and employee benefits expense of $0.6 million, partially offset by reduced insurance expense of $0.3 million and legal fees of $0.3 million. Maintenance and repairs expense decreased $0.7 million which resulted from additional repairs on our operating lease equipment of $1.6 million, offset by $2.3 million of billable repairs to a bankrupt customer recoverable from insurance.

           Provision for Doubtful Accounts. The provision for doubtful accounts increased to $2.3 million for the year ended December 31, 2001 from $2.2 million for the year ended December 31, 2000, an increase of $0.1 million or 5%.

           Depreciation and Amortization of Leasing Equipment. Our depreciation and amortization expenses increased to $74.3 million for the year ended December 31, 2001 from $60.8 million for the year ended December 31, 2000, an increase of $13.5 million or 22%. The increase was primarily a result of the October 2000 acquisition of assets from Transamerica, partially offset by reduced depreciation expense of $3.9 million as a result of our sale of rail trailers and domestic containers to GE Capital in March 2001. Additionally, effective October 1, 2000, we revised our estimate of the depreciation life of chassis from 15 years to 17.5 years. The effect of this change was to decrease depreciation expense by $1.0 million for the three months ended December 31, 2000. For the year ended December 31, 2001, the effect of this change was to decrease depreciation expense by $3.7 million.

           Other (Income)/Expense, Net. The change in other (income)/expense, net of $2.0 million was primarily due to a gain of $1.8 million on the sale of the rail trailers and domestic containers previously owned by us to GE Capital. These rail trailers and domestic containers were not acquired from Transamerica as part of the October 2000 acquisition. Additionally, exclusive of the sale of the above mentioned rail trailers and domestic containers to GE Capital, our net loss on the sale of leasing equipment increased $0.2 million during the year ended December 31, 2001, partially offset by an increase in our income from unconsolidated subsidiaries of $0.4 million during the year ended December 31, 2001. During the year ended December 31, 2001, our net loss on the sale of leasing equipment includes losses on sales of equipment recovered from a bankrupt customer of $1.4 million.

           Interest Expense, Net. Our net interest expense increased to $85.6 million in the year ended December 31, 2001 from $68.1 million in the year ended December 31, 2000, an increase of $17.5 million or 26%. The increase in net interest expense was due to increased interest expense of $10.4 million, as well as decreased investment income of $7.1 million. The increase in interest expense was primarily due to increased borrowings to acquire assets from Transamerica and fund capital expenditures, resulting in incremental interest expense of $11.0 million, partially offset by reduced interest rates resulting in reduced interest expense of $0.6 million.

           Provision for Income Taxes. Our provision for income taxes decreased to $6.7 million from $8.2 million primarily due to a lower effective tax rate resulting from greater income contribution from the international container division, which is subject to a lower statutory tax rate than our domestic intermodal division.

           Income from Continuing Operations Before Cumulative Effect of Change in Accounting Principle and Extraordinary Gain. As a result of the factors described above, our income from continuing operations before cumulative effect of change in accounting principle and extraordinary gain was $43.0 million in the year ended December 31, 2001 versus $41.8 million in the year ended December 31, 2000.

           (Loss) Gain from Discontinued Operations. During the three months ended September 30, 2001, we initiated a plan to dispose of PCR, a 51%-owned subsidiary, and to discontinue the operations of Microtech, a 75.5%-owned subsidiary, and liquidate its lease portfolio. As a result of this decision, PCR and Microtech have been classified as discontinued operations in the consolidated financial statements. On December 31, 2001, we completed the sale of our 51% ownership stake of PCR to an investment group comprised of the management of PCR. Our loss from discontinued operations was $1.9 million for the year ended December 31, 2001, as compared to a gain from discontinued operations of $1.2 million for the year ended December 31, 2000. The increased loss is primarily due to $1.7 million of losses incurred by PCR during the year ended December 31, 2001, as compared to $0.7 million of income during the year ended December 31, 2000. In addition, Microtech incurred $0.2 million of losses during the year ended December 31, 2001, as compared to $0.5 million of income during the year ended December 31, 2000. The increased losses are primarily the result of a weaker economic environment.

           Cumulative Effect of Change in Accounting Principle. We recorded the cumulative effect of a change in accounting principle of $0.8 million in the three months ended March 31, 2001. This represents the cumulative effect through December 31, 2000 regarding our accounting for swap transactions not accounted for as hedges in accordance with the Financial Accounting Standards Board issued statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. The adoption of Statement 133 on January 1, 2001 increased liabilities by approximately $9.0 million, with offsetting amounts recorded as decreases to deferred tax liabilities of $2.4 million and accumulated other comprehensive income of $7.4 million.

           We recorded the cumulative effect of a change in accounting principle of $0.7 million in the three months ended March 31, 2000. This represents a change in our accounting for its maintenance and repairs expense from an accrual to cash basis.

           Extraordinary Gain. We recorded an extraordinary gain on the retirement of debt of $0.6 million in the year ended December 31, 2001 and $0.8 million in the year ended December 31, 2000.

           Net Income. As a result of the factors described above, our net income decreased to $42.5 million in the year ended December 31, 2001 from $44.5 million in the year ended December 31, 2000.

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

           Revenue. Our revenues increased to $242.3 million for the year ended December 31, 2000, from $189.8 million in the year ended December 31, 1999, an increase of $52.5 million or 28%. The increase was primarily attributable to our October 2000 acquisition of the Transamerica assets which resulted in $20.8 million of additional leasing revenues generated from the assets acquired which were not included as assets held for sale and increased operating lease revenues of $31.7 million primarily generated by an expanded container and chassis fleet. Utilization rates of the chassis and container operating lease fleet at December 31, 2000 were 97% and 99%, respectively, and at December 31, 1999 were 95% and 98%, respectively.

           Lease Operating and Administrative Expenses. Our lease operating and administrative expenses increased to $58.7 million for the year ended December 31, 2000 from $48.3 million in the year ended December 31, 1999, an increase of $10.4 million or 22%. The increase was primarily due to our October 2000 acquisition of assets from Transamerica which resulted in $6.4 million of additional lease operating and administrative expenses. In addition we had higher operating and administrative expenses resulting from expanded operations generating increased equipment rental of $2.7 million, licensing expense of $1.1 million, insurance expense of $1.0 million, consulting expense of $0.7 million and salary expense of $0.2 million, partially offset by reduced maintenance and repairs expense of $1.7 million.

           Provision for Doubtful Accounts. Our provision for doubtful accounts decreased to $2.2 million for the year ended December 31, 2000 from $6.9 million for the year ended December 31, 1999, a decrease of $4.7 million. The decrease was primarily due to additional bad debt reserves for specific losses of $4.7 million incurred during 1999.

           Depreciation and Amortization of Leasing Equipment. Our depreciation and amortization expenses increased to $60.8 million for the year ended December 31, 2000 from $55.6 million for the year ended December 31, 1999, an increase of $5.2 million or 9%. The increase was primarily a result of the October 2000 acquisition of assets from Transamerica, partially offset by a $6.8 million write down during 1999 for certain container equipment for which the residual value was impaired. A specific manufacturer provided us with defective containers subject to a warranty claim, for which the expenses are not recoverable due to the bankruptcy of the manufacture. We isolated the unit numbers of the defective containers and analyzed the proceeds received upon the sale of these defective containers. We then reduced the book value of these defective containers to scrap value in order to approximate their net realizable value. Additionally, effective October 1, 2000, we revised our estimate of the depreciation life of chassis from 15 years to 17.5 years. The effect of this change was to decrease depreciation expense by $1.0 million for the three months ended December 31, 2000.

           Other (Income)/Expense, Net. The change in other (income)/expense, net of $0.3 million was due to an increase in our income from unconsolidated subsidiaries of $0.4 million. Additionally our net loss on sale of leasing equipment was $1.5 million in the year ended December 31, 2000 as compared to a loss of $1.4 million in 1999.

           Interest Expense, Net. Our net interest expense increased to $68.1 million in the year ended December 31, 2000 from $52.4 million in the year ended December 31, 1999, an increase of $15.7 million or 30%. The increase in net interest expense was due to increased interest expense of $20.2 million, partially offset by increased investment income of $4.5 million. The increase in interest expense was primarily due to increased borrowings to fund capital expenditures resulting in incremental interest expense of $19.0 million, as well as increased interest rates resulting in incremental interest expense of $1.2 million.

           Provision for Income Taxes. Our provision for income taxes increased to $8.2 million from $2.8 million primarily due to higher taxable income, as well as a higher effective tax rate resulting from greater income contribution from the domestic intermodal division, which is subject to a higher statutory tax rate than our international container division.

           Income from Continuing Operations Before Cumulative Effect of Change in Accounting Principle and Extraordinary Gain. As a result of the factors described above, our income from continuing operations before cumulative effect of change in accounting principle and extraordinary gain was $41.8 million in the year ended December 30, 2000 versus $20.9 million in the year ended December 31, 1999.

           (Loss) Gain from Discontinued Operations. Our gain from discontinued operations was $1.2 million for the year ended December 31, 2000, as compared to a gain from discontinued operations of $0.9 million for the year ended December 31, 1999. The increased gain is primarily due to $0.7 million of income earned by PCR during the year ended December 31, 2000, as compared to $0.3 million of income during the year ended December 31, 1999. In addition, Microtech earned $0.5 million of income during the year ended December 31, 2000, as compared to $0.7 million of income during the year ended December 31, 1999.

           Cumulative Effect of Change in Accounting Principle. We recorded the cumulative effect of a change in accounting principle of $0.7 million in the three months ended March 31, 2000. This represents a change in our accounting for its maintenance and repairs expense from an accrual to cash basis.

           Extraordinary Gain. We recorded an extraordinary gain on the retirement of debt of $0.8 million in the year ended December 31, 2000 and $0.7 million in the year ended December 31, 1999.

           Net Income. As a result of the factors described above, our net income increased to $44.5 million in the year ended December 31, 2000 from $22.6 million in the year ended December 31, 1999.

Liquidity and Capital Resources

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

           We generated cash flow from operations of $72.8 million, $115.6 million, and $111.5 million in 1999, 2000 and 2001, respectively. In 1999, 2000 and 2001 net cash (used for) provided by financing activities was $244.0 million, $621.9 million and $(218.9) million, respectively. We purchased equipment costing $296.3 million in 1999, $293.5 million in 2000 and $280.8 million in 2001.

           We generated cash flow from operations of $83.7 million and $83.6 million in the first nine months of 2001 and 2002, respectively, and net cash provided by (used for) financing activities was ($324.5) million and $111.8 million for the first nine months of 2001 and 2002, respectively. We purchased equipment amounting to 169.5 million for the nine months ended September 30, 2001 and $228.7 million for the nine months ended September 30, 2002.

           The following table sets forth certain historical cash flow information for the three years ended December 31, 2001 and the nine months ended September 30, 2001 and 2002:

                                                                                      Nine Months
                                               Year Ended December 31,            Ended September 30,
                                    ------------------------------------------    -------------------
                                         1999          2000         2001            2001       2002
                                         ----          ----         ----            ----       ----
                                                             (dollars in millions)

Net cash provided by operating
   activities.....................      $72.8        $115.6        $111.5          $83.7      $83.6
Proceeds from disposition of
   leasing equipment..............       22.9          84.4          30.9           31.8       18.8
Acquisition of leasing equipment..    (196.2)       (245.8)       (157.1)         (97.7)    (191.6)
Investment in direct financing
   leases.........................    (100.1)        (47.7)       (123.7)         (37.0)     (71.8)
Net collections on direct finance
   leases.........................       53.0          49.1          43.0           37.3       29.0
Net proceeds (payments) of
   issuance of long-term debt and
   capital lease obligations in
   excess of payment of long-term
   debt and capital lease
   obligations....................        80.8        474.4        (99.7)        (132.6)      138.9

           In March 1999, we established a container securitization facility of $250.0 million. This program provides us with a lower cost of capital for out finance lease business and access to an additional source of funding. Included in other investment securities at September 30, 2002 is approximately $11.6 million of retained interests in the securitized receivables. In July 2001, our container securitization facility, which was originally established as an off-balance sheet source of financing in March 1999, was amended allowing additional financings to be accounted for as on-balance sheet secured debt financing. In August 2002, the container securitization facility was extended with the maximum outstanding limited to $150.0 million. In October 2002 the facility was renewed and the facility amount was set at $200.0 million. At September 30, 2002, $120.0 million of the container securitization facility was utilized, of which $39.6 million relates to off-balance sheet financing, while $80.4 million relates to on-balance sheet financing and is included in debt and capital lease obligations in the condensed consolidated balance sheets. At September 30, 2002, the rate on this facility is 5.06%, including the effect of interest rate swap contracts in place as of September 30, 2002.

           In March 2002, we completed a $500.0 million chassis asset-based securitization facility. This facility is guaranteed by MBIA and was therefore rated AAA by Standard & Poor's and Aaa by Moody's. The proceeds from this financing were used to repay debt related to a secured financing facility used to fund the acquisition of assets from Transamerica, to repay a previously established chassis securitization facility, to fund growth of our intermodal equipment fleet and for working capital purposes. On September 30, 2002, we completed the second phase of this transaction by entering into a sale/leaseback transaction and expanding the total debt and capital lease obligations to a total of $540.9 million outstanding, of which $129.3 million is a debt obligation and $411.6 million is a capital lease obligation under the sale/leaseback. The interest rate on this facility is 5.05%, including the effect of interest rate swap contracts in place as of September 30, 2002. This facility continues to be accounted for as on-balance sheet secured financing. The assets used to secure this facility are segregated in a Delaware statutory titling trust (the Trust) and in a special purpose entity (which is consolidated by us) and amount to $18.4 million of accounts receivable and fixed assets with a net book value of $502.9 million at September 30, 2002. In addition, $23.3 million of cash and marketable securities at September 30, 2002 are restricted for use by the Trust and the special purpose entity and included on our consolidated balance sheet. The assets, which are segregated in the special purpose entity and included on our consolidated balance sheet, are not available to pay the claims of our creditors.

           In July 2000, we established a chassis securitization facility of $280.0 million. In October 2000, this chassis securitization facility was increased to $300.0 million. At December 31, 2001, $277.4 million of this facility was outstanding, with an interest rate of 4.75%, including the effect of interest rate swap contracts in place as of December 31, 2001. We repaid the facility in full in March 2002 with proceeds from our new chassis asset-based securitization facility completed March 2002.

           In October 2000, we established a secured financing facility in the amount of $300.0 million, to fund the Transamerica transaction. At December 31, 2001, $97.7 million of this facility was outstanding with an interest rate of 3.94%. We repaid the facility in full in March 2002 with proceeds from our new chassis asset-based securitization facility completed March 2002.

           We have a $215.0 million revolving credit facility with a group of commercial banks; on September 30, 2002, $170.0 million was outstanding, with an interest rate of 7.08%, including the effect of interest rate swap contracts in place as of September 30, 2002. In July 2000, this facility was renewed and amended with the term extended to July 31, 2005. The credit limit remains at $215.0 million through July 31, 2003; thereafter the credit limit declines to $193.5 million through July 31, 2004 and $172.0 million through July 31, 2005. Subsequent to September 30, 2002, we have continued to incur and repay debt obligations in connection with financing our equipment leasing activities. Under our revolving credit facility and most of our other debt instruments, we are required to maintain covenants (as defined) for a tangible net worth of $125 million, a fixed charge coverage ratio of 1.5 to 1 and a funded debt to net worth ratio of 4.0 to 1. At September 30, 2002, we were in compliance with these requirements.

           In February 1998, we issued $100.0 million principal amount of 6-5/8% Notes due 2003. During the second and third quarter of 2001, we retired $27.2 million of the 6-5/8% Notes and recognized an extraordinary gain, net of tax, of $0.4 million. During the second quarter of 2002, we retired $6.4 million of the 6-5/8% Notes. As of September 30, 2002, $41.3 million principal amount of 6-5/8% Notes remain outstanding. On October 16, 2002, we commenced a tender offer for any and all of its outstanding 6-5/8% Notes due 2003 (the "6-5/8% Notes"). Approximately $41.3 million principal amount of 6-5/8% Notes were outstanding upon commencement of the tender offer. The purchase price in the tender offer is $1,000 per $1,000 principal amount of the 6-5/8% Notes, plus accrued and unpaid interest. The source of the consideration for the tender offer is cash on hand. The expiration date of the tender offer is November 15, 2002, unless extended by us.

           In April 1998, we acquired a 50% common equity interest in CAI. CAI owns and leases its own fleet of containers and manages, for a fee, containers owned by third parties. We entered into our operating relationship with CAI primarily to facilitate the rental in the short-term market of containers coming off long-term lease, to gain access to new companies looking to lease containers on a long-term basis and to realize cost efficiencies from the operation of a coordinated container lease marketing group. The marketing group which is organized as a wholly-owned subsidiary of Interpool, is responsible for soliciting container lease business for both Interpool and CAI, including long-term and direct finance lease business and short-term lease business on master lease agreements. All long-term and direct finance lease business is purchased by Interpool, except that we offer to CAI, at cost, 10% of this long-term and direct finance lease business.

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

           On June 27, 2002, CAI entered into an amended $110.0 million senior revolving credit agreement with a group of financial institutions. To facilitate the closing of this new credit facility, we agreed to extend the repayment terms of our Note so as to require mandatory quarterly principal payments of $1.7 million beginning July 30, 2006 through July 30, 2011 and modified certain financial covenants in the Note. Interest on the Note continues to accrue at an annual fixed rate of 10.5% and is payable quarterly. The Note continues to be cross-defaulted with CAI's credit agreement, subject to the terms of an amended and restated subordination agreement.

           A total of $86.3 million was outstanding under CAI's senior revolving credit facility at September 30, 2002. Borrowings under CAI's senior credit facility are secured by substantially all CAI's assets and are payable on June 27, 2005. The senior credit facility contains various financial and other covenants. At June 30, 2002, CAI would not have been in compliance with one of the financial covenants then contained in the senior credit facility as well as similar covenants under two master lease agreements relating to equipment in CAI's fleet. CAI received amendments to these covenants in September 2002 which were made retroactive to June 30, 2002. As a result, CAI was in compliance as of June 30, 2002 with all senior credit facility and lease covenants as amended and continued to be in compliance as of September 30, 2002.

           In March 2001, the Company completed the sale of 50,000 rail trailers and domestic containers to GE Capital Corporation, including all 40,000 rail trailers and domestic containers we acquired from Transamerica in October 2000, for approximately $345.0 million.

           In May 1999, our Microtech subsidiary acquired a 51% interest in Personal Computer Rentals, Inc. (PCR), a nationwide lessor of computers and related equipment. We also provided financing to PCR. During the three months ended September 30, 2001, we initiated a plan to dispose of PCR, a 51%-owned subsidiary, and to discontinue the operations of Microtech, a 75.5%-owned subsidiary, and liquidate its lease portfolio. As a result of this decision, PCR and Microtech have been classified as discontinued operations in the consolidated financial statements. On December 31, 2001, we completed the sale of our 51% ownership stake of PCR to an investment group comprised of the management of PCR.

           During the three months ended June 30, 2001, we initiated a bankruptcy claim against a customer and sought to collect receivables and to recover equipment values through its insurance policies. We have demanded the return of approximately $48.6 million of equipment, including $8.5 million of direct finance leases, which were reclassified to leasing equipment. At September 30, 2002, the outstanding receivables from this customer, including amounts for equipment we anticipate will not be recovered, totaled approximately $33.5 million, all of which is covered by insurance (which is net of $1.0 million reserves for amounts not covered by insurance). The receivables are included in other receivables, net in the accompanying condensed consolidated balance sheets. At this time, we estimate no impairment upon the liquidation and/or re-lease of these assets after considering anticipated insurance proceeds. The maximum insurance coverage related to this claim is $35.0 million. The overall recovery of the asset values has been evaluated taking into consideration the equipment book value, the cost to recover and re-lease the equipment, and the total outstanding receivables, as well as the likelihood to collect through the recovery and sale of the equipment or the stipulated equipment values within the lease contracts that are covered by the insurance policies. We continued to record revenue from these leases through August 20, 2001, at which time revenue recognition was discontinued, as contractual lease payments through August 20, 2001 were covered by the insurance policies. Over the past several months, we have provided the supporting documentation for our claim to an adjuster appointed by the insurance underwriters. Based upon discussions with the adjuster, the analysis of the supporting documentation is nearly complete and it is anticipated that a report of the adjuster's findings will be submitted to the underwriters in November 2002. We will continue to assess the overall recovery of the claim and will pursue its timely resolution. As additional information becomes available, reserves for the impairment of the asset values may be necessary.

           As of September 30, 2002, commitments for capital expenditures totaled approximately $9.8 million. We believe that the net proceeds of this offering, cash on hand, cash flow from operations, borrowings under credit facilities and the net proceeds of the issuance of debt and equity securities in appropriate markets will be sufficient to meet our working capital needs, capital expenditures and required debt repayment for the next twelve months. Our available liquidity at September 30, 2002 was $189.9 million, consisting of $144.9 million of cash and marketable securities (excluding $23.3 million of cash within the chassis securitization facility) and $45.0 million of availability under our credit facilities. Required debt repayments are $179.0 million for the next twelve months. In addition, we expect to rely in substantial part on long-term financing for any purchase of equipment or strategic acquisitions to expand its business in the future. We cannot assure that additional long-term financing will be available for these purposes on acceptable terms or at all. In addition, from time to time, we explore new sources of capital both at the parent and subsidiary levels. For example, we have given consideration to the possibility of securitizing new categories of assets.

           On July 1, 2001, we restructured our relationship with The Ivy Group and its principals to provide us with managerial control over 6,047 chassis previously leased by Trac Lease, Inc. (Trac Lease), a wholly owned subsidiary of Interpool, from The Ivy Group. As a result of the restructuring, the partners of The Ivy Group contributed these 6,047 chassis and certain other assets and liabilities to a newly formed subsidiary, Chassis Holdings I LLC (Chassis Holdings), in exchange for $26.0 million face value of preferred membership units and 10% of the common membership units, and Trac Lease contributed 902 chassis and $2.4 million in cash to Chassis Holdings in exchange for $3.0 million face value of preferred membership units and 90% of the common membership units. The preferred membership units are entitled to receive a preferred return prior to the receipt of any distributions by the holders of the common membership units. The value of the contributed chassis was determined by taking the arithmetic average of the results of independent appraisals performed by three nationally recognized appraisal firms in connection with our establishment of a chassis securitization facility in July 2000. As the managing member of Chassis Holdings, Trac Lease exercises sole managerial control over the entity's operations. Chassis Holdings leases all of its chassis to Trac Lease at a rental rate equal to the then current Trac Lease fleet average per diem. Chassis Holdings and the holders of the preferred membership units are party to a Put/Call Agreement which provides that the holders of preferred units may put such units to Chassis Holdings under certain circumstances and Chassis Holdings may redeem such units under certain circumstances. Chassis Holdings will be required to make certain option payments to the holders of the preferred membership units in order to preserve its right to redeem such units. For the nine months ended September 30, 2002, dividends paid on the common units and distributions on the preferred units owned by The Ivy Group, totaling $2.3 million, are included in lease operating and administrative expenses in the accompanying condensed consolidated statements of income.

           As previously announced, we have authorized the repurchase up to 1,000,000 shares of our common stock. The shares will be purchased from time to time through open market purchases or privately negotiated transactions. During the first quarter of 2002, we purchased 2,100 shares for an aggregate purchase price of $0.04 million. During the fourth quarter of 2001, we purchased 58,100 shares for an aggregate purchase price of $0.9 million. Subsequent to September 30, 2002, we purchased 7,200 shares for an aggregate purchase price of $0.09 million.

           From time to time, we enter into discussions with third parties regarding potential acquisitions or business combinations. If additional capital were to be required for any such acquisition, there can be no assurance that such additional capital would be available on terms acceptable to us.

           In 2001, we entered into an interest rate swap contract with notional amounts totaling $51.5 million. These amounts relate to on and off balance sheet financing, of which the notional amounts are $43.3 million and $8.2 million, respectively. The terms of the interest rate swap contract are for six years. The interest rate swap contracts convert variable rate debt into fixed rate debt. The maturity of the contract coincides with the maturity of the underlying debt instruments hedged. At December 31, 2001, the on and off balance sheet notional amounts are approximately $39.6 million and $7.4 million, respectively.

           In 2000, we entered into interest rate swap contracts with notional amounts totaling $334.9 million. The terms of the interest rate swap contracts are for two and seven years. The interest rate swap contracts convert variable rate debt into fixed rate debt. The maturity of these contracts coincides with the maturity of the underlying debt instruments hedged. At December 31, 2001, the notional amount was approximately $323.3 million.

           In 1998, we entered into interest rate swap contracts with notional amounts totaling $79.7 million. The terms of the interest rate swap contracts are for three, five and seven years. The interest rate swap contracts convert variable rate debt into fixed rate debt. The maturity of these contracts coincides with the maturity of the underlying debt instruments hedged. In 2000, a portion of the debt instrument hedged was retired and the related portion of the swap contract was closed. At December 31, 2001, the notional amount was approximately $34.2 million.

           Prior to the adoption of Statement 133, interest differentials paid or received under these contracts are recognized as yield adjustments to the effective yield of the underlying debt instruments hedged. Interest rate swap contracts would only be recognized at fair value if the hedged relationship is terminated. Gains or losses accumulated prior to termination of the relationship would be amortized as a yield adjustment over the shorter of the remaining life of the contract, or the remaining period to maturity of the underlying debt instrument hedged. If the contract remained outstanding after termination of the hedged relationship, subsequent changes in market value of the contract would be recognized in earnings. We do not use leverage swaps and we do not use leverage in any of our investment activities that would put principal capital at risk.

United States Federal Income Tax

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

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

           Based upon current management projections, we will be considered a personal holding company for federal income tax purposes for 2002 (and possibly in subsequent years). If we or any of our subsidiaries are classified as a personal holding company for federal income tax purposes, in addition to our regular federal income tax liability, our subsidiary's undistributed personal holding company income (generally taxable income with certain adjustments, including a deduction for federal income taxes and dividends paid) would be subject to a personal holding company tax at the highest marginal federal income tax rate applicable to unmarried individuals. Management anticipates that for 2002 our current level of dividends will be sufficient to avoid having any undistributed personal holding company income, and thus does not anticipate that there will be any personal holding company tax imposed for 2002. There can be no assurance, however, that we will not at some point in the future become liable for personal holding company tax. Furthermore, we may at some point in the future elect to increase the dividend rate on our common stock in order to avoid personal holding company tax.

           We have incurred certain losses from leasing activities that are characterized for tax purposes as "suspended passive losses." These losses can be carried forward indefinitely to offset income from future leasing activities. As of December 31, 2001, our suspended passive losses totaled approximately $286.3 million.

           Trac Lease. As of December 31, 2001, Trac Lease had approximately $15.6 million of net operating loss carry-forwards for federal income tax purposes, which may be used only to offset the income of Trac Lease and, if not utilized, will expire between 2005 and 2006. The use of substantially all these loss carry-forwards is subject to a number of limitations under federal tax laws.

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

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

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

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

           At December 31, 2001, unremitted earnings of Interpool Limited were approximately $236.6 million. The deferred U.S. Federal Income taxes related to the unremitted earnings of Interpool Limited would be approximately $82.8 million, assuming these earnings are taxable at the United States statutory rate, net of foreign tax credits.

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

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

State and Local Taxes

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

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

Inflation

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

Recent Accounting Pronouncements

          In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. In June 1999, the FASB issued Statement No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133. In June 2000, the FASB issued Statement 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133. Statement 133, as amended, establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. Statement 133 requires that changes in the derivative instrument's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative instrument's gains and losses to offset related results on the hedged item in the income statement, to the extent effective, and requires that a company must formally document, designate and assess the effectiveness of transactions that receive hedge accounting.

          We adopted Statement 133 effective January 1, 2001. We apply Statement 133 to only those hybrid instruments that were issued, acquired or substantively modified after December 31, 1998. We do not currently hold any hybrid instruments.

          Statement 133, in part, allows special hedge accounting for fair value and cash flow hedges. Statement 133 provides that the gain or loss on a derivative instrument designated and qualifying as a fair value hedging instrument as well as the offsetting loss or gain on the hedged item attributable to the hedged risk be recognized currently in earnings in the same accounting period. Statement 133 provides that the effective portion of the gain or loss on a derivative instrument designated and qualifying as a cash flow hedging instrument be reported as a component of other comprehensive income and be reclassified into earnings in the same period or periods during which the hedged forecasted transaction affects earnings. (The remaining gain or loss on the derivative instrument, if any, must be recognized currently in earnings.)

          As of December 31, 2000, we had entered into 13 interest rate swap agreements with various financial institutions. The aggregate notional balance of the swaps was $384.7 million as of December 31, 2000. We use these agreements to manage interest rate risks created by loans indexed to a floating rate index, primarily LIBOR, and contractually terminate at various dates between 2001 and 2007. Under previous generally accepted accounting principals, as interest rates change we accrued the interest differential payable or receivable by us on our interest rate swaps and we recognized this accrued interest differential over the life of the swap agreement. In contrast, Statement 133 requires that changes in the fair value of the swap agreements which are designated as effective cash flow hedges be reported as a component of other comprehensive income and changes in the fair value of the swap agreements that do not qualify for hedge accounting to be reported in earnings. We have determined that of the 13 interest rate swap agreements held, 10 qualify under Statement 133 as effective cash flow hedges with no ineffectiveness, while the remaining 3 interest rate swap agreements intended as cash flow hedges do not quality for hedge accounting treatment. The adoption of Statement 133 on January 1, 2001 increased liabilities by approximately $9.0 million, with offsetting amounts recorded as decreases to deferred tax liabilities of $2.4 million and accumulated other comprehensive income of $7.4 million and an increase to earnings (net of tax) of $0.8 million.

          On June 29, 2001, the FASB approved its proposed Statement of Financial Accounting Standards No. 141, Business Combinations, and Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.

          Under Statement 141, all business combinations should be accounted for using the purchase method of accounting; use of the pooling-of-interests method is prohibited. The provisions of the statement will apply to all business combinations initiated after June 30, 2001.

          Statement 142 applies to all acquired intangible assets whether acquired singly, as part of a group, or in a business combination. The statement supersedes Accounting Principals Board, or APB, Opinion No. 17, "Intangible Assets," and will carry forward provisions in APB Opinion No 17 related to internally developed intangible assets. Adoption of Statement 142 also requires that the companies cease amortization of goodwill. During the three months ended March 31, 2001, we recorded amortization expense related to our goodwill of $0.2 million which is included in other income, net in the accompanying condensed consolidated financial statements of income. On January 1, 2002, we adopted Statement 142. The adoption of Statement 142 did not result in an adjustment to recorded goodwill. Total goodwill recorded by the Company was approximately $9.6 million related to certain investments accounted for under the equity method of accounting.

          In August 2001, the Financial Accounting Standards Board (FASB) approved its proposed Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long Lived Assets. Statement 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. This Statement supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and reporting provisions of APB Opinion No. 30, Reporting the Results of Operations -- Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions, for the disposal of a segment of a business (as previously defined in that Opinion). This Statement also amends ARB No. 51, Consolidated Financial Statements, to eliminate the exception to consolidation for a subsidiary for which control is likely to be temporary. During the first quarter of 2002, we evaluated the carrying value of our long lived assets as prescribed by Statement 144. The adoption of this statement in the first quarter of 2002 and the application of this statement in the second and third quarter of 2002 did not result in an adjustment to our consolidated financial statements.

           In April 2002, the FASB issued Statement of Financial Accounting Standards No. 145 (FAS 145). This Statement rescinds FASB Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt, and an amendment of that Statement, FASB Statement No. 64, Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements. This Statement also rescinds FASB Statement No. 44, Accounting for Intangible Assets of Motor Carriers. This Statement amends FASB Statement No. 13, Accounting for Leases, to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The statement is effective for the fiscal year beginning January 1, 2003. If we were to have adopted the provisions of the statement in the current quarter, extraordinary gains on the retirement of certain debt of $301 for the three months ended September 30, 2001, and $19 and $558 for the nine months ended September 30, 2002 and 2001, respectively, would have been reclassified into operating income and recorded on a pre-tax basis. Such reclassification would not impact any financial covenants we have in place with any of its lenders. We intend to adopt FAS 145 effective October 1, 2002.

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

Quantitative and Qualitative Disclosures About Market Risk

          Interest Rate Risk. The nature of our business exposes us to market risk arising from changes in interest rates. We manage interest rate risk to protect our margins on existing transactions. Interest rate risk is the risk of earnings volatility attributable to changes in interest rates. Additionally, we consider interest rate swap contracts as an integral part of borrowing transactions. We seek to minimize our exposure by entering into amortizing interest rate swap contracts, which coincide with the principal and maturity of the underlying debt instruments hedged. We do not use leveraged swaps and do not use leverage in any of our investment activities that would put principal capital at risk.

          For 2001, a 10 basis point change in interest rates would result in a $1.6 million change in our pretax earnings.

          Credit Risk. We maintain detailed credit records about our customers. Our credit policy sets different maximum exposure limits for our customers. Credit criteria may include, but are not limited to, customer trade route, country, social and political climate, assessments of net worth, asset ownership, bank and trade credit references, credit bureau reports, and operational history.

          In the past we have sought to reduce our credit risk by maintaining insurance coverage against lessee defaults. Our insurance policy covering such credit risks expired on January 31, 2002. We do not currently anticipate replacement coverage can be obtained upon terms acceptable to the Company. Even if replacement coverage is obtainable we expect that premium rates and deductibles will increase as a result of general rate increases for this type of insurance as well as our historical claim experience and that of our competitors in the industry.

BUSINESS

General

          We are the largest lessor of intermodal chassis in the United States and one of the world's leading lessors of intermodal dry freight standard containers. At September 30, 2002, our chassis fleet totaled approximately 202,000 chassis and our container fleet totaled approximately 764,000 TEUs. From 1996 to 2001, we increased the size of our chassis fleet at a compound annual rate of 29% and our container fleet at a compound annual rate of 18%.

          We concentrate on leasing equipment to our customers on a long-term basis. Substantially all of our new equipment is initially leased for terms of five to eight years and approximately 75% of our total fleet of chassis and 85% of our total fleet of containers are currently on long-term lease. We believe our focus on long-term leasing has enabled us to:

          Approximately 25% of our chassis are currently leased on a short-term basis to satisfy customers' peak or seasonal requirements, generally at higher rates than under long-term leases. For customers who require daily or weekly chassis rentals, we operate chassis pools at major domestic shipping ports and terminals. These chassis pools consist of our chassis as well as those of our customers.

           Approximately 15% of our containers are currently leased on a short-term basis Our 50%-owned affiliate, CAI, markets and manages our containers available for short-term leasing as part of its fleet, facilitating redeployment of our containers at the end of long-term leases. Containers managed by CAI are considered to be on hire for utilization purposes, although, revenues from these containers depend on the overall utilization of CAI's fleet. Our relationship with CAI maximizes utilization of our container fleet and increases our leverage in the marketplace by giving us the world's third largest container lessor fleet on a combined basis.

          We lease our chassis and containers to over 400 shipping and transportation customers throughout the world, including all of the world's 20 largest international container shipping lines and major North American railroads. We provide customer service and market to our customers through a worldwide network of offices, agents and marketing representatives. We believe one of the key factors in our ability to compete effectively has been the long-standing relationships that our management and marketing representatives have established with most of the world's large shipping lines and major North American railroads. As a result of these relationships, 7 of our top 10 customers have been customers for at least 10 years.

Industry Overview

          The fundamental components of intermodal transportation are the chassis and the container. When a container vessel arrives in port, each marine container is loaded onto a chassis or rail car. A chassis is a rectangular, wheeled steel frame, generally 20 or 40 feet in length, built specifically for the purpose of transporting a container. Once mounted, the chassis and container are the functional equivalent of a trailer. When mounted on a chassis, the container may be trucked either to its final destination or to a railroad terminal for loading onto a rail car. Similarly, a container shipped by rail may be transferred to a chassis to travel over-the-road to its final destination. As the use of containers has become a predominant factor in the intermodal movement of cargo, the chassis has become a prerequisite for the domestic segment of the journey. A chassis seldom travels permanently with a single container, but instead serves as a transport vehicle for containers that are loaded or unloaded at ports or railroad terminals. Because of differing international road regulations and the lack of international standards for chassis, chassis used in the United States are seldom used in other countries.

          Containers provide a secure and cost-effective method of transporting finished goods and component parts because they are generally freely interchangeable between different modes of transport, making it possible to move cargo from a point of origin to a final destination without the repeated unpacking and repacking of the goods required by traditional shipping methods. The same container may be carried successively on a ship, rail car and truck and across international borders with minimal customs formalities. Containerization is more efficient, more economical and safer in the transportation of cargo than "break bulk transport" in which the goods are unpacked and repacked at various intermediate points en route to their final destination. By eliminating manual repacking operations when differing modes of transportation are used, containerization reduces freight and labor costs. In addition, automated handling of containers permits faster loading and unloading and more efficient utilization of transportation equipment, thereby reducing transit time. The protection provided by sealed containers also reduces damage to goods and loss and theft of goods during shipment. Containers may also be picked up, dropped off, stored and repaired at independent common user depots located throughout the world.

          The adoption of uniform standards for containers in 1968 by the International Standards Organization (ISO) precipitated a rapid growth of the container industry, as shipping companies recognized the advantages of containerization over traditional break bulk transportation of cargo. This growth resulted in substantial investments in containers, container ships, port facilities, chassis, specialized rail cars and handling equipment.

          Most containers are constructed of steel in accordance with recommendations of the International Standards Organization. The basic container type is the general-purpose dry freight standard container (accounting for approximately 87% of the world's container fleet), which measures 20 or 40 feet long, 8 feet wide and 8 1/2 or 9 1/2 feet high. In general, 20-foot containers are used to carry heavy, dense cargo loads (such as industrial parts and certain food products) and in areas where transport facilities are less developed, while 40-foot containers are used for lighter weight finished goods (such as apparel, electronic appliances and other consumer goods) in areas with better developed transport facilities.

          Worldwide container traffic at the world's major ports has grown at a compound annual rate of 9% since 1990 and 14% since 1970, significantly outpacing world GDP over these periods.

          The demand for containers is influenced primarily by the volume of international and domestic trade. In recent years, however, the rate of growth in the container industry has exceeded that of world trade as a whole due to several factors, including:

          In recent years domestic railroads and trucking lines have begun actively marketing intermodal services for the domestic transportation of freight. Management believes that this trend should serve to accelerate the growth of intermodal transportation, and hence result in increased chassis and container demand.

The Leasing Market

          Leasing companies own approximately half of the domestic chassis and half of the world's container fleet with the balance owned predominantly by shipping lines and railroads. Leasing companies have maintained this market position because container shipping lines and railroads receive both financial and operational benefits by leasing a portion of their equipment. The principal benefits of leasing are the following:

           Because of these benefits, container shipping lines and railroads generally obtain a significant portion of their container fleets from leasing companies, either on short-term or long-term leases. Short-term leases provide considerable operational flexibility in allowing a customer to pick up and drop off containers at various worldwide locations at any time. However, customers pay for this flexibility in the form of substantially higher lease rates for short-term leases and drop-off charges for the privilege of returning equipment to certain locations. Most short-term leases are "master leases," under which a customer reserves the right to lease a certain number of containers, as needed under a general agreement between the lessor and the lessee. Long-term leases provide the lessee with advantageous pricing structures, but usually contain an early termination provision allowing the lessee to return equipment prior to expiration of the lease only upon payment of an early termination fee or a retroactive increase in lease payments.

Business Strategy

          Our objective is to continue to expand on our market position as a leading long-term lessor of intermodal transportation equipment. To achieve this objective, we intend to continue to:

Operations

          Lease Terms. Approximately 75% of our chassis and 85% of our containers are leased on a long-term basis as of September 30, 2002. Our long-term leases generally have five to eight year initial terms.

          We offer our customers both operating leases and "direct finance" leases. Under a direct finance lease, the customer owns the container at the expiration of the lease term. Although customers pay a higher per diem rate under a direct finance lease than under a long-term operating lease, a direct finance lease enables us to provide customers with access to financing on terms generally comparable to those available from financial institutions, which provide this type of financing.

          Lease rentals are typically calculated on a per diem basis, regardless of the term of the lease. Our leases generally provide for monthly or quarterly billing and require payment by the lessee within 30 to 60 days after presentation of an invoice. Generally, the lessee is responsible for payment of all taxes and other charges arising out of use of the equipment and must carry specified amounts of insurance to cover physical damage to and loss of equipment, as well as bodily injury and property damage to third parties. In addition, our leases usually require lessees to repair any damage to the chassis and containers. Lessees are also required to indemnify us against our losses arising from accidents or similar occurrences involving the leased equipment. Our leases generally provide for pick-up, drop-off and other charges and set forth a list of locations where lessees may pick-up or return equipment.

          Long-term leases provide the lessee with advantageous pricing structures, but usually contain an early termination provision allowing the lessee to return equipment prior to expiration of the lease only upon payment of an early termination fee or a retroactive increase in lease payments. Since 1991, we have experienced minimal early returns under our long-term leases, primarily because of the penalties involved and because customers must return all containers covered by the particular long-term lease being terminated, generally totaling several hundred units, and bear substantial costs related to their repositioning and repair.

          Frequently, a lessee will desire to retain long-term leased equipment well beyond the initial lease term. In these cases, long-term leases will be renewed at the then prevailing market rate, either for one or more additional one-year periods or as part of a short-term agreement. In some cases, the customer has the right to purchase the equipment at the end of a long-term lease.

          Equipment Tracking and Billing. We use a real time, internet accessible proprietary computer software system to enable sophisticated equipment tracking and billing and to provide a central operating database that coordinates our chassis leasing activities. The system processes information received electronically from our regional offices. The system records the movement and status of each chassis and links that information with the complex data comprising the specific lease terms in order to generate billings to lessees. More than 83,000 movement transactions per month are processed through the system, which is capable of tracking revenue on the basis of individual chassis. The system also generates a wide range of management reports containing information on all aspects of our leasing activities. The equipment acquired from Transamerica was integrated into our billing system on July 1, 2001.

          Chassis Pools. For customers who require daily or weekly chassis rentals, we operate "chassis pools" at most of the major port authorities and terminal operations on the Eastern seaboard and the Gulf coast. These chassis pools consist of our chassis and those of our customers. The principal ports in the United States where we operate chassis pools are Baltimore, Boston, Charleston, Houston, New Orleans, Norfolk and Savannah. We also operate chassis pools at railroad locations within the United States.

          Depots. We and our affiliate CAI operate in over 90 locations in all major transportation markets throughout the world. Depots are facilities owned by third parties at which containers and other items of transportation equipment are stored, maintained and repaired. We retain independent agents at these depots to handle and inspect equipment delivered to or returned by lessees, to store equipment that is not leased and to handle maintenance and repairs of chassis and containers. Some agents are paid a fixed monthly retainer to defray recurring operating expenses and some are guaranteed a minimum level of commission income. In addition, we generally reimburse our agents for incidental expenses.

          Logistic Support. Our worldwide network of offices and relationships and our industry experience enables us to provide logistic services in order to facilitate the movement of chassis and containers to meet our customers' needs.

          Repositioning and Related Expenses. If lessees return large numbers of equipment to a location which has a larger supply than demand, we may incur expenses in repositioning the equipment to a better location. Repositioning expenses generally range between $50 and $500 per item of equipment, depending on geographic location, distance and other factors, and may not be fully covered by the drop-off charge collected from the lessee. In connection with necessary repositioning, we may also incur storage costs, which generally range between $0.20 and $2.50 per TEU per day. In addition, we bear certain operating expenses associated with our chassis and containers, such as:

          Maintenance, Repairs and Refurbishment. As chassis and containers age, the need for maintenance increases, and they may eventually require extensive maintenance. With the exception of chassis pool customers, our customers are responsible for maintenance and repairs of equipment other than normal wear and tear. When normal wear and tear of equipment is extensive, the equipment may have to be refurbished or remanufactured. Refurbishing and remanufacturing involve substantial cost, although chassis can be remanufactured for substantially less than the cost of purchasing a new chassis. Alternatively, we may elect to sell equipment requiring refurbishment.

           Disposition of Chassis and Containers and Residual Values. On an ongoing basis, we sell equipment that was previously leased. The decision whether to sell depends on the equipment's condition, remaining useful life and suitability for continued leasing or for other uses, as well as prevailing local market resale prices and an assessment of the economic benefits of repairing and continuing to lease the equipment compared to the benefits of selling. Pursuant to our relationship with CAI, containers that have come off long-term lease and have been designated for short-term leasing (not including renewals with existing lessees) are provided to CAI for deployment in CAI's short-term fleet. For each of our containers in its fleet, CAI pays us its average total fleet per diem rate less a management fee. Containers tendered for short-term leasing under our agreement with CAI are accounted for by us as fully utilized. Containers are also sold to shipping or transportation companies for continued use in the intermodal transportation industry or to secondary market buyers, such as wholesalers, depot operators, mini storage operators, construction companies and others, for use as storage sheds and similar structures. Because old chassis are more easily remanufactured than old containers, chassis are less likely to be sold than containers.

          At the time of sale, the residual value of a container or chassis will depend, among other factors, upon mechanical or economic obsolescence, the current newly manufactured equipment price, as well as its physical condition. While there have been no major technological advances in the short history of containerization that have made active equipment obsolete, several changes in standards have decreased the demand for older equipment, such as the increase in the standard height of containers from 8 feet to 8 1/2 feet in the early 1970's.

          Sources of Supply. Most chassis used in the United States are manufactured domestically due to the high cost of transportation to the United States of chassis manufactured abroad. Manufacturers of chassis frequently produce over-the-road trailers as well, and can convert some production capability to chassis as needed. Because of the rising demand for containers and the availability of relatively inexpensive labor in the Pacific Rim, approximately 80% of world container production now occurs in China. Containers are also produced in other countries, such as South Korea, India, Indonesia, Malaysia, Taiwan, Turkey, South Africa, and, to a lesser extent, other parts of the world.

          Upon completion of manufacture, new chassis and containers are inspected to insure that they conform to applicable standards of the International Standards Organization and other international self-regulatory bodies, as well as our internal standards.

PoolStat Chassis Pool Management

          We have developed a proprietary internet-based real-time chassis management system which we call PoolStat. PoolStat has enabled us to operate, on a cooperative basis, pools of chassis which are owned by us and by shipping lines. Under this program, shipping lines can "pool" their chassis at common locations such as marine terminals and railroad depots. The billing and tracking features of PoolStat enable us to operate chassis pools. Our PoolStat software compiles data from each location and reports on levels of chassis contribution as compared to levels of chassis usage by each shipping line in the cooperative pool. In addition, centralized maintenance and repair improves service levels to customers and the trucking community and we receive a management fee.

          PoolStat provides several benefits to customers, including allowing customers to:

          By providing the PoolStat service, we are able to forge closer relationships with our customers for both short-term and long-term leasing opportunities. PoolStat now has approximately 240,000 chassis under its management and is actively looking to increase its level of business. We believe that PoolStat is the leading provider of chassis management tools in the United States.

Marketing and Customers

          We lease our chassis and containers to over 400 shipping and transportation companies throughout the world, including all of the world's 20 largest international container shipping lines and major North American railroads. The customers for our chassis are a large number of domestic companies, many of which are domestic subsidiaries or branches of international shipping lines to which we also lease containers. With a network of offices and agents covering major ports in the United States, Europe and the Far East, we have been able to supply containers in nearly all locations requested by our customers. Our customer base is diverse. As of December 31, 2001, our top 25 customers represented approximately 69% of our consolidated revenues, with no single customer accounting for more than 6%.

          We perform detailed credit risk analysis on our customers. Our credit policy sets different maximum exposure limits depending on our relationship and previous experience with each customer. Credit criteria may include, but are not limited to, customer trade route, country, social and political climate, assessments of net worth, asset ownership, bank and trade credit references, credit bureau reports, and operational history.

          In the past we have sought to reduce our credit risk by maintaining insurance coverage against lessee defaults. Our insurance policy covering such credit risks expired on January 31, 2002. We do not currently anticipate replacement coverage can be obtained upon terms acceptable to the Company. Even if replacement coverage is obtainable we expect that premium rates and deductibles will increase as a result of general rate increases for this type of insurance as well as our historical claim experience and that of our competitors in the industry.

Competition

          There are many companies leasing intermodal transportation equipment with which we compete. Some of our competitors have greater financial resources than we do, or are subsidiaries or divisions of much larger companies. Over the last several years, there has been consolidation in the container leasing business resulting from several acquisitions. The result of the consolidation has been fewer lessors, a more rationalized industry and a stabilizing pricing environment.

          In addition, the containerized shipping industry, which we service, competes with providers of alternative methods of transporting goods, such as by air, truck and rail. We believe that in most instances these alternative methods are not as cost-effective as shipping of containerized cargo.

           Because rental rates for chassis and containers are not subject to regulation by any government authority but are determined principally by the demand for and supply of equipment in each geographical area, price is one of the principal methods by which we compete. In times of low demand and excess supply, leasing companies tend to grant price concessions, such as free days or pick-up credits, in order to keep their equipment on lease and to avoid storage charges. We attempt to design lease packages tailored to the requirements of individual customers and consider our long-term relationships with customers to be important to our ability to compete effectively. We also compete on the basis of our ability to deliver equipment in a timely manner in accordance with customer requirements.

Other Business Operations

           In addition to our chassis and container leasing operations we also receive revenues from other activities. We lease approximately 500 freight rail cars to railroad companies through our Chicago based Railpool division. In December 2001, we sold our investment in Personal Computer Rentals (PCR) and have initiated a plan to liquidate the operations of Microtech Leasing Corporation. Both companies are involved in the computer rental business. They have been accounted for as discontinued operations in the consolidated financial statements.

Employees

           As of September 30, 2002, we had approximately 192 employees, approximately 167 of whom are based in the United States, excluding CAI's 54 employees and discontinued operations. None of our employees is covered by a collective bargaining agreement. We believe our relations with our employees are good.

Facilities/Properties

           In connection with our acquisition of Transamerica's North American Intermodal Division in October 2000, we purchased real property located in Chicago, Illinois and Atlanta, Georgia. The purchase price for these two properties was included in the acquisition's aggregate purchase price. The Atlanta site was sold on July 31, 2001. The Chicago site was sold in April 2002.k

           In July 1998, we purchased approximately 18,000 square feet of condominium office space located on the 27th floor at 633 Third Avenue, New York, NY 10017 which serves as our New York office. All our other commercial office space, aggregating approximately 42,438 square feet, is leased. Our executive offices are located at 211 College Road East, Princeton, New Jersey. We also lease office facilities in Chicago, Atlanta, Jacksonville, Barbados, Aberdeen, Antwerp, Basel, Hong Kong and Singapore.

           On January 28, 2002 we executed a Purchase and Sale Agreement, pursuant to which, on May 1, 2002, we acquired the building in Princeton, New Jersey which houses our chief executive offices. The fair market value purchase price of the approximately 39,000 square feet building was $6,250,000 as determined by an independent property appraisal firm and approved by our Board of Directors. See "Certain Relationships and Related Party Transactions."

Legal Proceedings

           We are engaged in various legal proceedings from time to time incidental to the conduct of our business. In the opinion of management, we are adequately insured against the claims relating to these proceedings, and any ultimate liability arising out of these proceedings will not have a material adverse effect on our financial condition or results of operations.

MANAGEMENT

Directors and Executive Officers

          Our directors and executive officers are as follows:

                 NAME                    AGE                                     POSITION
                 ----                    ---                                     --------

Martin Tuchman (a)(c)...............     61          Chairman of the Board of Directors and Chief Executive Officer
Raoul J. Witteveen..................     47          President, Chief Operating Officer and Director
Mitchell I. Gordon..................     45          Chief Financial Officer, Executive Vice President and Director
Arthur L. Burns.....................     57          General Counsel, Secretary and Director
Herbert Mertz.......................     48          Chief   Administrative   Officer  of  Interpool, Inc., Chief
                                                     Operating Officer of Trac Lease, Inc. and Interpool Limited
Ernst Baenziger.....................     66          Senior Vice President and Director of Interpool Limited
William Geoghan.....................     52          Senior Vice President
Peter D. Halstead (a)(b)(c).........     60          Director
Clifton H.W. Maloney (b)............     65          Director
Warren L. Serenbetz (a).............     78          Director
Joseph J. Whalen (a)(b).............     70          Director
_______________
(a)      member of Compensation Committee
(b)      member of Audit Committee
(c)      member of Stock Option Committee

           Our Board of Directors is divided into three classes, as nearly equal in number as possible. Each class serves three years, with the terms of office of the respective classes expiring in successive years.

           Martin Tuchman has served as our Chairman of the Board of Directors and Chief Executive Officer since February 1988. He is also Chairman of the Board of Directors, Chief Executive Officer and a director of Interpool Limited, which he co-founded in 1968. He also has served as a director of Trac Lease since June 1987, President of Trac Lease from June 1987 through January 1994 and currently serves as its Chairman and Chief Executive Officer. He is Chairman of the Board of Directors of Princeton International Properties, Inc., a family-owned real estate company, which owns and has interests in properties located in Princeton, New Jersey. Mr. Tuchman was previously a member of the Society of Automotive Engineers as well as the American National Standards Institute. Currently, Mr. Tuchman is a member of the United Nations Business Council, comprised of leading international executives organized to promote understanding and cooperation between business and government, and a member of the Board of Trustees of the New Jersey Institute of Technology. In 1995, Mr. Tuchman was honored as Entrepreneur Of The Year in an awards program sponsored by Ernst & Young LLP and in 1996 was named Alumnus of the Year by the New Jersey Institute of Technology. Mr. Tuchman is a member of the Board of Trustees of The Parkinson's Alliance and a director of the Parkinson's Disease Foundation of Columbia Presbyterian Hospital. In 2000, Mr. Tuchman was honored by The Smithsonian Institution for his extensive case study of Interpool for the 2000 Computerworld Smithsonian Collection and Interpool was nominated for the World Smithsonian Award. Interpool's material is now part of the Permanent Research Collection on Information Technology at The Smithsonian's National Museum of American History. Mr. Tuchman was elected to the Yardville National Bank's Board of Directors and serves on its Executive Committee. Mr. Tuchman holds a bachelor's degree in mechanical engineering from the New Jersey Institute of Technology (Newark College of Engineering) and a master's degree in business administration from Seton Hall University.

           Raoul J. Witteveen has served as our President, Chief Operating Officer and a Director since March 1993, also having served as Chief Financial Officer from 1993 to 2000. Mr. Witteveen has been President, Chief Financial Officer and a director of Interpool Limited, since 1988, also having served as Chief Financial Officer from 1988 to 2000. He is a co-founder of Trac Lease and has been Chief Financial Officer, Vice President and a Director of Trac Lease since June 1987. From 1982 to 1986, Mr. Witteveen served in a variety of management capacities at Thyssen-Bornemisza N.V., the former parent of Interpool Limited. Mr. Witteveen holds a bachelor's degree in economics and business administration and a master's degree in economics from the Erasmus University in Rotterdam, The Netherlands.

           Mitchell I. Gordon has served as our Chief Financial Officer and Executive Vice President since October 2000 and as a member of our Board of Directors since 1998. From February 1998 to October 2000, Mr. Gordon was President of Atlas Capital Partners, LLC, a private equity investment and consulting firm which provided investment banking consultation services to us. Prior to February 1998, he was Managing Director of Salomon Smith Barney Inc. and co-head of its Transportation Investment Banking Group from July 1993 to January 1998. From 1988 to 1993, Mr. Gordon was Senior Vice President of Furman Selz Inc., where he ran the firm's Transportation and Automotive Investment Banking groups. From 1984 to 1988, he was a Vice President of Needham & Company Inc. From 1981 to 1984, he held various positions at American Broadcasting Companies, Inc., including Manager of Strategic Planning. Mr. Gordon holds a bachelor's degree in business administration from Washington University and a master's degree in business administration from Harvard Business School.

           Arthur L. Burns has served as our General Counsel, Secretary and a Director since January 1990 and Secretary of Interpool Limited since 1986. Mr. Burns was Senior Vice President of Law and Administration of Interpool Limited from 1980 until June 1996. Prior to joining Interpool Limited, Mr. Burns served as Assistant General Counsel to GATX Leasing Corp. between 1975 and 1980, and as an associate attorney at the law firm of Cahill, Gordon & Reindel from 1969 to 1975. Mr. Burns holds a bachelor's degree in economics from Holy Cross College and a law degree from Fordham University School of Law.

           Herbert Mertz has served as our Director of Information Systems since December 1988. In September 2000, he was appointed our Chief Administrative Officer, and Chief Operating Officer of Interpool Limited and Trac Lease. Prior to joining us, Mr. Mertz was an independent consultant in the computer industry. From 1980 to 1983, Mr. Mertz was President of Princeton Energy Partners, an international franchise company in the field of energy conservation. Mr. Mertz holds a bachelor's degree in engineering from Princeton University. He is an associate member of Sigma Xi, the North American Research Society.

           Ernst Baenziger has served as an employee of Interpool since 1977, serving as Senior Vice President and as a Director of Interpool Limited since 1991. Mr. Baenziger is responsible for operations in Europe, Far East, Australia and New Zealand. He also serves as Managing Director of Interpool Limited's Basel, Switzerland branch, handling sales and operations, and as Managing Director of CTC Equipment A.G. Mr. Baenziger holds a bachelor's degree in economics and business administration from Handelshochschule, St. Gallen.

           William Geoghan has served as Senior Vice President of each of Interpool, Interpool Limited and Trac Lease since 1998. Previously, Mr. Geoghan served as Controller of Interpool from 1992 to 1998 and Vice President and Controller of Interpool Limited from 1989 to 1998. Mr. Geoghan joined Interpool Limited in 1981 and served as Assistant Controller for Interpool Limited from 1985 to 1989. Mr. Geoghan is a Certified Public Accountant and holds a bachelor's degree in commerce from Rider University.

           Peter D. Halstead has served as a member of our Board of Directors since June 1994. Mr. Halstead is a retired Executive Vice President of Summit Bancorp where he worked in various capacities since 1971. He is now the Principal of P.D. Halstead Associates LLC, a firm consulting in corporate administration and finance. Mr. Halstead serves as a Trustee for numerous associations including McCarter Theatre and as Treasurer of the National Kidney Foundation of the Delaware Valley. Mr. Halstead holds a bachelor's degree from Colgate University and a master's degree in business administration from Fairleigh Dickinson University.

           Clifton H. W. Maloney has served as a member of our Board of Directors since February 2000. He has been President of C.H.W. Maloney & Co., Incorporated, a private investment firm, since 1981. He was a Vice President in investment banking at Goldman, Sachs & Co. from 1974 to 1981. Mr. Maloney is a Director of Chromium Industries, Inc., Liberty-Pittsburgh Systems Inc., and The Wall Street Fund. Mr. Maloney holds a bachelor's degree in Engineering from Princeton University and a master's degree in business administration from Harvard Business School.

           Warren L. Serenbetz has served as a member of our Board of Directors since February 1988 and served as Executive Consultant from February 1988 through January 1995. He has also been a Director of Trac Lease since its founding in November 1986. After co-founding Interpool Limited in 1968, Mr. Serenbetz served as Interpool Limited's President and Chief Executive Officer and as a Director until 1975, after which he was Director, Chairman of the Executive Committee and Chief Executive Officer until his retirement in 1986. Mr. Serenbetz rejoined the Board of Directors of Interpool Limited in 1988. Mr. Serenbetz is currently President of Radcliff Group, Inc. He has been active in industry affairs, serving as an officer, director and member of various world trade and shipping associations. Mr. Serenbetz holds a bachelor's degree in engineering from Columbia University and a master's degree in industrial engineering from Columbia University.

           Joseph J. Whalen has served as a member of our Board of Directors since April 1996. He originally joined the accounting firm of Arthur Andersen LLP in 1957 and served as an audit partner in Andersen's New York and New Jersey offices for more than ten years prior to his retirement in 1994. Mr. Whalen is a member of the American Institute of Certified Public Accountants and the New Jersey State Society of Certified Public Accountants. Mr. Whalen also serves on the Board of Directors of Griffon Corporation. Mr. Whalen is a Certified Public Accountant in New Jersey and New York and holds a bachelor's degree from St. Peter's College.

Board Compensation

           Each member of the Board of Directors who is not an officer or executive consultant receives an annual service fee of $10,000 for serving on the Board plus $1,000 and reimbursement of expenses for each Board of Directors' or committee meeting attended.

Board Committees

           The Board of Directors has three standing committees: an audit committee, a compensation committee and a stock option committee. The audit committee's function is to review management's maintenance of systems of internal control, financial reporting and application of generally accepted accounting principles. In addition, the audit committee reviews the scope of the services of our independent auditors and may recommend the independent auditors for appointment by the Board of Directors subject to stockholder approval. The compensation committee's functions are to review our general compensation strategy, establish salaries, review benefit programs and approve certain employment contracts. The stock option committee's functions are to administer our stock option plans. Our Board of Directors may establish other committees from time to time to facilitate the management of our business and affairs. We intend to comply with recent corporate governance initiatives.

Executive Compensation

           The following table sets forth information for the calendar years ended December 31, 2001, 2000 and 1999 concerning the annual compensation paid or accrued by us to our chief executive officer and our four other most highly compensated executive officers:

                                                                                                       Long Term
                                                              Annual Compensation                    Compensation
                                                                                        Other         # of Stock
Name and Principal Position                   Year       Salary         Bonus        Compensation       Options
Martin Tuchman                                2001      $814,447       $651,784        $62,742 (1)            0
   Chairman of the Board of Directors,        2000       775,664      1,221,100         28,990 (1)            0
   Chief Executive Officer and Director       1999       738,727      1,095,100         27,091 (1)            0

Raoul J. Witteveen                            2001       573,991        651,784         22,542 (1)            0
   President, Chief Operating Officer         2000       546,658      1,002,650         50,381 (1)            0
   and Director                               1999       520,627      1,095,100          7,717 (1)            0

Ernst Baenziger                               2001       183,901              0        776,045 (2)            0
   Sr. Vice President, Interpool              2000       190,074              0      1,306,278 (2)            0
   Limited                                    1999       198,033         15,000      1,294,820 (2)            0

Mitchell I. Gordon                            2001       240,000              0        550,000 (5)            0
   Executive Vice President,                  2000        39,692 (3)          0        750,000 (4)(5)    50,000
   Chief Financial Officer                    1999             0              0        807,500 (4)            0

herbert Mertz                                 2001       240,000        150,000          7,046                 0
   Chief Administrative Officer,              2000        74,042 (3)    115,000        243,135 (4)       50,000
   Chief Operating Officer, Trac              1999             0              0        279,307 (4)            0
   Lease, Inc. and Interpool Limited

_________________

Stock Option Activity During Fiscal Year 2001

           No stock options were granted or exercised during fiscal year 2001.

1993 Stock Option Plan

           Our 1993 Stock Option Plan for Executive Officers and Directors was adopted by our Board of Directors and approved by the stockholders in March 1993. A total of 6 million shares of common stock have been reserved for issuance under the Stock Option Plan. Options may be granted under the Stock Option Plan to executive officers and Directors of Interpool or a subsidiary (including any executive consultant of Interpool and its subsidiaries), whether or not they are employees. As of October 31, 2002, 4,494,001 options were issued and outstanding, of which 4,344,001 are exercisable. Options under the Stock Option Plan have been granted to 18 persons.

           The Stock Option Plan is administered by a committee of the Board of Directors consisting of at least two Directors. The Stock Option Plan does not require that the members of the Stock Option Committee be "disinterested persons" within the meaning of Rule 16b-3, as from time to time amended, under the Securities Exchange Act of 1934. The Stock Option Committee consists of Mr. Tuchman and Mr. Halstead. The Stock Option Committee has the authority, within limitations as set forth in the Stock Option Plan, to establish rules and regulations concerning the Stock Option Plan, and to determine the persons to whom options may be granted, the number of shares of common stock to be covered by each option and the terms and provisions of the option to be granted. The Stock Option Committee has the right to cancel any outstanding options and to issue new options on the terms and upon the conditions as may be consented to by the optionee affected. In addition, the Stock Option Committee has the authority, subject to the terms of the Stock Option Plan, to determine the appropriate adjustments in the terms of each outstanding option in the event of a change in the common stock or our capital structure.

           Options granted under the Stock Option Plan may be either incentive stock options ("ISO's") within the meaning of Section 422 of the Code, or non-qualified stock options ("NQSO's"), as the Stock Option Committee may determine. No option intended to qualify as an ISO may be granted to any individual who, at the time of grant, is not an employee of Interpool or a subsidiary. The exercise price of an option will be fixed by the Stock Option Committee on the date of grant, except that (1) the exercise price of an ISO granted to any individual who owns (directly or by attribution) shares of common stock possessing more than 10% of the total combined voting power of all our classes of outstanding stock must be at least equal to 110% of the fair market value of the common stock on the date of grant and (2) the exercise price of an ISO granted to any individual other than a 10% owner must be at least equal to the fair market value of the common stock on the date of the grant. Any options granted must expire within ten years from the date of grant (five years in the case of an ISO granted to a 10% owner). Shares subject to options granted under the Stock Option Plan which expire, terminate or are canceled without having been exercised in full become available again for option grants. No options shall be granted under the Stock Option Plan more than ten years after the adoption of the Stock Option Plan.

           Options are exercisable by the holder subject to terms fixed by the Stock Option Committee. No option can be exercised until at least six months after the date of grant. However, an option will be exercisable immediately upon the occurrence of any of the following (but in no event during the six-month period following the date of grant or subsequent to the expiration of the term of an option):

           Under the Stock Option Plan, a holder may pay the exercise price in cash, by check, by delivery to us of shares of common stock already owned by the holder, or, with respect to NQSO's and subject to approval by the Stock Option Committee, in shares issuable in connection with the option, or by such other method as the Stock Option Committee may permit from time to time.

           Options granted under the Stock Option Plan will be non-transferable and non-assignable; provided, however, that the estate of a deceased holder may exercise any options held by the decedent. If an option holder terminates employment with us and all subsidiaries or service as a director of Interpool or a subsidiary while holding an unexercised option, the option will terminate immediately, but the option holder will have until the end of the tenth business day following his termination of employment or service to exercise the option. However, all options held by an option holder will terminate immediately if the termination is for cause, including but not limited to a result of a violation of the holder's duties. If cessation of employment or service is due to retirement on or after attainment of age 65, disability or death, the option holder or the holder's successor-in-interest, as the case may be, is permitted to exercise any option within three months of retirement or disability or within six months of death.

           The Stock Option Plan may be terminated and may be modified or amended by the Stock Option Committee or the Board of Directors at any time; provided, however, that (1) no modification or amendment increasing the aggregate number of shares which may be issued under options, increasing materially the benefits accruing to participants under the Stock Option Plan, or materially modifying the requirements as to eligibility to receive options will be effective without stockholder approval within one year of the adoption of the amendment and (2) no such termination, modification or amendment of the Stock Option Plan will alter or affect the terms of any then outstanding options without the consent of the holders thereof. The Stock Option Committee may cancel or terminate an outstanding option with the consent of the holder and grant an option for the same number of shares to the individual based on the then fair market value of the common stock, which may be higher or lower than the exercise price of the canceled option.

Directors Plan

           Our Non-Qualified Stock Option Plan for Non-Employee, Non-Consultant Directors was adopted by our Board of Directors and approved by the stockholders in March 1993. The Directors' Plan provides for the automatic grant of non-qualified options to non-employee, non-consultant directors at the time the director first joins the Board. The Directors' Plan authorizes grants of options up to an aggregate of 150,000 shares of common stock. The exercise price per share is the fair market value of our common stock on the date the person becomes a director. The options granted pursuant to the Directors' Plan may be exercised at the rate of one-third of the shares on the first anniversary of the options' grant date, one-third of the shares on the second anniversary of the options' grant date and one-third of the shares on the third anniversary of the options' grant date, subject to applicable holding periods required under rules of the Securities and Exchange Commission. Options granted pursuant to the Directors' Plan expire ten years from their grant date except that in the event of the death of a director, the option must be exercised within six months of the date of death or, in the event of resignation of a director, the option must be exercised within ten days of the date of resignation. The Directors' Plan is administered by the Stock Option Committee of the Board of Directors. Pursuant to the Directors' Plan, an option to purchase 15,000 shares of common stock was granted to each of Peter D. Halstead in June 1994, Joseph J. Whalen in April 1996 and Clifton H.W. Maloney in February 2000. In addition, our directors may be granted options under the 1993 Stock Option Plan for Executive Officers and Directors as adopted by the Board of Directors and approved by the stockholders in March 1993. On September 16, 1998, pursuant to an option repricing program, 15,000 options held by each of Messrs. Halstead and Whalen were cancelled and replaced with newly issued options with an exercise price equal to the closing market price on September 16, 1998, the grant date, which vested six months from the grant date and expire ten years from the grant date. All other terms and conditions of the newly issued options are the same as those of the cancelled options. As of October 31, 2002, 45,000 options were issued and outstanding, of which 40,000 are exercisable.

401(k) Plan

           We have adopted a deferred savings plan which is intended to qualify under Section 401(k) of the Code. All our employees who complete three months of service are eligible to participate in the 401(k) Plan. Each participant may elect to defer the receipt of up to 15% of such participant's compensation on a pre-tax basis and have us contribute the deferred compensation to the 401(k) Plan on the participant's behalf, up to the annual statutory limitation in effect at the time of the contribution. Such salary deferral contributions are 100% vested at all times. Amounts credited to a participant's account are distributed to the participant at the earliest of (1) the termination of his or her employment with us, (2) a requested withdrawal after age 59 1/2 or upon evidence of disability or (3) a requested withdrawal due to financial hardship. The 401(k) Plan administrator may authorize loans from the 401(k) Plan to participants in a manner which is uniform and nondiscriminatory. Under the Code, salary deferral contributions are not taxable to the employee until the amounts are distributed to the employee, and all contributions are tax deductible to us. The 401(k) Plan provides for the making by us of any matching or profit sharing contributions to the 401(k) Plan, in the form of shares of common stock of Interpool.

Compensation Committee Interlocks and Insider Participation

           During fiscal year 2001, Mr. Tuchman participated in deliberations of our Board of Directors concerning executive officer compensation. Mr. Tuchman did not participate in discussions regarding his own compensation.

Employment Agreements With Named Executive Officers

           We have employment agreements with Martin Tuchman and Raoul J. Witteveen. Each employment agreement currently expires on December 31, 2008, except that on each January 1, the expiration date of each employment agreement is automatically extended for an additional year unless we or the employee party to the employment agreement has given written notice of an election not to extend beyond the end of the then current seven-year term. Notice of any election not to extend the expiration date must be delivered not less than six months prior to the next occurring January 1.

           As compensation for the services to be rendered under their employment agreements, Mr. Tuchman is currently paid an annual base salary of $855,169, Mr. Witteveen is currently paid an annual base salary of $602,691. The base salary under each employment agreement increases by a minimum of 5% each year. In addition, each of Messrs. Tuchman and Witteveen is entitled to receive an annual bonus equal to 2%, in the case of Mr. Tuchman, or 1%, in the case of Mr. Witteveen, of the amount of any increase in our net income during the year from its net income during the preceding year. Mr. Tuchman and Mr. Witteveen may each be entitled to receive discretionary additional bonuses as determined by our Compensation Committee. Each employment agreement (1) includes a non-competition provision; (2) provides that, in the event of the employee's death, the employee's base salary will continue to be paid to his beneficiary for two additional years and, in the event of termination of the employee without cause, the employee will continue to receive his base salary for the entire remaining term then in effect under the employment agreement; and (3) provides for reimbursement to the employee, for both the employee and his spouse, of all health related costs and expenses that are not advanced or reimbursed to the employee pursuant to our medical and dental insurance plans, which additional reimbursement continues for a period of five years after expiration of the employment agreement. Mr. Tuchman and Mr. Witteveen may each be entitled to receive incentive bonuses as determined by our Compensation Committee.

           We have also entered into employment agreements with Mitchell I. Gordon, our Chief Financial Officer and Executive Vice President, and Herbert Mertz, the Chief Administrative Officer and Chief Operating Officer of Interpool Limited and Trac Lease (the "Employment Agreements"). Under the terms of the Employment Agreements, each of Messrs. Gordon and Mertz are paid an annual base salary and may be entitled to receive discretionary bonuses as determined by the Compensation Committee. Each employment agreement (i) includes a non-competition provision; (ii) provides that, in the event of the employee's death, the employee's base salary will continue to be paid to his beneficiary for the remainder of the term and, (iii) provides for participation in all Interpool medical and dental insurance plans.

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Stockholders' Agreement

           Martin Tuchman, Raoul J. Witteveen, Arthur L. Burns, Hickory Enterprises L.P., Warren L. Serenbetz Revocable Trust, Warren L. Serenbetz, Jr., Stuart W. Serenbetz, Paul H. Serenbetz, Clay R. Serenbetz, and Chartres Limited Partnership, will collectively own directly or indirectly approximately 70.3% of our common stock, and are parties to an Amended and Restated Stockholders' Agreement dated May 3, 1994 pursuant to which they have agreed not to sell or transfer any shares of common stock beneficially owned by them to any person other than us or the other parties to the Stockholders' Agreement without the consent of the other parties to the Stockholders' Agreement, unless (1) the shares are first offered to us for purchase at a per share price equal to the price offered by any third party making a bona fide offer to buy the shares for cash, cash equivalents or marketable securities (or if no such bona fide offer has been received, at a price equal to the average closing price of a share of common stock on the New York Stock Exchange over a period of twenty prior trading days) and we do not elect to purchase the shares and (2) the shares are then offered to the other parties to the Stockholders' Agreement for purchase by them at the same per share price described in clause (1) and the other stockholders do not elect to purchase the shares. Notwithstanding the foregoing, the parties to the Stockholders' Agreement may transfer shares of common stock to one or more of certain members of their immediate families (or trusts for the benefit of such family members) so long as each transferee agrees to be bound by the terms of the Stockholders' Agreement. The Stockholders' Agreement further provides that if Interpool (which is not a party to the Stockholders' Agreement) elects to purchase any shares offered to it by a party to the Stockholders' Agreement and the shares offered represent greater than 10% of the shares held by the offeror, we shall have the right to pay the purchase price of the shares by delivery of a promissory note, payable in equal monthly installments (with interest at the prime rate) over the following year. Pursuant to the Stockholders' Agreement, each of the parties thereto has agreed to vote for the re-election of Messrs. Tuchman, Serenbetz, Witteveen and Burns as our directors. The Stockholders' Agreement continues in effect until May 4, 2003 and may be extended by the parties. Shared voting power with the other parties to the Stockholders' Agreement is acknowledged but the existence of a group or beneficial ownership of shares owned by other parties to the Stockholders' Agreement is disclaimed.

The Ivy Group Transactions

           The Ivy Group, a New Jersey general partnership composed directly or indirectly of Mr. Tuchman, Radcliff Group, Inc. (which is owned directly or indirectly by Warren L. Serenbetz and certain members of his family), Mr. Witteveen, Thomas P. Birnie and Graham K. Owen, has previously leased chassis to Trac Lease. As of December 31, 2000, pursuant to various equipment lease agreements, Trac Lease leased 6,047 chassis from The Ivy Group and its principals for an aggregate annual lease payment of approximately $2.9 million. On January 1, 2001, the various leases for the 6,047 units were combined into a single lease pursuant to which The Ivy Group and its principals were paid an aggregate lease payment of approximately $2.6 million through June 30, 2001. Effective as of July 1, 2001, we restructured our relationship with The Ivy Group and its principals to provide us with managerial control over these 6,047 chassis. As a result of the restructuring, the partners of The Ivy Group contributed these 6,047 chassis and certain other assets and liabilities to our newly formed subsidiary, Chassis Holdings I LLC, in exchange for $26.0 million face value of preferred membership units and 10% of the common membership units, and Trac Lease contributed 902 chassis and $2,407 in cash to Chassis Holdings in exchange for $3.0 million face value of preferred membership units and 90% of the common membership units. The preferred membership units are entitled to receive a preferred return prior to the receipt of any distributions by the holders of the common membership units. The value of the contributed chassis was determined by taking the arithmetic average of the results of independent appraisals performed by three nationally recognized appraisal firms that were engaged by us in connection with our establishment of a chassis securitization facility in July 2000. As the managing member of Chassis Holdings, Trac Lease exercises sole managerial control over the entity's operations. Chassis Holdings leases all of its chassis to Trac Lease at a rental rate equal to the then current Trac Lease fleet average per diem. Chassis Holdings and the holders of the preferred membership units are party to a Put/Call Agreement which provides that the holders of preferred units may put such units to Chassis Holdings under certain circumstances and Chassis Holdings may redeem such units under certain circumstances. Chassis Holdings will be required to make certain option payments to the holders of the preferred membership units in order to preserve its right to redeem such units. For the nine months ended September 30, 2002, dividends paid on the common units and distributions on the preferred units owned by The Ivy Group, totaling $2.3 million, are included in lease operating and administrative expenses in the accompanying condensed consolidated statement of income.

           The terms of all arrangements between Chassis Holdings and Trac Lease, including rental rates, are, in the opinion of our management, comparable to terms that we would have obtained in arms' length transactions with unrelated third parties. The Ivy Group has entered into an agreement with us pursuant to which it has agreed not to engage in any business activities that are competitive with the business activities of Interpool or its subsidiaries without our prior written consent.

           Trac Lease previously leased an additional 983 chassis from The Ivy Group under a lease with buyout provisions expiring in 2000. In 2000 Trac Lease paid The Ivy Group lease payments of $252,000 under this agreement. Trac Lease exercised its buyout right under the lease during 2000 and purchased the chassis for $2,212,000.

           During 1992 through 1996, The Ivy Group borrowed $13.4 million from us. The aggregate loan balance of $13.4 million bears interest at LIBOR plus 1.75% repayable on an interest only basis, subject to maintenance of fixed loan to collateral value ratios, and will mature in 2013. In connection therewith, The Ivy Group executed a Chattel Mortgage Security Agreement and Assignment under which we were granted a security interest in 4,364 chassis owned by The Ivy Group and we were granted an assignment of all rights to receive rental payments and proceeds related to the lease of these chassis. This Ivy Group collateral was contributed, subject to this debt to us, to Chassis Holdings as part of our July 1, 2001 restructuring with The Ivy Group.

Eurochassis L.P. Transactions

           Eurochassis L.P., a New Jersey limited partnership in which Raoul J. Witteveen is one of the limited partners and the general partner, leases 100 chassis to Trac Lease for an annual lease payment of approximately $91,000. The annual lease term renews automatically unless canceled by either party prior to the first day of the renewal period. The terms of the lease agreement, in the opinion of our management, are comparable to terms that Trac Lease would have obtained in an arms' length transaction with an unrelated third party.

The Radcliff Consultation Services Agreement

           We entered into a Consultation Services Agreement with Radcliff Group, Inc. (which is owned directly or indirectly by Warren L. Serenbetz and certain members of his family) dated as of January 1, 1992, as amended and restated in February 1993, pursuant to which Radcliff Group appointed Warren L. Serenbetz, a stockholder and Director of Interpool, as Executive Consultant. The Consultation Services Agreement was terminated as of January 1, 1995. In accordance with the terms of the Consultation Services Agreement, Radcliff Group is entitled to receive its full annual consultation services fee in the amount of $492,000 through December 31, 2002 and reimbursement to both the designated Executive Consultant and his spouse, of all health related costs and expenses that are not advanced or reimbursed to the Executive Consultant pursuant to our medical and dental insurance plans.

The Atlas Consulting Agreement

           In February 1998, we entered into a non-exclusive Consulting Agreement with Atlas Capital Partners, LLC pursuant to which Mitchell I. Gordon, a Director of Interpool since 1998 and Chief Financial Officer and Executive Vice President since October 2000, provided investment banking consultation services to us. Under the terms of the Consulting Agreement, Atlas was to have been paid $240,000 (plus reimbursement of reasonable expenses), additional compensation of $560,000 and a twenty percent carried interest in investments made with funds provided by Interpool. In addition, Atlas was contractually entitled to an annual bonus in an amount that is usual and customary in the investment banking business for investment opportunities actually completed by us subject to set-off of the $560,000 additional compensation. In 2000, other compensation in the amount of $1,650,000, to be paid over three years, was earned by Atlas in connection with the acquisition by us of the North American Intermodal Division of Transamerica. As of October 2000, Mitchell Gordon was named our Chief Financial Officer and Executive Vice President and the Consulting Agreement was terminated.

Executive Office Lease

           During 2001, we leased approximately 28,500 square feet of commercial space for our executive offices in Princeton, New Jersey from 211 College Road Associates, a New Jersey general partnership. Martin Tuchman, a Director and the Chief Executive Officer of the Company, holds a direct or indirect equity interest of 42.76% and Radcliff Group holds a direct or indirect equity interest of 42.17% in 211 College Road Associates. The 2001 annual base rental for this property was approximately $557,000 under a triple net lease expiring in 2010. In the opinion of our management, rent being paid under this lease does not exceed rent that we would have paid in an arms' length transaction with an unrelated third party. On January 28, 2002, we executed a Purchase and Sale Agreement, pursuant to which, on May 1, 2002, we acquired the building which houses our corporate offices. The fair market value purchase price of the approximately 39,000 square feet building was $6,250,000 as determined by an independent property appraisal firm and approved by our Board of Directors.

                                             AND OPTIONS            OPTIONS
                                         EXERCISABLE WITHIN       EXERCISABLE     PERCENTAGE
       NAME OF BENEFICIAL OWNER(1)            60 DAYS(2)        WITHIN 60 DAYS    OF CLASS(2)
       ---------------------------            ----------        --------------    -----------

  Martin Tuchman (3)(4)............          9,519,110            2,280,000          32.12%
  Raoul J. Witteveen (3)(5)........          4,712,429            1,140,000          16.54%
  Warren L. Serenbetz (3)(6)(7)....          1,667,127              668,438           5.95%
  Arthur L. Burns .................            210,408               96,563               *
  Mitchell I. Gordon...............             15,000                    0               *
  Peter D. Halstead................             67,500               60,000               *
  Clifton H. W. Maloney............             10,000               10,000               *
  Joseph J. Whalen.................             37,500               37,500               *
  Ernst Baenziger..................              7,250                    0               *
  William Geoghan..................              9,300                7,500               *
  Herbert Mertz....................              9,250                7,500               *
  Executive officers and directors
     as a group (eleven persons)...         16,264,874            4,307,501          51.37%

  Other Stockholders:
  Hickory Enterprises, L.P. (8)
     165 Signal Hill North Wilton,
     Connecticut 06897-1933........          4,856,911                    0          17.76%
  Warren L. Serenbetz Jr. (9)(10)
     c/o American National Can Co.
     101 Merritt 7, 3rd Floor
     Norwalk, CT 06856.............            283,646                    0           1.04%
  Paul H. Serenbetz (9)(10) c/o
     The Morgan School Route 81
     Clinton, CT 06413.............            283,646                    0           1.04%
  Stuart W. Serenbetz (9)(10) c/o
     Turner Development Corp. 375
     Hudson Street, 6th Floor New
     York, NY 10014................            283,646                    0           1.04%
  Clay R. Serenbetz (9)(10) c/o
     Radcliff Group, Inc. 695 West
     Street Harrison, NY 10528.....            283,646                    0           1.04%
  The Chartres Limited Partnership
     (11) c/o Interpool, Inc. 633
     Third Avenue New York, NY
     10017.........................             90,000                    0               *

                                                                                           2000           2001
                                                                                      ------------    -----------
ASSETS
Cash and short-term investments..................................................      $   155,553   $    102,189
Marketable securities, at fair value.............................................              136            638
Accounts and notes receivable, less allowance of $14,271 and $5,862,
   respectively..................................................................           63,470         64,891
Assets held for sale.............................................................          348,389             --
Net investment in direct financing leases........................................          151,386        229,239
Other receivables, net, including amounts from related parties of $13,433
   and $-0-, respectively........................................................           53,354         43,434
Leasing equipment, net of accumulated depreciation and amortization of
   $275,405 and $322,702, respectively...........................................        1,254,935      1,372,326
Other investment securities, at fair value.......................................           30,454         15,970
Other assets.....................................................................           99,111         79,078
Assets related to discontinued operations........................................           38,043         10,020
                                                                                       -----------    -----------
         Total Assets............................................................      $ 2,194,831    $ 1,917,785
                                                                                       ===========    ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts Payable and Accrued Expenses............................................      $   122,673   $     80,683
Income Taxes:
   Current.......................................................................            1,075            353
   Deferred......................................................................           28,892         29,890
                                                                                       -----------    -----------
                                                                                            29,967         30,243
Deferred Income..................................................................              911            766
Debt and capital lease obligations:
   Due within one year...........................................................          199,487        179,664
   Due after one year............................................................        1,396,788      1,155,646
                                                                                       -----------    -----------
                                                                                         1,596,275      1,335,310
                                                                                       -----------    -----------
Liabilities related to discontinued operations...................................           25,823          6,072
Company-Obligated mandatorily redeemable preferred securities in
   subsidiary grantor trusts (holding solely junior Subordinated Deferrable
   interest debentures of the Company) (75,000 shares 9 7/8% Capital
   Securities outstanding, liquidation preference $75,000).......................           75,000         75,000
Minority interest in equity of subsidiaries......................................            1,951         27,427
Stockholders' equity:
   Preferred stock, par value $.001 per share; 1,000,000 authorized, none
     issued......................................................................              ---            ---
   Common stock, par value $.001 per share; 100,000,000 shares authorized,
     27,579,952 issued at December 31, 2000 and 2001.............................               28             28
   Additional paid-in capital....................................................          124,184        124,184
   Treasury stock, at cost, 158,500 and 216,600 shares at December 31, 2000 and .
     2001, respectively..........................................................           (1,170)        (2,099)
   Retained earnings.............................................................          217,955        255,154
   Accumulated other comprehensive income (loss).................................            1,234        (14,803)
                                                                                       -----------    -----------
         Total stockholders' equity..............................................          342,231        362,464
                                                                                       -----------    -----------
         Total liabilities and stockholders' equity..............................       $2,194,831     $1,917,785
                                                                                       ===========    ===========

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

                                                                                1999         2000          2001
                                                                            ------------ ------------  ------------
Revenues                                                                      $189,788     $242,255      $305,133
Cost and expenses:
   Lease operating expenses........................................             28,391       36,865        63,870
   Administrative expenses.........................................             19,910       21,862        26,170
   Provision for doubtful accounts.................................              6,925        2,192         2,302
   Market value adjustment for derivative instruments..............                ---          ---         2,647
   Depreciation and amortization of leasing equipment..............             55,635       60,767        74,311
   Other expense, net..............................................              2,822        2,509           466
   Interest expense................................................             64,429       84,596        95,044
   Interest income.................................................            (12,049)     (16,511)       (9,400)
                                                                           -----------  -----------    ----------
                                                                               166,063      192,280       255,410
                                                                           -----------  -----------    ----------
Income from continuing operations before provision for income
  taxes, results from discontinued operations, cumulative effect
  of change in accounting principle and extraordinary gain.........             23,725       49,975        49,723
Provision for income taxes.........................................              2,800        8,175         6,725
                                                                           -----------  -----------    ----------
Income from continuing operations before results from discontinued
  operations, cumulative effect of change in accounting principle
  and extraordinary gain...........................................             20,925       41,800        42,998
(Loss) income from discontinued operations, net of applicable taxes
  of $600, $450 and $29............................................                946        1,156        (1,909)
Gain (loss)from disposal of discontinued operations................                ---          ---           ---
Cumulative effect of change in accounting principle, net
  of applicable taxes of $440 and $44..............................                ---          660           833
Extraordinary gain of debt retirement, net of applicable
  taxes of $494, $560 and $372.....................................                740           84           558
                                                                           -----------  -----------    ----------
Net income.........................................................          $  22,611    $  44,456     $  42,480
                                                                           ===========  ===========    ==========
Income per share from continuing operations before results from
  discontinued operations, cumulative effect of change in accounting
  principle and extraordinary gain:
     Basic.........................................................          $    0.76    $    1.52     $    1.57
     Diluted.......................................................          $    0.74    $    1.50     $    1.48
(Loss) income from discontinued operations:
     Basic.........................................................          $    0.03    $    0.04     $   (0.07)
     Diluted.......................................................          $    0.03    $    0.04     $   (0.06)
Cumulative effect of change in accounting principle:
     Basic.........................................................                 NA    $    0.02     $    0.03
     Diluted.......................................................                 NA    $    0.02     $    0.03
Extraordinary gain:
     Basic.........................................................          $    0.03    $    0.03     $    0.02
     Diluted.......................................................          $    0.03    $    0.03     $    0.02
Net income per share:
     Basic.........................................................          $    0.82    $    1.62     $    1.55
     Diluted.......................................................          $    0.80    $    1.60     $    1.47
Weighted average shares outstanding (in thousands):
     Basic.........................................................             27,571       27,421        27,417
     Diluted.......................................................             28,234       27,834        28,965

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

                          Preferred Stock   Common Stock
                          ---------------   ------------   Additional                        Accum.
                                    Par              Par    Paid-in    Treasury  Retained  Other Comp.  Comp.
                          Shares   Value   Shares   Value   Capital      Stock   Earnings  Income(Loss) Income
                          ------   -----   ------   -----   -------    --------  --------  ------------ ------
Balance, December
  31, 1998...........       --     $  --   27,566     $28    $124,046    $ --    $159,138   $  3
Net income...........       --        --       --      --          --      --      22,611     --        $22,611
Other comprehensive
  income.............       --        --       --      --          --      --        --      710            710
                                                                                                           ----
Comprehensive
  income.............       --        --       --      --          --      --        --       --        $23,321
                                                                                                        =======
Shares issued on
  exercise of
  stock Option.......       --        --       14      --         138      --        --       --
Purchase of 158,500
  shares of
  treasury stock.....       --        --       --      --          --    (1,170)     --       --
Cash dividends declared:
  Common Stock, $0.15
  per share..........       --        --       --      --          --      --      (4,137)    --
                          ------   -----   ------   -----     -------    --------  --------  --------- -------

Balance, December
  31, 1999...........       --        --   27,580      28     124,184   (1,170)   177,612    713
Net income...........       --        --       --      --          --      --      44,456     --       $44,456
Other comprehensive
  income.............       --        --       --      --          --      --         --      521          521
                                                                                                       -------
Comprehensive income.       --        --       --      --          --      --         --       --      $44,977
                                                                                                       =======
Cash dividends declared:
  Common stock, $0.15
    per share........       --        --       --      --          --      --      (4,113)     --
                          ------   -----   ------   -----     -------    --------  --------  --------- -------

Balance, December 31,
  2000...............       --        --   27,580      28     124,184   (1,170)   217,955  1,234
Net income...........       --        --       --      --          --      --      42,480     --       $42,480
Adoption of FAS 133-
  Cumulative effect
  through December 31,
  2000...............       --        --       --      --          --      --         --  (7,411)       (7,411)
Other comprehensive
  loss...............       --        --       --      --          --      --         --  (8,626)       (8,626)
                                                                                                       -------
Comprehensive income.       --        --       --      --          --      --         --      --       $26,443
                                                                                                       =======
Purchase of 58,100
  shares of treasury
  stock..............       --        --       --      --          --     (929)       --      --
Cash dividends declared:
  Common stock,
  $0.1925
  per share..........       --        --       --      --          --      --      (5,281)    --
                          ------   -----   ------   -----     -------    --------  --------  --------- -------
Balance, December 31,
  2001...............       --     $  --   27,580     $28    $124,184  $(2,099)  $255,154  $(14,803)
                          ======   =====   ======   =====     =======  ========  ========  =========== =======

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

                                                                              1999           2000           2001
                                                                           ----------     ----------      --------
Cash flows from operating activities:
Net income......................................................           $   22,611     $   44,456      $ 42,480
Adjustments to reconcile net income to net cash provided
  by operating activities:
  Loss (Gain) from discontinued operations, net of tax..........                 (946)        (1,156)        1,909
  Depreciation and amortization.................................               50,954         66,694        79,044
  Loss on sale of leasing equipment.............................                  470          1,520         1,659
  Gain on sale of assets held for sale..........................                  ---            ---        (1,774)
  Provision for uncollectible accounts..........................                6,925          2,192         2,302
  Gain on securitized lease receivables.........................               (7,942)           ---           ---
  Gain on retirement of debt, net of tax........................                 (740)          (840)         (558)
  Cumulative effect of change in accounting principle, net of tax                 ---           (660)         (833)
  Loss on market value adjustment for derivative instruments....                  ---            ---         2,647
  Changes in assets and liabilities:
     Accounts and notes receivable..............................               (5,005)        (4,287)       (7,555)
     Other receivables..........................................                4,321           (917)       (3,513)
     Other assets...............................................               10,562        (11,002)       10,542
     Accounts payable and accrued expenses......................               (9,172)         9,061       (18,016)
     Income taxes payable.......................................                1,172          9,373         4,377
     Deferred income............................................                 (950)           330          (145)
     Minority interest in equity of subsidiaries................                  520            807        (1,030)
                                                                           ----------     ----------      --------
       Net cash provided by operating activities................               72,780        115,571       111,536
                                                                           ----------     ----------      --------
Cash flows from investing activities:
     Acquisition of leasing equipment...........................             (196,234)      (245,756)     (157,116)
     Proceeds from dispositions of leasing equipment............               22,921         84,419        30,948
     Proceeds from disposition of assets held for sale..........                  ---            ---       299,105
     Investment in direct financing leases......................             (100,092)       (47,717)     (123,728)
     Cash collections on direct financing leases, net of
       income recognized........................................               53,025         49,074        43,014
     Changes in marketable securities and other investing
       activities...............................................                4,818            112          (512)
     Investment in and advances to subsidiary...................               (3,500)           ---           ---
     Change in accrued equipment purchases......................                2,661         48,857       (44,033)
     Changes in assets and liabilities related to discontinued
       operations...............................................                 (530)        (4,334)        6,363
     Acquisitions, net of cash acquired.........................                  ---       (673,369)          ---
                                                                           ----------     ----------      --------
       Net cash provided by (used for) investing activities.....             (216,931)     (788,714)        54,041
                                                                           ----------     ----------      --------
Cash flows from financing activities:
     Proceeds from issuance of debt.............................              134,570       570,742       145,200
     Payment of long-term debt and capital lease
       obligations..............................................              (53,749)      (96,373)     (244,930)
     Borrowings of revolving credit lines.......................              240,190       304,814       165,384
     Repayment of revolving credit lines........................             (260,974)     (153,138)     (278,867)
     Proceeds from issuance of common stock.....................                  136           ---           ---
     Proceeds from securitized lease receivables................              189,087           ---           ---
     Purchase of treasury stock.................................               (1,170)          ---         (929)
     Dividends paid.............................................               (4,136)       (4,113)      (4,799)
                                                                           ----------     ----------      --------
       Net cash provided by (used for) financing activities.....              243,954       621,932     (218,941)
                                                                           ----------     ----------      --------
       Net increase (decrease) in cash and short-term
         investments............................................              $99,803      $(51,211)     $(53,364)
Cash and short-term investments, beginning of period............              106,961       206,764       155,553
                                                                           ----------     ----------      --------
Cash and short-term investments, end of period..................          $   206,764    $  155,553      $102,189
                                                                          ===========    ===========  ============
Supplemental schedule of non-cash financing activities:
Assumption of debt in connection with Assets Held for Sale......                  ---           ---           ---
                                                                          ===========    ===========  ============
                                                                                  ---           ---       $52,551
                                                                          ===========    ===========  ============
Increase in minority interest in consolidated subsidiary from
   contribution of equipment....................................                  ---            ---      $26,326
                                                                          ===========    ===========  ============
Liability on unrealized loss on swap agreements.................                  ---            ---      $19,798
                                                                          ===========    ===========  ============

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

           Dry freight standard containers...............    12.5 to 15 years

           Chassis.......................................    17.5 years

           Other.........................................    3 to 25 years

                                                                         Gross Unrealized
                                                                         ----------------

                                                  Amortized          Holding          Holding       Estimated
                                                     Cost             Gains            Losses      Fair Value
                                                     ----             -----            ------      ----------

2000
----
   Other Investment Securities...........          $29,140           $1,314              $---        $30,454
   Equity and Other Securities...........              193               10              (67)            136
                                                       ---               --              ----            ---
                                                   $29,333           $1,324             $(67)        $30,590
                                                   =======           ======             =====        =======
2001
----
   Other Investment Securities...........          $15,314             $656              $---        $15,970
   Equity and Other Securities...........              663               42              (67)            638
                                                       ---               --              ----            ---
                                                   $15,977             $698             $(67)        $16,608
                                                   =======             ====             =====        =======

                                                          Amortized        Estimated Fair
                                                          ---------        --------------
                                                            Cost                Value
                                                            ----                -----
     Due in one year..................................     $7,887              $8,225
     Due after one year through five years............      7,427               7,745

                                                              Before Tax             Tax            Net of
                                                                Amount              Effect        Tax Amount
                                                                ------              ------        ----------
Year Ended December 31, 1999
Unrealized holding gains (losses) arising during the
period:
          Marketable securities......................            $(34)                $12            $(22)
          Other investment securities................              771               (39)              732
                                                                   ---               ----              ---
                                                                  $737              $(27)             $710
                                                                  ====              =====             ====

Year Ended December 31, 2000
Unrealized holding gains arising during the
period:
          Marketable securities......................              $14               $(5)                $9
          Other investment securities................              539               (27)               512
                                                                   ---                --                ---
                                                                  $553              $(32)              $521
                                                                  ====              =====              ====

Year Ended December 31, 2001
Unrealized holding losses arising during the period:
          Marketable securities......................            $(28)                $10             $(18)
          Other investment securities................            (658)                 33             (625)
          Swap agreements............................          (9,911)              1,928           (7,983)
                                                               -------              -----           -------
                                                             $(10,597)             $1,971          $(8,626)
                                                             =========             ======          ========

                                                        December 31, 2000
                                                        -----------------
                                                  Carrying
                                                  Amount           Fair Value
                                                  ------           ----------
       Interest rate swap agreements..........       $133           ($9,012)

                                                                                1999          2000       2001
                                                                                ----          ----       ----
     Average common shares outstanding.................................       27,571        27,421     27,417
     Common shares issuable(1).........................................          663           413      1,548
                                                                             -------      --------     ------
     Average common shares outstanding assuming dilution...............       28,234        27,834     28,965
                                                                              ======        ======     ======

                                                        2000             2001
                                                        ----             ----
      Deferred tax assets:
             Loss carry forwards..................     $75,844         $105,662
             Finance leases receivable............      3,392             3,704
             Other, primarily operating reserves..      4,934             8,617
                                                        -----             -----
                Total deferred tax assets.........      84,170          117,983
                                                        ------          -------

      Deferred tax liabilities:
             Operating property, net..............     103,603          135,765
             Other................................       9,459           12,108
                                                       -------         --------
                Total deferred tax liabilities....     113,062          147,873
                                                       -------          -------
                Net deferred tax liability........     $28,892          $29,890
                                                       =======          =======

                                                                   1999         2000          2001
                                                                   ----         ----          ----
   U.S.  statutory rate...................................        35.0%        35.0%         35.0%
   Difference due to operation of subsidiary in
      Barbados............................................       (25.7)       (23.1)        (23.6)
   Federal taxes on foreign income........................         1.3          0.9           1.0
   State taxes............................................         0.9          3.1           0.6
   Other..................................................         0.3          0.5           0.5

           Actual tax rate..................................      11.8%        16.4%         13.5%
                                                                  -----        -----         -----

                                                                 1999           2000            2001
                                                                 ----           ----            ----
                  U.S.................................         $2,400         $7,459          $5,981
                  Other...............................            400            716             744
                                                                  ---            ---             ---
                                                               $2,800         $8,175          $6,725
                                                               ======         ======          ======

                  Current.............................         $2,248         $2,691          $2,144
                  Deferred............................            552          5,484           4,581
                                                                  ---          -----           -----
                                                               $2,800         $8,175          $6,725
                                                               ======         ======          ======

                                                 Payment               Interest               Principal
                                                 -------               --------               ---------
           2002......................            $54,128                $15,482                 $38,646
           2003......................             69,741                 13,767                  55,974
           2004......................             60,226                 10,658                  49,568
           2005......................             67,797                  8,662                  59,135
           2006......................             40,989                  6,084                  34,905
           Thereafter................            124,988                  7,964                 117,024
                                               ---------              ---------               ---------
                                                $417,869                $62,617                $355,252
                                                ========                =======                ========

                    2002................................       $ 11,625
                    2003................................          9,411
                    2004................................          9,388
                    2005................................          9,397
                    2006................................          8,966
                    Thereafter..........................         44,910

                                                                 December 31, 2001
                                        ---------------------------------------------------------------------
                                              Total Lease               Unearned              Net Lease
                                              Receivable              Lease Income            Receivable
                                              ----------              ------------            ----------

2002................................            $69,732                  $23,376               $46,356
2003................................             59,776                   18,551                41,225
2004................................             55,521                   13,699                41,822
2005................................             42,258                    9,295                32,963
2006................................             33,355                    6,213                27,142
Thereafter..........................             48,000                    8,269                39,731
                                                 ------                    -----                ------
                                               $308,642                  $79,403              $229,239
                                               ========                  =======              ========

                 2002.......................................       $70,402
                 2003.......................................        62,194
                 2004.......................................        40,689
                 2005.......................................        23,314
                 2006.......................................         6,735
                 Thereafter.................................         3,928

                                                                   1999            2000            2001
                                                                   ----            ----            ----
Balance, beginning of year..............................         $4,632         $10,260         $14,271
Provision charged to expense............................          6,925           2,192           2,302
Acquired................................................            ---           1,281             ---
Write-offs, net of recoveries...........................         (1,297)            538         (10,711)
                                                                -------         -------         -------
Balance, end of year....................................        $10,260         $14,271          $5,862
                                                                =======         =======         =======

                      2002................................      $141,018
                      2003................................        95,561
                      2004................................        56,357
                      2005................................       219,804
                      2006................................        19,365
                      Thereafter..........................       447,953
                                                                 -------
                                                                $980,058
                                                                ========

                                                                       1999             2000
                                                                       ----             ----
         Revenues.............................................      $258,433        $298,484
         Income from continuing operations before change in
            accounting principle and extraordinary items......        28,909          47,050
         Basic net income per share...........................         $1.05           $1.72
         Diluted net income per share.........................         $1.02           $1.69

                                                                Securitized Lease
                                                                   Receivables
                                                                   -----------
     Carrying amount/fair value of retained interests.......         $15,970
     Weighted-average life (in years).......................             2.0
     Expected credit losses (annual rate)...................             1.5%
     Impact on fair value of 10% adverse change.............            $129
     Impact on fair value of 20% adverse change.............            $275
     Residual cash flows discount rate (annual).............            12.6%
     Impact on fair value of 10% adverse change.............            $310
     Impact on fair value of 20% adverse change.............            $619

                                                                 Year Ended December 31
                                                                 ----------------------

                                                                  2000              2001
                                                                  ----              ----
        Proceeds from new securitizations................         $---              $---
        Servicing fees received..........................         $611              $486
        Cash flows received on retained interest.........       $7,593           $15,585

                                                                          1999            2000             2001
                                                                          ----            ----             ----
        Revenue................................................           $958           $1,104             $496
        Lease operating expense................................         $3,030           $3,033           $4,343
        Administrative expense.................................         $1,092           $1,061           $1,379
        Interest expense.......................................           $353             $168             $---

                                                                                     Domestic
                                                                   Container        Intermodal
      1999:                                                         Leasing         Equipment            Totals
      -----                                                         -------         ---------            ------
      Revenues from external customers.....................          $94,608           $95,180         $189,788
      Lease operating and administrative expenses..........           16,959            38,267           55,226
      Depreciation and amortization........................           32,886            22,749           55,635
      Other income/(expense), net..........................           (1,953)             (869)          (2,822)
      Interest income......................................            3,563             8,486           12,049
      Interest expense.....................................           24,635            39,794           64,429
      Income from continuing operations before
        taxes and extraordinary item.......................           21,738             1,987           23,725

                                                                                     Domestic
                                                                   Container        Intermodal
      2000:                                                         Leasing         Equipment            Totals
      -----                                                         -------         ---------            ------
      Revenues from external customers.....................         $103,018          $139,237         $242,255
      Lease operating and administrative expenses..........           12,637            48,282           60,919
      Depreciation and amortization........................           29,911            30,856           60,767
      Other income/(expense), net..........................             (719)           (1,790)          (2,509)
      Interest income......................................            5,984            10,527           16,511
      Interest expense.....................................           32,569            52,027           84,596
      Income from continuing operations before
        taxes and extraordinary item.......................           33,166            16,809           49,975
      Net investment in DFL's..............................          125,046            26,340          151,386
      Leasing equipment, net...............................          483,925           771,010        1,254,935
      Equipment purchase...................................          163,535           129,938          293,473
      Total segment assets.................................         $795,994        $1,360,794       $2,156,788

                                                                                     Domestic
                                                                   Container        Intermodal
      2001:                                                         Leasing         Equipment            Totals
      -----                                                         -------         ---------            ------
      Revenues from external customers.....................         $112,085          $193,048         $305,133
      Lease operating and administrative expenses..........           12,443            82,546           94,989
      Depreciation and amortization........................           36,583            37,728           74,311
      Other income/(expense), net..........................           (1,644)            1,178             (466)
      Interest income......................................            3,788             5,612            9,400
      Interest expense.....................................           27,966            67,078           95,044
      Income from continuing operations before
        taxes and extraordinary item.......................           37,237            12,486           49,723
      Net investment in DFL's..............................          168,890            60,349          229,239
      Leasing equipment, net...............................          529,867           842,459        1,372,326
      Equipment purchase...................................          168,906           111,938          280,844
      Total segment assets.................................         $822,784        $1,084,981       $1,907,765

    REVENUES:                                                           1999             2000             2001
                                                                        ----             ----             ----
    United States (a).....................................          $103,190         $139,312         $193,111
    International.........................................            86,598          102,943          112,022
                                                                      ------          -------          -------
                                                                    $189,788         $242,255         $305,133
                                                                    ========         ========         ========
    ASSETS:
    United States.........................................                         $1,360,794       $1,084,981
    International.........................................                            795,994          822,784
                                                                                      -------          -------
                                                                                   $2,156,788       $1,907,765
                                                                                   ==========       ==========

                                                                       Number of              Weighted Average
                                                                        Options                Exercise Price
                                                                        -------                --------------
              Outstanding at January 1, 1999.............               4,393,501                      $10.25
                Granted in 1999..........................                     ---                         ---
                Exercised in 1999........................                 (13,500)                      10.25
                                                                        ---------

              Outstanding at December 31, 1999...........               4,380,001                      $10.25
                Granted in 2000..........................                 115,000                       11.21
                Exercised in 2000........................                     ---                         ---

              Outstanding at December 31, 2000...........               4,495,001                      $10.27
                Granted in 2001..........................                     ---                         ---
                Exercised in 2001........................                     ---                         ---

              Outstanding at December 31, 2001...........               4,495,001                      $10.27
                                                                        ---------

              Exercisable at December 31, 2001...........               4,385,001                      $10.25
                                                                        ---------

                                                                            Year Ended December 31,
                                                              -----------------------------------------------------
                                                                     1999              2000             2001
                                                                     ----              ----             ----
      Net income as reported..............................          $22,611          $44,456          $42,480
      Net income pro forma................................          $18,681          $44,423          $42,360
      Basic net income per share, as reported.............            $0.82            $1.62            $1.55
      Basic net income per share, pro forma...............            $0.68            $1.62            $1.55
      Diluted net income per share, as reported...........            $0.80            $1.60            $1.47
      Diluted net income per share, pro forma.............            $0.66            $1.60            $1.46

2000 quarterly financial data (unaudited):              1st            2nd             3rd          4th(a)
------------------------------------------              ---            ---             ---          ------
Revenues.......................................       $50,529        $54,258         $57,964       $79,504
Income from continuing operations before
   results from discontinued operations,
   cumulative effect of change in accounting
   principle and extraordinary gain............        $8,724        $10,074         $10,709       $12,293
Basic income per share.........................         $0.32          $0.37           $0.39         $0.45
Diluted income per share.......................         $0.32          $0.37           $0.38         $0.43

2001 quarterly financial data (unaudited):              1st            2nd             3rd          4th(b)
------------------------------------------              ---            ---             ---          ------
Revenues.......................................       $76,468        $77,653         $74,945       $76,067
Income from continuing operations before
   results from discontinued operations,
   cumulative effect of change in accounting
   principle and extraordinary gain............       $11,035        $12,208         $10,037        $9,718
Basic income per share.........................         $0.40          $0.45           $0.37         $0.35
Diluted income per share.......................         $0.38          $0.42           $0.34         $0.34

                                         INTERPOOL, INC. AND SUBSIDIARIES
                                    CONDENSED CONSOLIDATED BALANCE SHEETS
                            (dollars in thousands, except share and per share amounts)

                                                                                    December 31,     September 30,
                                                                                        2001              2002
ASSETS                                                                                                (Unaudited)
Cash and short-term investments..................................................     $102,189          $166,508
Marketable securities, at fair value.............................................          638             1,673
Accounts and notes receivable, less allowance of
    $5,862 and $10,526 respectively..............................................       45,156            57,450
Net investment in direct financing leases........................................      229,239           235,770
Other receivables, net...........................................................       63,169            43,154
Leasing equipment, net of accumulated depreciation and amortization of
    $322,702 and $462,347, respectively..........................................    1,372,326         1,623,361
Other investment securities, at fair value.......................................       15,970            11,589
Other assets.....................................................................       79,078            79,996
Assets related to discontinued operations........................................       10,020             4,109
         Total assets............................................................   $1,917,785        $2,223,610

LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses............................................      $80,683          $164,525
Income  taxes:
    Current......................................................................          353               812
    Deferred.....................................................................       29,890            27,532
                                                                                        30,243            28,344

Deferred income..................................................................          766             1,187

Debt and capital lease obligations:
    Due within one year..........................................................      179,664           179,040
    Due after one year...........................................................    1,155,646         1,376,730
                                                                                     1,335,310         1,555,770

Liabilities related to discontinued operations...................................        6,072               786

Company-obligated mandatorily redeemable preferred securities
    in subsidiary grantor trusts (holding solely junior Subordinated
    Deferrable interest debentures of the Company) (75,000 shares 9-7/8%
    Capital Securities outstanding, liquidation preference $75,000)..............       75,000            75,000

Minority interest in equity of subsidiaries......................................       27,247            34,056

Stockholders' equity:
    Preferred stock, par value $.001 per share; 1,000,000 shares
       authorized, none issued...................................................         ---                ---
    Common stock, par value $.001 per share; 100,000,000 shares authorized,
       27,579,952 issued at December 31, 2001 and September 30, 2002 ............           28                28
    Additional paid-in capital...................................................      124,184           124,184
    Treasury shares, at cost, 216,600 at December 31, 2001 and
       218,700 at September 30, 2002.............................................      (2,099)           (2,139)
    Retained earnings............................................................      255,154           271,007
    Accumulated other comprehensive loss, net of taxes...........................     (14,803)          (29,138)
         Total stockholders' equity..............................................      362,464           363,942
         Total liabilities and stockholders' equity..............................   $1,917,785        $2,223,610

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

                                         INTERPOOL, INC. AND SUBSIDIARIES
                                    CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                            (Dollars in thousands, except share and per share amounts)
                                                    (Unaudited)
                                                                   Three Months Ended      Nine Months Ended
                                                                     September 30,          September 30,
                                                                     2001      2002          2001     2002
                                                                   --------  ---------      -------- -----

Revenues..........................................................  $74,945   $86,096      $229,066   $233,413
Cost and expenses:
   Lease operating and administrative expenses....................   20,554    26,570        65,645     65,406
   Provision for doubtful accounts................................      497     1,288         1,852      2,935
   Market value adjustment for derivative instruments.............    1,250     3,757         2,084      5,809
   Depreciation and amortization of leasing equipment.............   18,792    23,191        55,525     60,958
   Minority interest (income)/expense, net........................      533        (7)          553      1,535
   (Income)/loss for investments accounted for
    under the equity method.......................................      (59)      (88)          105      3,648
   Other  (income)/expense, net...................................      259       561        (1,136)    (4,673)
   Interest expense...............................................   23,150    29,452        71,468     81,210
   Interest income................................................   (1,308)     (591)       (6,560)    (4,127)
                                                                      ------    -------      ---------   --------
                                                                     63,688    84,133       189,536     212,701
                                                                      ------    -------      ---------   --------
Income from continuing operations before provision
  for income taxes, results from discontinued
  operations, cumulative effect of change in
  accounting  principle and extraordinary gain ....................  11,257     1,963        39,530      20,712
(Benefit) provision for income taxes...............................   1,220    (1,527)        6,250        (350)
                                                                      ------    -------      ---------   --------
Income from continuing operations before results
  from discontinued operations, cumulative effect
  of change in accounting principle and extraordinary gain.........  10,037     3,490        33,280     21,062

Loss from discontinued operations, net of applicable
  taxes of $125, $0, $380 and $472.................................    (876)       ---       (1,694)      (710)

Cumulative effect of change in accounting principle,
   net of applicable taxes of $44..................................      ---       ---           833        ---

Extraordinary gain on debt retirements, net of
  applicable taxes of $200, $0, $372 and $13.......................      301       ---           558         19
                                                                      ------    -------      ---------   --------
Net income..........................................................  $9,462     $3,490      $32,977     $20,371
                                                                      ------    -------      ---------   --------
Income per share from continuing operations
  before results from discontinued operations,
   cumulative effect of change in accounting
    principle and extraordinary gain:
     Basic...........................................................  $0.37     $0.13         $1.21       $0.77
                                                                      ------    -------      ---------   --------
     Diluted.........................................................  $0.34     $0.12         $1.15       $0.72
                                                                      ------    -------      ---------   --------
Loss from discontinued operations:
     Basic........................................................... ($0.03)     N/A         ($0.06)    ($0.03)
                                                                      ------    -------      ---------   --------
     Diluted......................................................... ($0.03)     N/A         ($0.06)    ($0.02)
                                                                      ------    -------      ---------   --------

Cumulative effect of change in accounting principle:
     Basic...........................................................    N/A      N/A          $0.03      N/A
                                                                      ------    -------      ---------   --------

     Diluted.........................................................     N/A      N/A          $0.03      N/A
                                                                      ------    -------      ---------   --------
Extraordinary gain:
     basic...........................................................  $0.01       N/A          $0.02      $0.00
                                                                      ------    -------      ---------   --------
     Diluted.........................................................  $0.01       N/A          $0.02      $0.00
                                                                      ------    -------      ---------   --------
Net income per share:
     Basic...........................................................  $0.35     $0.13          $1.20      $0.74
                                                                      ------    -------      ---------   --------
     Diluted.........................................................  $0.32     $0.12          $1.14      $0.70
                                                                      ------    -------      ---------   --------
Weighted average shares outstanding (in  thousands):
     Basic........................................................... 27,421    27,361         27,421      27,361
                                                                      ------    -------      ---------   --------
     Diluted......................................................... 29,161    28,969         29,011      29,285
                                                                      ------    -------      ---------   --------

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

                                         INTERPOOL, INC. AND SUBSIDIARIES
                       CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                 for the Year ended December 31, 2001 and the Nine Months ended September 30, 2002
                                         (dollars and shares in thousands)
                                                    (unaudited)

                                                                                                      Accum.
                               Preferred Stock    Common Stock                                        Other
                                                                 Additional                           Comp.       Comp.
                                         Par              Par      Paid-in   Treasury    Retained     Income     Income
                               Shares   Value    Shares  Value     Capital    Stock      Earnings     (Loss)     (Loss)

BALANCE, December 31, 2000......  ---   $---    27,580    $28     $124,184  $(1,170)    $217,955      $1,234
Net income......................  ---    ---       ---    ---          ---       ---      42,480         ---    $42,480
Adoption of FAS 133-
    Cumulative effect through
    December 31, 2000...........                                                                     (7,411)    (7,411)
Other comprehensive loss........  ---    ---       ---    ---          ---       ---         ---     (8,626)    (8,626)
Comprehensive income............  ---    ---       ---    ---          ---       ---         ---         ---    $26,443
Purchase of 58,100 shares of
    treasury stock..............  ---    ---       ---    ---          ---     (929)         ---         ---
Cash dividends declared:
    Common stock, $0.1925 per
      share.....................  ---    ---       ---    ---          ---       ---     (5,281)         ---

BALANCE, December 31, 2001......  ---    ---    27,580     28      124,184   (2,099)     255,154    (14,803)
Net income......................  ---    ---       ---    ---          ---       ---      20,371         ---    $20,371
Other comprehensive loss........  ---    ---       ---    ---          ---       ---         ---    (14,335)   (14,335)
Comprehensive income............  ---    ---       ---    ---          ---       ---         ---         ---     $6,036
Purchase of 2,100 shares of
    treasury stock..............  ---    ---       ---    ---          ---      (40)         ---         ---
Cash dividends declared:
    Common stock, $0.11  per
      share ....................  ---    ---       ---    ---          ---       ---     (4,518)         ---

BALANCE , September 30, 2002....  ---   $---    27,580    $28     $124,184  $(2,139)    $271,007   $(29,138)

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

                                         INTERPOOL, INC. AND SUBSIDIARIES
                                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                              (dollars in thousands)
                                                    (Unaudited)

                                                                                                Nine Months Ended
                                                                                                  September 30,
                                                                                                2001          2002

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income..................................................................................    $32,977       $20,371
Adjustments to reconcile net income to net cash provided by operating activities --
  Loss from discontinued operations, net of tax.............................................      1,694           710
  Depreciation and amortization.............................................................     58,890        68,504
  Loss on sale of leasing equipment.........................................................         72           494
  Gain on sale of assets held for sale......................................................     (1,774)          ---
  Gain on sale of land......................................................................        ---        (4,766)
  Provision for doubtful accounts...........................................................      1,852         2,935
  Gain on retirement of debt, net of tax....................................................       (558)          (19)
  Loss on market value adjustment for derivative instruments................................      2,084         5,809
  Cumulative effect of change in accounting principle, net of tax...........................       (833)           ---
  Changes in assets and liabilities -
     Accounts and notes receivable..........................................................     (3,181)         2,375
     Other receivables......................................................................        293         (3,464)
     Other assets ..........................................................................      8,323         (6,715)
     Accounts payable and accrued expenses..................................................    (19,278)           130
     Income taxes payable...................................................................      4,653            979
     Benefit for deferred income taxes......................................................        ---         (2,697)
     Deferred income........................................................................       (116)          (122)
     Minority interest in equity of subsidiaries............................................     (1,370)          (889)
        Net cash provided by operating activities...........................................     83,728         83,635

CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisition of leasing equipment.......................................................    (97,699)      (191,620)
     Proceeds from dispositions of leasing equipment........................................     31,815         18,830
     Proceeds from disposition of assets held for sale......................................    292,294           ---
     Proceeds from sale of land.............................................................        ---         7,955
     Investment in direct financing leases..................................................    (71,832)      (37,048)
     Cash collections on direct financing leases, net of income recognized..................     29,078        37,275
     Changes in marketable securities and other investing activities........................       (660)       (1,087)
     Change in accrued equipment purchases..................................................    (50,106)       34,627
     Incremental cash from consolidation of CAI as of June 27, 2002.........................        ---           880
     Changes in assets and liabilities related to discontinued operations...................      1,388          (977)
        Net cash (used for) provided by investing activities................................    134,278      (131,165)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from issuance of long-term debt...............................................     82,415     1,119,589
     Payment of long-term debt and capital lease obligations................................   (214,975)     (940,410)
     Borrowings of revolving credit lines...................................................     90,384        22,000
     Repayment of revolving credit lines....................................................   (278,867)      (85,150)
     Purchase of treasury stock.............................................................        ---           (40)
     Dividends paid.........................................................................     (3,428)       (4,140)
        Net cash provided by (used for) financing activities................................   (324,471)      111,849
        Net increase (decrease) in cash and short-term investments..........................   (106,465)       64,319
CASH AND SHORT-TERM INVESTMENTS, beginning of period........................................    155,553       102,189
CASH AND SHORT-TERM INVESTMENTS, end of period..............................................    $49,088      $166,508
Supplemental schedule of non-cash financing activities:
    Assumption of debt by purchaser in connection with Assets Held for Sale ................    $52,552           ---

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

                                                                                  (in thousands)
                                                                     Nine Months Ended    Three Months Ended
                                                                       September 30,         September 30,
                                                                      2001       2002       2001        2002
                                                                      ----       ----       ----        ----

     Average common shares outstanding........................       27,421     27,361     27,421      27,361

     Common shares issuable under stock option plans..........        1,740      1,608      1,590       1,924
                                                                      -----      -----      -----       -----

     Average common shares outstanding assuming dilution......       29,161     28,969     29,011      29,285
                                                                     ======     ======     ======      ======

           Dry freight standard containers.................    12.5 years
           Chassis.........................................    17.5 to 22.5 years
           Other...........................................    3 to 25 years

                                                                         Before-Tax       Tax          Net of Tax
                                                                         Amount           Effect       Amount
                                                                         ----------       ------       ----------
Nine Months Ended September 30, 2001
Unrealized holding losses arising during the period:
  Marketable securities............................................          $(100)          $35           $(65)
  Other investment securities......................................          $(658)          $33          $(625)
  Swap agreements..................................................        (13,867)        3,083        (10,784)
                                                                           --------        -----        --------
                                                                          $(14,625)       $3,151       $(11,474)
                                                                          =========       ======       =========

                                                                         Before-Tax       Tax          Net of Tax
                                                                         Amount           Effect       Amount
                                                                         ----------       ------       ----------
Nine Months Ended September 30, 2002
Unrealized holding losses arising during the period:
  Marketable securities............................................           $(18)           $6           $(12)
  Cumulative foreign currency translation adjustment...............           $(80)          $28           $(52)
  Swap agreements..................................................        (22,953)        8,682        (14,271)
                                                                           --------        -----        --------
                                                                          $(23,051)       $8,716       $(14,335)
                                                                          =========       ======       =========

                                                                          December 31, 2001   September 30, 2002
                                                                          -----------------   ------------------
Marketable securities................................................             $(28)                 $(40)
Other investment securities..........................................              618                   618
Cumulative foreign currency translation adjustment...................              ---                   (52)
Swap agreements......................................................          (15,393)              (29,664)
                                                                               --------              --------
                                                                              $(14,803)             $(29,138)
                                                                              =========             =========

Cash and short term investments........................................   $2,591
Accounts and notes receivable..........................................   21,558
Net investment in direct financing leases..............................    2,352
Leasing equipment, net of accumulated depreciation and amortization....  139,881
Other assets...........................................................    2,744

Accounts payable and accrued expenses..................................  $26,581
Income taxes...........................................................    7,588
Deferred income........................................................      569
Debt and capital lease obligations.....................................   86,300
Minority interest......................................................    7,770

                                                Three Months      Nine Months      Nine Months
                                                   Ended             Ended            Ended
                                                September 30,    September 30,    September 30,
                                                   2001              2001             2002
                                                   ----              ----             ----
Revenues.....................................     $3,032            $9,440           $5,608
Lease operating and administrative expenses..       $760            $1,384           $1,026
Interest income..............................       $903            $2,689           $1,776
Interest expense.............................        ---               ---              $77

     Twelve Months Ended
         September 30,                  Payment       Interest       Principal
                                     ------------   ------------   -------------
     2003........................       $80,102        $32,397        $47,705
     2004........................       102,592         29,869         72,723
     2005........................        78,337         27,018         51,319
     2006........................        91,793         24,114         67,679
     2007........................        79,228         21,598         57,630
     Thereafter..................       574,901        131,203        443,698
                                        -------        -------        -------
                                     $1,006,953       $266,199       $740,754
                                     ==========       ========       ========

     Twelve Months Ended September 30,
     2003...........................................          $19,800
     2004...........................................           21,006
     2005...........................................           20,543
     2006...........................................           18,105
     2007...........................................           16,057
     Thereafter.....................................           41,650

                                                              September 30, 2002
                                                              ------------------
                                                  Total Lease      Unearned      Net Lease
Twelve Months Ended September 30,                 Receivable     Lease Income    Receivable
                                                  -----------    ------------    ----------
2003.........................................       $75,909          $24,501       $51,408
2004.........................................        69,497           18,230        51,267
2005.........................................        52,731           12,910        39,821
2006.........................................        42,761            8,795        33,966
2007.........................................        32,435            4,854        27,581
Thereafter...................................        37,061            5,334        31,727
                                                     ------            -----        ------
                                                   $310,394          $74,624      $235,770
                                                   ========          =======      ========

     Twelve Months Ended September 30,
     2003...........................................       69,687
     2004...........................................       47,082
     2005...........................................       29,969
     2006...........................................       17,473
     2007...........................................       10,595
     Thereafter.....................................       6,888

                                                               2001         2002
                                                               ----         ----
    Balance beginning of year...........................     $14,271       $5,862
        Provision charged to expense....................       1,852        2,935
        Increase for allowance from the consolidation
          of CAI at June 27, 2002.......................         ---        1,898
        Write-offs, net of recoveries...................    (10,364)        (169)
                                                            --------     --------
    Balance, September 30...............................      $5,759      $10,526
                                                            ========     ========

                                                                                  Domestic
                                                                  Container      Intermodal
                   Nine Months ended 2001:                         Leasing       Equipment       Totals
                   -----------------------                         -------       ---------       ------
Revenues from external customers............................       $82,692        $146,374      $229,066
Lease operating, administrative and other expenses..........        10,529          59,052        69,581
Depreciation and amortization...............................        26,835          28,690        55,525
Other income/(expense), net.................................         (167)             645           478
Interest income.............................................         3,057           3,503         6,560
Interest expense............................................        21,588          49,880        71,468
Income from continuing operations before taxes, results from
discontinued operations, extraordinary item and change in
accounting principle........................................        26,630          12,900        39,530
Net investment in DFL's.....................................       147,025          43,904       190,929
Leasing equipment, net......................................       522,105         812,016     1,344,121
Total segment assets........................................       751,420       1,035,651     1,787,071
Equipment purchases.........................................      $118,558         $50,973      $169,531


                                                                                  Domestic
                                                                  Container      Intermodal
                   Nine Months ended 2002:                         Leasing       Equipment       Totals
                   -----------------------                         -------       ---------       ------
Revenues from external customers............................       $94,458        $138,955      $233,413
Lease operating, administrative and other expenses..........        17,663          56,487        74,150
Depreciation and amortization...............................        34,633          26,325        60,958
Other income/(expense), net.................................          (25)           (485)         (510)
Interest income.............................................         1,646           2,481         4,127
Interest expense............................................        19,662          61,548        81,210
Income from continuing operations before taxes, results from
discontinued operations, extraordinary item and change in
accounting principle........................................        24,121         (3,409)        20,712
Net investment in DFL's.....................................       173,585          62,185       235,770
Leasing equipment, net......................................       753,867         869,494     1,623,361
Total segment assets........................................     1,053,244       1,166,257     2,219,501
Equipment purchases.........................................      $140,861         $87,807      $228,668

                                                           2001           2002
                                                           ----           ----
     REVENUES :
     United States..................................     $146,419       $149,839
     International..................................       82,647         83,574
                                                           ------         ------
                                                         $229,066       $233,413
                                                         ========       ========
     ASSETS:
     United States..................................   $1,035,651     $1,346,291
     International..................................      751,420        873,210
                                                          -------        -------
                                                       $1,787,071     $2,219,501
                                                       ==========     ==========

                                                              December 31, 2001     September 30, 2002
                                                              -----------------     ------------------
     Carrying amount/fair value of retained interests.....          $15,970               $11,589
     Weighted-average life (in years).....................              2.0                   1.8
     Expected credit losses (annual rate).................              1.5 %                 1.5 %
     Impact on fair value of 10% adverse change...........             $129                  $236
     Impact on fair value of 20% adverse change...........             $275                  $336
     Residual cash flows discount rate (annual)...........             12.6 %                12.6 %
     Impact on fair value of 10% adverse change...........             $310                  $343
     Impact on fair value of 20% adverse change...........             $619                  $540

                                                                    2002
                                                                  --------
          Deferred tax assets:
               Loss carry forwards..........................      $104,818
               Finance leases receivable....................         4,337
               Other, primarily operating reserves..........        25,421
                                                                    ------
                   Total deferred tax assets................       134,576
                                                                   -------
          Deferred tax liabilities:
               Operating property, net......................       146,399
               Other........................................        15,709
                                                                    ------
                   Total deferred tax liabilities...........       162,108
                                                                   -------
                   Net deferred tax liability...............       $27,532
                                                                   =======

                                                               2001       2002
                                                               ----       ----
     U.S. statutory rate...................................... 35.0%      35.0%
     Difference due to operation of subsidiary in Barbados....(22.4)     (33.2)
     Federal taxes on foreign income..........................  1.0        2.6
     State taxes .............................................  1.7        1.3
     Tax benefit on U.S. losses...............................   ---      (8.4)
     Other....................................................   .5        1.0
                                                                 --        ---

              Actual tax rate................................. 15.8%      (1.7)%
                                                               =====      ======

                                                                2002
                                                              --------
               U.S.....................................       $(1,091)
               Other...................................            741
                                                                   ---
                                                                $(350)
                                                                ======

               Current.................................         $2,347
               Deferred................................        (2,697)
                                                               -------
                                                                $(350)
                                                                ======

          Twelve Months Ended September 30,
          2003...........................................        $131,335
          2004...........................................          89,372
          2005...........................................         319,338
          2006...........................................          39,005
          2007...........................................         227,791
          Thereafter.....................................           8,175
                                                                    -----
                                                                 $815,016
                                                                 ========