Cronos Global Income Fund Xvi 10-Q 2009 Q2 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2009

OR

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

For the transition period from                    to                    

Commission file number 0-27496

CRONOS GLOBAL INCOME FUND XVI, L.P.

(Exact name of registrant as specified in its charter)

California	94-3230380
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

One Front Street, Suite 925, San Francisco, California 94111
(Address of principal executive offices) (Zip Code)

(415) 677-8990
(Registrant’s telephone number, including area code)

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (17 C.F.R. §232.405) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer o Accelerated filer o  Non-accelerated filer o
(Do not check if a smaller reporting company) Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

CRONOS GLOBAL INCOME FUND XVI, L.P.

Report on Form 10-Q for the Quarterly Period
Ended June 30, 2009

TABLE OF CONTENTS

	PAGE
PART I — FINANCIAL INFORMATION		1
Item 1. Financial Statements		1
Unaudited Condensed Balance Sheets as of June 30, 2009 and December 31, 2008		2
Unaudited Condensed Statements of Income for the three and six months ended June 30, 2009 and 2008		3
Unaudited Condensed Statements of Cash Flows for the six months ended June 30, 2009 and 2008		4
Unaudited Notes to the Condensed Financial Statements		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 3. Quantitative and Qualitative Disclosures About Market Risk		16
Item 4. Controls and Procedures		16
Item 4T. Controls and Procedures		16
PART II — OTHER INFORMATION		17
Item 1. Legal Proceedings		17
Item 1A. Risk Factors		17
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		17
Item 3. Defaults Upon Senior Securities		17
Item 4. Submissions of Matters to a Vote of Security Holders		17
Item 5. Other Information		17
Item 6. Exhibits		17
EX-31.1
EX-31.2
EX-32

PART I — FINANCIAL INFORMATION

Item 1.Financial Statements

Presented herein are Cronos Global Income Fund XVI, L.P.’s (the “Partnership”) condensed balance sheets as of June 30, 2009 and December 31, 2008, condensed statements of income for the three and six months ended June 30, 2009 and 2008, and condensed statements of cash flows for the six months ended June 30, 2009 and 2008 (collectively the “Financial Statements”), prepared by the Partnership without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Partnership believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these Financial Statements be read in conjunction with the financial statements and the notes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2008. These Financial Statements reflect, in the opinion of the Partnership and Cronos Capital Corp., the general partner, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the results for the interim periods. The statements of income for such interim periods are not necessarily indicative of the results for the full year.

The information in this Quarterly Report on Form 10-Q contains certain “forward-looking statements” within the meaning of the securities laws. These forward-looking statements reflect the current view of the Partnership with respect to future events and financial performance and are subject to a number of risks and uncertainties, many of which are beyond the Partnership’s control. All statements, other than statements of historical fact included in this report, including the statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” regarding the Partnership’s strategy, future operations, financial position, estimated revenues, projected costs, prospects, plans and objectives of the Partnership are forward-looking statements. When used in this report, the words “would”, “believe”, “anticipate”, “intend”, “estimate”, “expect”, “project”, and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. All forward-looking statements speak only as of the date of this report. The Partnership does not undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Although the Partnership believes that its plans, intentions and expectations reflected in or suggested by the forward-looking statements made in this report are reasonable, the Partnership can give no assurance that these plans, intentions or expectations will be achieved. Future economic and industry trends that could potentially impact revenues and profitability are difficult to predict.

1

CRONOS GLOBAL INCOME FUND XVI, L.P.

Condensed Balance Sheets

(Unaudited)

	June 30,			December 31,
	2009			2008
Assets
Current assets:
Cash	$	748,624		$	886,181
Net lease receivables due from Leasing Agent		270,402			396,009
Direct finance lease receivable, due from Leasing Agent within one year, net		23,515			22,382
Total current assets		1,042,541			1,304,572
Direct finance lease receivable, due from Leasing Agent after one year, net		37,767			21,091
Container rental equipment, at cost		15,973,569			18,016,216
Less accumulated depreciation		(11,465,013	)		(12,517,613	)
Net container rental equipment		4,508,556			5,498,603
Total assets	$	5,588,864		$	6,824,266
Partners’ Capital
Partners’ capital:
General partner		467			607
Limited partners		5,588,397			6,823,659
Total partners’ capital	$	5,588,864		$	6,824,266

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

2

CRONOS GLOBAL INCOME FUND XVI, L.P.

Condensed Statements of Operations

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2009			2008			2009			2008
Net lease revenue from Leasing Agent	$	228,620		$	370,093		$	523,384		$	814,203
Other operating (expenses) income:
Depreciation		(247,771	)		(340,984	)		(505,485	)		(674,087	)
Other general and administrative expenses		(27,467	)		(39,091	)		(53,309	)		(77,166	)
Net gain on disposal of equipment		38,136			30,667			87,636			41,845
		(237,102	)		(349,408	)		(471,158	)		(709,408	)
(Loss) income from operations		(8,482	)		20,685			52,226			104,795
Other income:
Interest income		—			1,103			—			4,137
Net (loss) income	$	(8,482	)	$	21,788		$	52,226		$	108,932
Allocation of net (loss) income:
General partner	$	19,454		$	41,947		$	41,080		$	70,834
Limited partners		(27,936	)		(20,159	)		11,146			38,098
	$	(8,482	)	$	21,788		$	52,226		$	108,932
Limited partners’ per unit share of net (loss) income	$	(0.02	)	$	(0.01	)	$	0.01		$	0.02

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

3

CRONOS GLOBAL INCOME FUND XVI, L.P.

Condensed Statements of Cash Flows

(Unaudited)

	Six Months Ended
	June 30,			June 30,
	2009			2008
Net cash provided by operating activities	$	528,935		$	806,519
Cash flows from investing activities:
Proceeds from sale of container rental equipment		621,135			576,799
Cash flows from financing activities:
Distributions to general partner		(41,220	)		(46,190	)
Distributions to limited partners		(1,246,407	)		(1,233,077	)
Net cash used in financing activities		(1,287,627	)		(1,279,267	)
Net (decrease) increase in cash		(137,557	)		104,051
Cash at the beginning of the period		886,181			831,160
Cash at the end of the period	$	748,624		$	935,211

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

4

CRONOS GLOBAL INCOME FUND XVI, L.P.

Notes to Unaudited Condensed Financial Statements

(1) Summary of Significant Accounting Policies

(a)	Nature of Operations
	Cronos Global Income Fund XVI, L.P. (the “Partnership”) is a limited partnership that was organized under the laws of the State of California on September 1, 1995, for the purpose of owning and leasing dry and specialized marine cargo containers to ocean carriers. The Partnership commenced operations on March 29, 1996, when the minimum subscription proceeds of $2,000,000 were received from over 100 subscribers (excluding from such count, Pennsylvania residents, Cronos Capital Corp. (“CCC”), the general partner, and all affiliates of CCC). On February 3, 1997, CCC suspended the offer and sale of units in the Partnership. The offering terminated on December 27, 1997, at which time 1,599,667 limited partnership units had been sold.
	CCC and its affiliate, Cronos Containers Limited (the “Leasing Agent”), manage the business of the Partnership. CCC and the Leasing Agent also manage the container leasing business for other partnerships affiliated with CCC.
	In April 2009, the Partnership commenced its 14th year of operations and continued its liquidation phase, wherein CCC focuses its attention on the retirement of the remaining equipment in the Partnership’s container fleet. At June 30, 2009, approximately 63% of the original equipment remained in the Partnership’s fleet. CCC will take several factors into consideration when examining options for the timing of the disposal of the containers. These factors include the level of gross lease revenue generated by the diminishing fleet, the level of costs relative to this revenue, projected disposal proceeds on the disposition of the Partnership’s containers, overall market conditions and any foreseeable changes in other general and administrative expenses.
	The Partnership’s operations are subject to economic, political and business risks inherent in a business environment. The Partnership believes that the profitability of, and risks associated with, leases to foreign customers is generally the same as those of domestic customers. The Partnership’s leases generally require all payments to be made in United States dollars.
(b)	Leasing Agent
	The Partnership and the Leasing Agent have entered into an agreement (the “Leasing Agent Agreement”) whereby the Leasing Agent manages the leasing operations for all equipment owned by the Partnership. In addition to responsibility for leasing and re-leasing the equipment to ocean carriers, the Leasing Agent disposes of the containers at the end of their useful economic life and has full discretion over which ocean carriers and suppliers of goods and services it may deal with. The Leasing Agent Agreement permits the Leasing Agent to use the containers owned by the Partnership, together with other containers owned or managed by the Leasing Agent and its affiliates, as part of a single fleet operated without regard to ownership. The Leasing Agent Agreement generally provides that the Leasing Agent will make payments to the Partnership based upon rentals collected from ocean carriers after deducting direct operating expenses and management fees due both to CCC and the Leasing Agent.
	The Leasing Agent leases containers to ocean carriers, generally under operating leases which are either master leases or term leases (mostly one to five years) and periodically under direct finance leases.

(Continued)

5

CRONOS GLOBAL INCOME FUND XVI, L.P.

Notes to Unaudited Condensed Financial Statements

	Master leases do not specify the exact number of containers to be leased or the term that each container will remain on hire but allow the ocean carrier to pick up and drop off containers at various locations. Rentals are charged and recognized based upon the number of containers used and the applicable per-diem rate. Accordingly, rentals under master leases are variable and contingent upon the number of containers used.
	Term leases are for a fixed quantity of containers for a fixed period of time, typically varying from three to five years. In most cases, containers cannot be returned prior to the expiration of the lease. Term lease agreements may contain early termination penalties that apply in the event of early redelivery. Term leases provide greater revenue stability to the lessor, usually at lower lease rates than master leases. Ocean carriers use term leases to lower their operating costs when they have a need for an identified number of containers for a specified term. Rentals under term leases are charged and recognized based upon the number of containers leased, the applicable per-diem rate and the length of the lease, irrespective of the number of days which the customer actually uses the containers.
	Direct finance leases are long-term in nature, usually ranging from three to seven years, and require relatively low levels of customer service. They ordinarily require fixed payments over a defined period and provide customers with an option to purchase the subject containers at the end of the lease term. Per-diem rates include an element of repayment of capital and therefore are usually higher than rates charged under either term or master leases.
(c)	Basis of Presentation
	The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required US GAAP for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2009. For further information, refer to the financial statements and footnotes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2008.
(d)	Use of Estimates in Interim Financial Statements
	The preparation of interim financial statements, in conformity with US GAAP and the Securities and Exchange Commission (“SEC”) regulations for interim reporting, requires the Partnership 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 reported period. The most significant estimates are those relating to the carrying value of equipment, including estimates relating to depreciable lives, residual values and asset impairments, and those relating to the allowance for doubtful accounts. Actual results could differ from those estimates.

(Continued)

6

CRONOS GLOBAL INCOME FUND XVI, L.P.

Notes to Unaudited Condensed Financial Statements

(e)	Container Rental Equipment
	Container rental equipment is depreciated over a 15-year life using the straight-line basis to its residual value of 10% of original equipment cost. CCC evaluates the period of depreciation and residual values to determine whether subsequent events and circumstances warrant revised estimates of useful lives.
	In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” container rental equipment is considered to be impaired if the carrying value of the asset exceeds the expected future cash flows from related operations (undiscounted and without interest charges). If impairment is deemed to exist, the assets are written down to fair value. An analysis of projected future cash flows from container rental equipment operations is prepared annually, or upon material changes in market conditions. Indicators of a potential impairment include a sustained decrease in utilization or operating profitability, or indications of technological obsolescence. The primary variables utilized in the analysis are current and projected utilization rates, per-diem rental rates, direct operating expenses, fleet size, container disposal proceeds and the timing of container disposals. Additionally, the Partnership evaluates future cash flows and potential impairment for its entire container fleet rather than for container type or each individual container. As a result, future losses could result for individual container dispositions due to various factors, including age, condition, suitability for continued leasing, as well as the geographical location of containers when disposed. There were no impairment charges recorded against the carrying value of container rental equipment for the six-month periods ended June 30, 2009 and 2008.
(f)	Allocation of Net Income or Loss, Partnership Distributions and Partners’ Capital
	Net income or loss has been allocated between the general and limited partners in accordance with the Partnership Agreement. The Partnership Agreement generally provides that CCC shall at all times maintain at least a 1% interest in each item of income or loss, including the gain arising from the sale of containers. The Partnership Agreement further provides that the gain arising from the sale of containers be allocated first to the partners with capital account deficit balances in an amount sufficient to eliminate any deficit capital account balance. Thereafter, the Partnership’s gains arising from the sale of containers are allocated to the partners in accordance with their share of sale proceeds distributed. The Partnership Agreement also provides for income (excluding the gain arising from the sale of containers) for any period, be allocated to CCC in an amount equal to that portion of CCC’s distributions in excess of 1% of the total distributions made to both CCC and the limited partners of the Partnership for such period, as well as other allocation adjustments.
	Actual cash distributions differ from the allocations of net income or loss between the general and limited partners as presented in these financial statements. Partnership distributions are paid to its partners (general and limited) from distributable cash from operations, allocated 95% to the limited partners and 5% to CCC. Distributions of sales proceeds are allocated 99% to the limited partners and 1% to CCC. The allocations remain in effect until such time as the limited partners have received from the Partnership aggregate distributions in an amount equal to their capital contributions plus an 8% cumulative, compounded (daily), annual return on their adjusted capital contributions. Thereafter, all Partnership distributions will be allocated 85% to the limited partners and 15% to CCC. Cash distributions from operations to CCC in excess of 5% of distributable cash will be considered an incentive fee and will be recorded as compensation to CCC, with the remaining distributions from operations charged to partners’ capital.

(Continued)

7

CRONOS GLOBAL INCOME FUND XVI, L.P.

Notes to Unaudited Condensed Financial Statements

Upon dissolution, the assets of the Partnership will be sold and the proceeds thereof distributed as follows: (i) all of the Partnership’s debts and liabilities to persons other than CCC or the limited partners shall be paid and discharged; (ii) all of the Partnership’s debts and liabilities to CCC and the limited partners shall be paid and discharged; and (iii) the balance of such proceeds shall be distributed to CCC and the limited partners in accordance with the positive balances of CCC and the limited partners’ capital accounts. CCC shall contribute to the Partnership an amount equal to the lesser of the deficit balance in its capital account at the time of such liquidation, or 1.01% of the excess of the Limited Partners’ capital contribution to the Partnership over the capital contributions previously made to the Partnership by CCC, after giving effect to the allocation of income or loss arising from the liquidation of the Partnership’s assets.

(2)	Net Lease Receivables Due from Leasing Agent
	Net lease receivables due from Leasing Agent at June 30, 2009 and December 31, 2008 comprised:

	June 30,		December 31,
	2009		2008
Gross lease receivables	$	496,643	$	607,309
Less:
Direct operating expenses payable		158,333		131,180
Base management fees payable		21,928		30,874
Reimbursed administrative expenses payable		6,548		6,421
Allowance for doubtful accounts		39,432		42,825
Net lease receivables due from Leasing Agent	$	270,402	$	396,009

Included within the amount of gross lease receivables are $101,674 and $183,061 in respect of amounts owed by the Leasing Agent in relation to the disposal of containers for the six months ended June 30, 2009, and the year ended December 31, 2008, respectively.

(Continued)

8

CRONOS GLOBAL INCOME FUND XVI, L.P.

Notes to Unaudited Condensed Financial Statements

(3)	Net Lease Revenue
	Net lease revenue for the three and six-month periods ended June 30, 2009 and 2008 comprised:

	Three Months Ended					Six Months Ended
	June 30,		June 30,			June 30,		June 30,
	2009		2008			2009		2008
Gross lease revenue	$	378,207	$	550,827		$	833,494	$	1,134,531
Interest income (loss) from direct finance lease		2,705		(5,540	)		5,182		(5,540	)
Less:
Direct operating expenses		105,079		108,113			216,642		179,987
Base management fees		26,472		37,484			57,616		77,682
Reimbursed administrative expenses
Salaries		15,899		22,750			30,785		43,275
Other payroll related expenses		1,310		2,234			3,065		4,753
General and administrative expenses		3,532		4,613			7,184		9,091
		152,292		175,194			315,292		314,788
Net lease revenue	$	228,620	$	370,093		$	523,384	$	814,203

(4)	Operating Segment
	An operating segment is a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the enterprise’s chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance, and about which separate financial information is available. CCC and the Leasing Agent operate the Partnership’s container fleet as a homogenous unit and have determined that as such, it has a single reportable operating segment.
	A summary of gross lease revenue earned by each Partnership container type for the periods ended June 30, 2009 and 2008 follows:

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2009		2008		2009		2008
Dry cargo containers	$	288,667	$	420,345	$	643,271	$	847,441
Refrigerated containers		51,518		83,483		113,483		200,518
Tank containers		38,022		46,999		76,740		86,572
Total	$	378,207	$	550,827	$	833,494	$	1,134,531

Due to the Partnership’s lack of information regarding the physical location of its fleet of containers when on lease in the global shipping trade, the Partnership believes that it does not possess discernible geographic reporting segments as defined in SFAS No. 131 “Disclosures about Segments of an Enterprise and Related Information”.

(Continued)

9

CRONOS GLOBAL INCOME FUND XVI, L.P.

Notes to Unaudited Condensed Financial Statements

(5)	Limited Partners’ Capital
	Cash distributions made to the limited partners for the six-month periods ended June 30, 2009 and 2008 were as follows:

	Six Months Ended
	June 30,		June 30,
	2009		2008
Cash Distribution from Operations	$	673,192	$	793,168
Cash Distribution from Sales Proceeds		573,215		439,909
Total Cash Distributions	$	1,246,407	$	1,233,077

These distributions are used in determining “Adjusted Capital Contributions” as defined by the Partnership Agreement.

The limited partners’ per unit share of capital at June 30, 2009, and December 31, 2008, was $3.49 and $4.27, respectively. This is calculated by dividing the limited partners’ capital at the end of June 30, 2009, and December 31, 2008, by 1,599,667, the total number of outstanding limited partnership units.

10

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The following discussion of the Partnership’s historical financial condition and results of operations should be read in conjunction with the Partnership’s December 31, 2008, Annual Report on Form 10-K and the financial statements and the notes thereto appearing elsewhere in this report.

Results of Operations

Partnership Overview

     Pursuant to the Limited Partnership Agreement of the Partnership, all authority to administer the business of the Partnership is vested with CCC. A Leasing Agent Agreement exists between the Partnership and the Leasing Agent, whereby the Partnership contracted with the Leasing Agent to manage the leasing operations for all equipment owned by the Partnership. In addition to responsibility for leasing and re-leasing the equipment to ocean carriers, the Leasing Agent disposes of the containers at the end of their useful economic life. The Leasing Agent has full discretion over which ocean carriers and suppliers of goods and services it may deal with. The Leasing Agent Agreement permits the Leasing Agent to use the containers owned by the Partnership, together with other containers owned or managed by the Leasing Agent and its affiliates, as part of a single fleet operated without regard to ownership.

     All of the revenue generated by the Partnership comes from the leasing and sale of marine dry cargo, refrigerated and tank containers. The primary component of the Partnership’s results of operations is net lease revenue. Net lease revenue is determined by deducting direct operating expenses, management fees and reimbursed administrative expenses from the gross lease revenues that are generated from the leasing of the Partnership’s containers. Gross lease revenue is directly related to the size, utilization and per-diem rental rates of the Partnership’s fleet. Direct operating expenses are direct costs associated with the Partnership’s containers and may be categorized as follows:

• Activity-related expenses, including agent costs and depot costs such as repairs, maintenance and handling;

• Inventory-related expenses for off-hire containers, comprising storage and repositioning costs. These costs are sensitive to the quantity of off-hire containers as well as the frequency at which containers are re-delivered and the frequency and size of repositioning moves undertaken; and

• Legal and other expenses, including legal costs related to the recovery of containers and doubtful accounts, insurance and provisions for doubtful accounts.

     The following table summarizes the composition of the Partnership’s operating lease fleet based on container type (measured in twenty foot equivalent unit) at June 30, 2009:

	Dry Cargo		Refrigerated			Tank
	Containers		Containers			Containers		Total
Container on lease:
Master lease		4,264		90			19		4,373
Term lease
Short term1		338		2			11		351
Long term2		1,139		37			12		1,188
		1,477		39			23		1,539
Subtotal		5,741		129			42		5,912
Containers off-hire		1,467		20			9		1,496
Total container fleet		7,208		149			51		7,408
					��

1.	Short term leases represent term leases that are either scheduled for renegotiation or that may expire on or before June 2010.
2.	Long term leases represent term leases, the majority of which will expire between July 2010 and December 2021.

11

     At June 30, 2009, approximately 63% of the original equipment remained in the Partnership’s operating fleet, compared to approximately 65% at December 31, 2008. The following table details the proportion of the operating lease fleet remaining by product type (measured in twenty equivalent unit (TEU)):

	Dry Cargo					Refrigerated					Tank
	Containers					Containers					Containers					Total
	TEU		%			TEU		%			TEU		%			TEU		%
Total purchases		11,053		100	%		690		100	%		52		100	%		11,795		100	%
Less disposals		3,845		35	%		541		78	%		1		2	%		4,387		37	%
Remaining fleet at June 30, 2009		7,208		65	%		149		22	%		51		98	%		7,408		63	%

Market & Industry Overview

     The overall operating environment for shipping lines and other customers showed little or no signs of improvement in the first half of 2009, and in some cases deteriorated. The growth rate for containerized trade has declined or become negative on certain trade routes as a result of the global economic and financial crisis that has impacted almost all major economies.

     Shipping lines are experiencing declining revenues as trade volumes have fallen, and are facing increased costs, credit restrictions and surplus container and containership capacity. Credit market constraints may have an impact on the ability of shipping lines to fund existing contractual commitments for new ship building and other capital programs. In addition, existing financial facilities may become increasingly difficult to refinance as they fall due and it is likely that, on renewal, the cost of such facilities will increase, therefore, creating liquidity concerns.

     For container leasing companies, a reduction or decline in the growth rate for containerized trade will usually result in surplus container capacity, declining utilization rates, downward pressure on existing lease rates, higher levels of direct operating expenses as activity and inventory related costs increase and increased risk of customer default.

     Utilization declined by 3% over the course of the second quarter as surplus containers were redelivered by customers. The level of direct operating expenses increased in line with the resulting change in inventories of off- hire containers.

     The sale of containers at the end of their useful economic life has had a strong positive effect on the Partnership’s income from operations. In recent years, strong containerized trade volumes resulted in only a limited supply of containers available for sale into secondary markets, contributing to sale prices reaching historically high levels. This situation has changed in the second quarter of 2009, resulting in an increase in the supply of containers available for sale to secondary markets and a reduction in container sales prices toward longer-term average historical levels. The average proceeds realized on the disposal of dry cargo containers in the first half of 2009 were approximately 16% lower than for the corresponding period in 2008. Future disposal volumes and the level of proceeds realized on the disposition of such containers will depend on a variety of factors including the location of the container at the time of disposition, foreign currency exchange rates, the lease market for marine cargo containers, the cost of new containers and the quantity of used containers supplied to the secondary market.

12

     The Partnership’s average fleet size and utilization rates for the six-month periods ended June 30, 2009 and 2008 were as follows:

	Six Months Ended
	June 30,			June 30,
	2009			2008
Fleet size (measured in twenty foot equivalent units)
Dry cargo containers		7,484			8,371
Refrigerated containers		187			356
Tank containers		51			51
Utilization rates for combined fleet
Average for the period		84	%		92	%
Position at end of period		80	%		94	%

Three Months Ended June 30, 2009 Compared to the Three Months Ended June 30, 2008

Overview

     Net lossfor the three months ended June 30, 2009, was $8,482, a decrease of $30,270, or 139%, when compared to net income of $21,788 in the corresponding period in the prior year. The primary changes between the two periods included the impact of:

• a 15% reduction in the size of the container fleet as equipment that was redelivered by customers was sold;

• a decline in the levels of net lease revenues, resulting from the combined effect of a reduction in the size of the fleet, lower utilization and lease per-diem levels; and

• a decrease in depreciation expense as a result of the declining fleet size.

Analysis and discussion

     Net lease revenue was$141,473, or 38%, lower in the second quarter of 2009 than the corresponding period in 2008. The decline was primarily due to a $172,620 decrease in gross lease revenue (a component of net lease revenue), of which approximately 52% was attributable to a reduction in the size of the Partnership’s fleet size and 48% was attributable to the combined effect of lower utilization rates and lower dry cargo container per-diem rental rates.

     Depreciation expenseof $247,771 was $93,213, or 27%, lower than in the corresponding period in 2008. This was a direct result of the Partnership’s declining fleet size.

     Other general and administrative expenseswere $27,467 for the three-month period ended June 30, 2009, a decrease of $11,624, or 30%, when compared to the same period in 2008. The decrease was attributable to lower fees for audit services and investor administrative services.

     Net gains on disposal of equipmentfor the three months ended June 30, 2009, was $38,136, an increase of $7,469, or 24%, when compared to the corresponding period in 2008. The Partnership disposed of 239 containers, compared to 190 containers during the same three-month period in 2008. The decline in disposal sale price per container was offset by the impact of the higher volume of container units disposed and lower net book value from an additional year of depreciation.

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Six Months Ended June 30, 2009 Compared to the Six Months Ended June 30, 2008

Overview

     Net incomefor the six months ended June 30, 2009, was $52,224, a decrease of $56,708, or 52%, when compared to the corresponding period in the prior year. The primary changes between the two periods included the impact of:

• a 14% reduction in the size of the container fleet as equipment that was redelivered by customers was sold;

• a decline in the levels of net lease revenues, resulting from the combined effect of a reduction in the size of the fleet, lower utilization, lease per-diem levels and increased direct operating expenses; and

• a decrease in depreciation expense as a result of the declining fleet size.

Analysis and discussion

     Net lease revenuewas $290,819, or 36%, lower in the second quarter of 2009 than the corresponding period. The decline was primarily due to a $301,037 decrease in gross lease revenue (a component of net lease revenue), of which approximately 52% was attributable to reduction in the size of the Partnership’s fleet size and 48% was attributable to the combined effect of lower utilization rates and lower dry cargo container per-diem rental rates.

     Depreciation expenseof $505,485 was $168,602, or 25%, lower than in the corresponding period in 2008. This was a direct result of the Partnership’s declining fleet size.

     Other general and administrative expenseswere $53,309 for the six-month period ended June 30, 2009, a decrease of $23,857, or 31%, when compared to the same period in 2008. The decrease was attributable to lower fees for audit services and third-party investor administrative services.

     Net gains on disposal of equipmentfor the six months ended June 30, 2009, was $87,636, an increase of $45,791, or 109%, when compared to the corresponding period in 2008. The Partnership disposed of 421 containers, compared to 329 containers during the same six-month period in 2008. The increase in the net gain was due to the higher volume of container units disposed, offset by the decline in the lower average proceeds per container unit.

Liquidity and Capital Resources

     During the Partnership’s first ten years of operations, the Partnership’s primary objective was to generate cash flow from operations for distribution to its limited partners. The Partnership relies primarily on container rental receipts to meet this objective. Cash generated from container sales proceeds are distributed to the partners. No credit lines are maintained to finance working capital. Commencing in April 2007, the Partnership entered its liquidation phase, wherein CCC began to focus its attention on the retirement of the remaining equipment in the Partnership’s container fleet, in accordance with another of its original investment objectives, realizing the residual value of its containers after the expiration of their economic useful lives, estimated to be 15 years after placement in leased service.

     In April 2009, the Partnership commenced its 14th year of operations and continued its liquidation phase. CCC will take several factors into consideration when examining options for the timing of the disposal of the containers. These factors include the level of gross lease revenue generated by the diminishing fleet, the level of costs relative to this revenue, projected disposal proceeds on the disposition of the Partnership’s containers, overall market conditions and any foreseeable changes in other general and administrative expenses. Upon the liquidation of CCC’s interest in the Partnership, CCC shall contribute to the Partnership, if necessary, an amount equal to the lesser of the deficit balance in its capital account at the time of such liquidation, or 1.01% of the excess of the limited partners’ capital contributions to the Partnership over the capital contributions previously made to the Partnership by CCC, after giving effect to the allocation of income or loss arising from the liquidation of the Partnership’s assets.

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Distributions are paid monthly, based primarily on each quarter’s cash flow from operations. Monthly distributions are also affected by periodic increases or decreases to working capital reserves, as deemed appropriate by CCC. Cash distributions from operations are allocated 5% to CCC and 95% to the limited partners. Distributions of sales proceeds are allocated 1% to CCC and 99% to the limited partners. This sharing arrangement will remain in place until the limited partners have received aggregate distributions in an amount equal to their capital contributions plus an 8% cumulative, compounded (daily) annual return on their adjusted capital contributions. Thereafter, all distributions will be allocated 15% to CCC and 85% to the limited partners, pursuant to Section 6.1(b) of the Partnership’s Partnership Agreement.

     At June 30, 2009, the Partnership had $748,624 in cash, a decrease of $137,557 from cash balances at December 31, 2008. As of June 30, 2009, the Partnership held its cash on deposit in an operating bank account. The Partnership will review its investment strategy for cash balances on a periodic basis but for the immediate future it will hold all available balances on deposit in operating bank accounts.

     Cash from Operating Activities: Net cash provided by operating activities, primarily generated by net lease revenue receipts, was $528,935 during the six months ended June 30, 2009, compared to $806,519 for the same six-month period in 2008.

     Cash from Investing Activities: Net cash provided by investing activities was $621,135 during the six months ended June 30, 2009, compared to $576,799 in the corresponding period of 2008. These amounts represent sales proceeds generated from the sale of container rental equipment.

     Cash from Financing Activities: Net cash used in financing activities was $1,287,627 during the six months ended June 30, 2009, compared to $1,279,267 during the six months ended June 30, 2008. These amounts represent distributions to the Partnership’s general and limited partners. The Partnership’s continuing container disposals should produce lower operating results, and consequently, lower distributions to its partners in subsequent periods.

Critical Accounting Policies

     The Partnership’s accounting policies are fundamental to understanding management’s discussion and analysis of results of operations and financial condition. The Partnership has identified three significant policies that require the Partnership to make subjective and / or complex judgments about matters that are inherently uncertain. These policies include the following:

• Container equipment — depreciable lives and residual values.

• Container equipment — recoverability and valuation in accordance with SFAS 144 “Accounting for the Impairment or Disposal of Long Lived Assets”.

• Allowance for doubtful accounts.

     The Partnership, in consultation with its audit committee, has reviewed and approved these significant accounting policies which are further described in the Partnership’s 2008 Annual Report on Form 10-K.

Inflation

     The Partnership believes inflation has not had a material adverse effect on the results of its operations.

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Item 3.Quantitative and Qualitative Disclosures About Market Risk

     Exchange rate risk: Substantially all of the Partnership’s revenues are billed and paid in US dollars and a significant portion of costs are billed and paid in US dollars. Of the non-US dollar direct operating expenses, the majority are individually small, unpredictable and incurred in various denominations. Thus, the Leasing Agent has determined such amounts are not suitable for cost effective hedging. As exchange rates are outside of the control of the Partnership and Leasing Agent, there can be no assurance that such fluctuations will not adversely affect the Partnership’s results of operations and financial condition. The Partnership believes it does not have significant exposure to other forms of market risk.

     Credit risk: The Leasing Agent sets maximum credit limits for all of the Partnership’s customers, limiting the number of containers leased to each according to established credit criteria. The Leasing Agent continually tracks its credit exposure to each customer. The Leasing Agent’s credit committee meets quarterly to analyze the performance of the Partnership’s customers and to recommend actions to be taken in order to minimize credit risks. The Leasing Agent uses specialist third party credit information services and reports prepared by local staff to assess credit quality.

Item 4.Controls and Procedures

     See Item 4T.

Item 4T.Controls and Procedures

     The principal executive and principal financial officers of CCC have evaluated the disclosure controls and procedures of the Partnership as of the end of the period covered by this report. Based upon their evaluation, the principal executive and principal financial officers of CCC have concluded that the Partnership’s disclosure controls and procedures were effective.

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PART II — OTHER INFORMATION

Item 1.Legal Proceedings

Not applicable.

Item 1A.Risk Factors

There are no material changes from the risk factors as disclosed under Item 1A of Part I in the Partnership’s December 31, 2008 report on Form 10-K.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3.Defaults Upon Senior Securities

Not applicable.

Item 4.Submissions of Matters to a Vote of Security Holders

Not applicable.

Item 5.Other Information

Not applicable.

Item 6.Exhibits

(a) Exhibits

Exhibit
No.	Description	Method of Filing
3(a)	Limited Partnership Agreement, amended and restated as of December 28, 1995	*
3(b)	Certificate of Limited Partnership	**
10	Form of Leasing Agent Agreement with Cronos Containers Limited	***
31.1	Rule 13a-14 Certification	Filed with this document
31.2	Rule 13a-14 Certification	Filed with this document
32	Section 1350 Certification	Filed with this document ****

*	Incorporated by reference to Exhibit “A” to the Prospectus of the Partnership dated December 28, 1995, included as part of Registration Statement on Form S-1 (No. 33-98290)
**	Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (No. 33-98290)
***	Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 (No. 33-98290)
****	This certification, required by Section 906 of the Sarbanes-Oxley Act of 2002, other than as required by Section 906, is not to be deemed “filed” with the Commission or subject to the rules and regulations promulgated by the Commission under the Securities Exchange Act of 1934, as amended, or to the liabilities of Section 18 of said Act.

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SIGNATURES

          Pursuant to the requirements of the Securities Exchange Act of 1934, the Partnership has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.

CRONOS GLOBAL INCOME FUND XVI, L.P.
By	Cronos Capital Corp. The General Partner
By	/s/ Dennis J. Tietz
	Dennis J. Tietz
	President and Director of Cronos Capital Corp. (“CCC”) Principal Executive Officer of CCC
By	/s/ Frank P. Vaughan
	Frank P. Vaughan
	Chief Financial Officer and Director of Cronos Capital Corp. (“CCC”) Principal Financial and Accounting Officer of CCC

Date: August 11, 2009

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EXHIBIT INDEX

Exhibit
No.	Description	Method of Filing
3(a)	Limited Partnership Agreement, amended and restated as of December 28, 1995	*
3(b)	Certificate of Limited Partnership	**
10	Form of Leasing Agent Agreement with Cronos Containers Limited	***
31.1	Rule 13a-14 Certification	Filed with this document
31.2	Rule 13a-14 Certification	Filed with this document
32	Section 1350 Certification	Filed with this document ****

*	Incorporated by reference to Exhibit “A” to the Prospectus of the Partnership dated December 28, 1995, included as part of Registration Statement on Form S-1 (No. 33-98290)
**	Incorporated by reference to Exhibit 3.2 to the Registration Statement on Form S-1 (No. 33-98290)
***	Incorporated by reference to Exhibit 10.2 to the Registration Statement on Form S-1 (No. 33-98290)
****	This certification, required by Section 906 of the Sarbanes-Oxley Act of 2002, other than as required by Section 906, is not deemed to be “filed” with the Commission or subject to the rules and regulations promulgated by the Commission under the Securities Exchange Act of 1934, as amended, or to the liabilities of Section 18 of said Act.