Cronos Global Income Fund Xvi 10-Q 2008 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, 2008

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. Yesþ Noo

     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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

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

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yeso Noþ

CRONOS GLOBAL INCOME FUND XVI, L.P.

Report on Form 10-Q for the Quarterly Period
Ended June 30, 2008

TABLE OF CONTENTS

	PAGE
PART I — FINANCIAL INFORMATION		1
Item 1. Financial Statements		1
Unaudited Condensed Balance Sheets – June 30, 2008 and December 31, 2007		2
Unaudited Condensed Statements of Income for the three and six months ended June 30, 2008 and 2007		3
Unaudited Condensed Statements of Cash Flows for the six months ended June 30, 2008 and 2007		4
Unaudited Notes to the Condensed Financial Statements		5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		12
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 Securities Holders		17
Item 5. Other Information		17
Item 6. Exhibits		17
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 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, 2008 and December 31, 2007, condensed statements of income for the three and six months ended June 30, 2008 and 2007, and condensed statements of cash flows for the six months ended June 30, 2008 and 2007, (collectively the “Financial Statements”) prepared by the Partnership without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). 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 should be read in conjunction with the financial statements and the notes thereto included in the Partnership’s December 31, 2007 Annual Report on Form 10-K. These Financial Statements reflect, in the opinion of the Partnership and Cronos Capital Corp. (“CCC”), 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 facts 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,
	2008			2007
Assets
Current assets:
Cash and cash equivalents, includes $920,211 at June 30, 2008 and $816,160 at December 31, 2007 in interest-bearing accounts	$	935,211		$	831,160
Net lease receivables due from Leasing Agent		392,847			390,560
Direct finance lease receivables, due from Leasing Agent within one year, net		12,735			—
Total current assets		1,340,793			1,221,720
Direct finance lease receivables, due from Leasing Agent after one year, net		8,090			—
Container rental equipment, at cost		20,403,504			22,530,005
Less accumulated depreciation		(13,704,677	)		(14,533,680	)
Net container rental equipment		6,698,827			7,996,325
Total assets	$	8,047,710		$	9,218,045
Partners’ capital
Partners’ capital (deficit):
General partner	$	48		$	(24,596	)
Limited partners		8,047,662			9,242,641
Total partners’ capital	$	8,047,710		$	9,218,045

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

2

CRONOS GLOBAL INCOME FUND XVI, L.P.

Condensed Statements of Income

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2008			2007			2008			2007
Net lease revenue from Leasing Agent	$	370,093		$	436,618		$	814,203		$	886,178
Other operating income (expenses):
Depreciation		(340,984	)		(377,445	)		(674,087	)		(770,172	)
Other general and administrative expenses		(39,091	)		(34,499	)		(77,166	)		(61,770	)
Net gain on disposal of equipment		30,667			28,500			41,845			33,632
		(349,408	)		(383,444	)		(709,408	)		(798,310	)
Income from operations		20,685			53,174			104,795			87,868
Other income:
Interest income		1,103			10,563			4,137			23,933
Net income	$	21,788		$	63,737		$	108,932		$	111,801
Allocation of net income (loss):
General partner	$	41,947		$	49,134		$	70,834		$	75,255
Limited partners		(20,159	)		14,603			38,098			36,546
	$	21,788		$	63,737		$	108,932		$	111,801
Limited partners’ per unit share of net (loss) income	$	(0.01	)	$	0.01		$	0.02		$	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,
	2008			2007
Net cash provided by operating activities	$	806,519		$	913,830
Cash flows from investing activities:
Proceeds from sale of container rental equipment		576,799			484,076
Cash flows from financing activities:
Distributions to general partner		(46,190	)		(59,310	)
Distributions to limited partners		(1,233,077	)		(1,746,304	)
Net cash used in financing activities		(1,279,267	)		(1,805,614	)
Net increase (decrease) in cash and cash equivalents		104,051			(407,708	)
Cash and cash equivalents at the beginning of the period		831,160			1,203,374
Cash and cash equivalents at the end of the period	$	935,211		$	795,666

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, CCC, 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. The Partnership shall continue until December 31, 2015, unless terminated sooner upon the occurrence of certain events.
	Cronos Capital Corp. (“CCC”), the general partner 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 2008, the Partnership commenced its 13th year of operations 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, 2008, approximately 71% 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 impact of a diminishing fleet size and current market conditions on the level of gross lease revenue generated, and the level of operating costs relative to this revenue. CCC will also consider the impact of a projected increase in expenses associated with the introduction of the additional reporting and compliance requirements of Section 404 of the Sarbanes Oxley Act of 2002. These additional costs, depending on their materiality, may reduce the Partnership’s results from operations and therefore negatively affect future distributions to the Limited Partners. The Partnership is required to be in compliance with Section 404 for the year ending December 31, 2008, however, the SEC has extended the requirement for auditor attestation compliance to fiscal years ending on or after December 15, 2009.
	The Partnership’s operations are subject to the fluctuations of world economic and political conditions. 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.

(Continued)

5

CRONOS GLOBAL INCOME FUND XVI, L.P.

Notes to Unaudited Condensed Financial Statements

(1) Summary of Significant Accounting Policies (continued)

(b)	Leasing Agent and Leasing Agent Agreement (continued)
	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. 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, and 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 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 by accounting principles generally accepted in the United States of America 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, 2008. 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, 2007.
(d)	Use of Estimates in interim financial statements
	The preparation of interim financial statements, in conformity with US GAAP and 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 relate to the carrying value of equipment including estimates relating to depreciable lives, residual values and asset impairments. Actual results could differ from those estimates.

(Continued)

6

CRONOS GLOBAL INCOME FUND XVI, L.P.

Notes to Unaudited Condensed Financial Statements

(1) Summary of Significant Accounting Policies (continued)

(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. Depreciation policies are also evaluated to determine whether subsequent events and circumstances warrant revised estimates of useful lives. Residual values are only revised downwards.
	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. 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 each container type or individual container, and 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, 2008 and 2007.
(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

(1) Summary of Significant Accounting Policies (continued)

(f)	Allocation of Net Income or Loss, Partnership Distributions and Partners’ Capital (continued)
	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.
(g)	Accounting pronouncements adopted during the period
	On February 15, 2007 the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement No. 115” (“SFAS 159”). This standard permits an entity to choose to measure many financial instruments and certain other items at fair value. The unrealized gains and losses on items for which the fair value option has been elected will be reported in earnings at each subsequent reporting date. The fair value option: (a) may be applied instrument by instrument, with a few exceptions, such as investments otherwise accounted for by the equity method; (b) is irrevocable (unless a new election date occurs); and (c) is applied only to entire instruments and not to portions of instruments. On January 1, 2008 the Partnership adopted SFAS 159, however, the Partnership has elected not to use the fair value option for any of its existing financial assets and liabilities and consequently, adoption had no impact.
	In September 2006 the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which provides a single definition of fair value, establishes a framework for the measurement of fair value and expands disclosure about the use of fair value to measure assets and liabilities. SFAS 157 is effective for fiscal years beginning after November 15, 2007, and for interim periods within those fiscal years. In February 2008, the FASB issued FSP 157-2, “Effective Date of FASB Statement No. 157”, which permits a one-year deferral for the implementation of SFAS 157 with regard to non-financial assets and liabilities that are not recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The Partnership elected to defer adoption of SFAS 157 for such items and does not currently anticipate that adoption for non-financial assets and liabilities in 2009 will have a material impact to the financial statements. The Partnership adopted the effective provisions of SFAS 157 as of January 1, 2008. There was no impact to the condensed interim financial statements upon adoption. At June 30, 2008, the Partnership did not have any financial assets or liabilities that were subject to the expanded disclosures regarding fair value measurements, consequently adoption had no disclosure impact.

(Continued)

8

CRONOS GLOBAL INCOME FUND XVI, L.P.

Notes to Unaudited Condensed Financial Statements

(1) Summary of Significant Accounting Policies (continued)

(h)

Accounting pronouncements not yet adopted

In May 2008 the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (“SFAS 162”). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles. SFAS 162 is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Partnership does not believe adoption of SFAS 162 will have an impact on the financial statements.

(2) Net Lease Receivables Due from Leasing Agent

Net lease receivables due from Leasing Agent at June 30, 2008 and December 31, 2007 comprised:

	June 30,		December 31,
	2008		2007
Gross lease receivables	$	629,093	$	599,208
Less:
Direct operating payables and accrued expenses		140,603		115,694
Base management fees payable		31,095		35,913
Reimbursed administrative expenses		10,480		9,622
Allowance for doubtful accounts		54,068		47,419
		236,246		208,648
Net lease receivables due from Leasing Agent	$	392,847	$	390,560

Included within the amount of gross lease receivables are $88,457 and $9,427 in respect of amounts owed by the Leasing Agent in relation to the disposal of containers for the six months ended June 30, 2008 and the year ended December 31, 2007, respectively.

(Continued)

9

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, 2008 and 2007 comprised:

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2008		2007		2008		2007
Gross lease revenue	$	545,287	$	666,093	$	1,128,991	$	1,364,447
Less:
Direct operating expenses		108,113		150,078		179,987		315,441
Base management fees		37,484		46,577		77,682		94,954
Reimbursed administrative expenses
Salaries		22,750		22,648		43,275		45,996
Other payroll related expenses		2,234		3,390		4,753		7,782
General and administrative expenses		4,613		6,782		9,091		14,096
Total reimbursed administrative expenses		29,597		32,820		57,119		67,874
		175,194		229,475		314,788		478,269
Net lease revenue	$	370,093	$	436,618	$	814,203	$	886,178

(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 assess its performance, and about which separate financial information is available. Management operates the Partnership’s container fleet as a homogenous unit and has 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 three and six-month periods ended June 30, 2008 and 2007 follows:

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2008		2007		2008		2007
Dry cargo containers	$	420,345	$	483,989	$	847,440	$	989,636
Refrigerated containers		77,943		143,664		194,979		296,271
Tank containers		46,999		38,440		86,572		78,540
Total	$	545,287	$	666,093	$	1,128,991	$	1,364,447

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” (“SFAS 131”).

(Continued)

10

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, 2008 and 2007 were as follows:

	Six Months Ended
	June 30,		June 30,
	2008		2007
Cash Distribution from Operations	$	793,168	$	979,797
Cash Distribution from Sales Proceeds		439,909		766,507
Total Cash Distributions	$	1,233,077	$	1,746,304

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, 2008 and December 31, 2007 was $5 and $6, respectively. This is calculated by dividing the limited partners’ capital at the end of June 30, 2008 and December 31, 2007 by 1,599,667, the total number of outstanding limited partnership units.

11

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, 2007 Annual Report on Form 10-K and the financial statements and the notes thereto appearing elsewhere in this report.

Results of Operations

Overview

     Pursuant to the Limited Partnership Agreement of the Partnership, all authority to administer the business of the Partnership is vested in CCC. A Leasing Agent Agreement (“the Agreement”) exists between the Partnership and the Leasing Agent, whereby the Leasing Agent is responsible for managing the leasing operations of all equipment owned by the Partnership. Pursuant to the Agreement, the Leasing Agent leases, manages and re-leases the Partnership’s containers to ocean carriers and has full discretion over which ocean carriers and suppliers of goods and services it may deal with. The 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 Partnership derives revenues from dry cargo, refrigerated and tank containers that are used by its customers in global trade routes. As of June 30, 2008, the Partnership operated 3,020 twenty-foot, 995 forty-foot and 1,578 forty-foot high-cube marine dry cargo containers, as well as 52 twenty-foot and 126 forty-foot high-cube refrigerated containers, and 51 twenty-four thousand-liter tanks.

     The following table summarizes the composition of the Partnership’s operating lease fleet (based on container type) at June 30, 2008:

	Dry Cargo						Refrigerated					Tank
	Containers						Containers					Containers
					40-Foot					40-Foot
	20-Foot		40-Foot		High-Cube		20-Foot			High-Cube		24,000-Liter
Containers on lease:									��
Master lease		2,222		741		1,206		26			63		20
Term lease
Short term1		309		79		68		5			5		11
Long term2		372		122		181		7			31		14
		681		201		249		12			36		25
Subtotal		2,903		942		1,455		38			99		45
Containers off lease		117		53		123		14			27		6
Total container fleet		3,020		995		1,578		52			126		51

1.	Short term leases represent term leases that are either scheduled for renegotiation or that may expire on or before June 2009.
2.	Long term leases represent term leases, the majority of which will expire between July 2009 and December 2019.

     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 gross lease revenues generated from the leasing of the Partnership’s containers. Net 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. Direct operating expenses may be categorized as follows:

• Activity-related expenses, including agent 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.

12

     At June 30, 2008, approximately 71% of the original equipment remained in the Partnership’s fleet, compared to approximately 75% at December 31, 2007. The following table details the proportion of the fleet remaining by product:

	Dry Cargo															Refrigerated										Tank
	Containers															Containers										Containers
											40-Foot										40-Foot
	20-Foot					40-Foot					High-Cube					20-Foot					High-Cube					24,000-Liter
	Units		%			Units		%			Units		%			Units		%			Units		%			Units		%
Total purchases		4,553		100	%		1,500		100	%		1,750		100	%		90		100	%		300		100	%		52		100	%
Less disposals		1,533		34	%		505		34	%		172		10	%		38		42	%		174		58	%		1		2	%
Remaining fleet at
June 30, 2008		3,020		66	%		995		66	%		1,578		90	%		52		58	%		126		42	%		51		98	%

     In the course of the last twelve months, the average lease per-diem rate for the combined Partnership fleet declined by 10%. This decline may be attributed to a number of factors:

§	The Leasing Agent extended certain expiring leases at lower rental rates;
§	Off hire containers were placed on leases at rates that, although they resulted in a reduction in the average per-diem rental rates, also significantly lowered inventory levels; and
§	The overall lease market for the Partnership’s older containers continues to be very competitive and, therefore, subject to significant pricing pressures.

     As a result of these changes and other market factors, the average utilization rate for the combined Partnership fleet was 2% higher in the second quarter of 2008 than in the corresponding period of 2007. The level of direct operating expenses declined in line with the reduction in inventories of off hire containers.

     The Partnership’s average fleet size and utilization rates for the six-month periods ended June 30, 2008 and 2007 were as follows:

	Six Months Ended
	June 30,			June 30,
	2008			2007
Fleet size (measured in twenty-foot equivalent units (TEU))
Dry cargo containers		8,371			9,138
Refrigerated containers		356			447
Tank containers		51			51
Average utilization rates
Dry cargo containers		97	%		88	%
Refrigerated containers		80	%		79	%
Tank containers		93	%		95	%

     The sale of the Partnership’s off-hire containers is in accordance with one of the Partnership’s original investment objectives, which was to realize the residual value of its containers after the expiration of their useful lives, estimated to be between 12 and 15 years after placement in service. The sale of these containers has positively affected the Partnership’s results from operations and minimized storage and other inventory-related costs incurred for its off-hire containers. The secondary market demand for used containers remained favorable during the first quarter of 2008. Changes in future inventory levels, as well as significant fluctuations in new container prices, may affect sales proceeds realized on the sale of the Partnership’s remaining containers. The price of a new twenty-foot dry cargo container increased from approximately $2,000 at the end of 2007 to $2,500 by the end of the second quarter of 2008. The volatility in new container pricing is expected throughout the remainder of 2008.

13

Three Months Ended June 30, 2008 Compared to the Three Months Ended June 30, 2007

     Overview

     Net incomefor the three months ended June 30, 2008 was $21,788, a decrease of $41,949, or 66% lower than net income for the corresponding period in the prior year due primarily to the decrease in net lease revenue.

     Analysis and discussion

     Net lease revenuewas $370,093 for the three months ended June 30, 2008 compared to $436,618 for the same period in the prior year. The decline was primarily due to a $120,086 decrease in gross lease revenue (a component of net lease revenue), reflecting the Partnership’s smaller fleet size. This was partly offset by a $41,945 reduction in direct operating expenses (a component of net lease revenue) as both activity-related and inventory-related expenses decreased in line with the decline in inventories of off-hire containers.

     Depreciation expenseof $340,984 for the three months ended June 30, 2008 declined by $36,461, or 10%, when compared to the corresponding period in 2007, a direct result of the Partnership’s declining fleet size.

     Other general and administrative expensesamounted to $39,091 for the three-month period ended June 30, 2008, an increase of $4,592, or 13%, when compared to the same period in 2007. The increase was attributable to higher fees for audit and banking services.

     Net gains on disposal of equipmentfor the three months ended June 30, 2008 was $30,667, compared to $28,500 for the corresponding period in 2007. The Partnership disposed of 190 containers, compared to 163 containers during the same three-month period in 2007.

     The net gain on container disposals in the three-month period ended June 30, 2008 was a result of various factors, including age, condition, suitability for continued leasing, as well as the geographical location of the containers when disposed. These factors will continue to influence the amount of sales proceeds received and the related gain or loss on container disposals.

Six Months Ended June 30, 2008 Compared to the Six Months Ended June 30, 2007

     Overview

     Net incomefor the six months ended June 30, 2008 was $108,932, a decrease of $2,869, or 3% lower than net income for the corresponding period in the prior year. The primary changes between the two periods included the impact of:

§	a decline in gross lease revenue, in line with the reduction in the size of the fleet; and
§	a decline in direct operating expenses and a slight increase in the level of gains recorded on the disposal of equipment at the end of its useful maritime life.

     Analysis and discussion

     Net lease revenuewas $814,203 for the six months ended June 30, 2008 compared to $886,178 for the same period in the prior year. The decline was primarily due to a $235,456 decrease in gross lease revenue (a component of net lease revenue), reflecting the Partnership’s smaller fleet size. This was partly offset by a $135,454 reduction in direct operating expenses (a component of net lease revenue) as both activity-related and inventory-related expenses decreased in line with the decline in inventories of off-hire containers.

     Depreciation expenseof $674,087 for the six months ended June 30, 2008 declined by $96,085, or 12%, when compared to the corresponding period in 2007, a direct result of the Partnership’s declining fleet size.

14

     Other general and administrative expensesamounted to $77,166 for the six-month period ended June 30, 2008, an increase of $15,396, or 25%, when compared to the same period in 2007. The increase was attributable to higher fees for audit and banking services.

     Net gains on disposal of equipmentfor the six months ended June 30, 2008 was $41,845, compared to $33,632 for the corresponding period in 2007. The Partnership disposed of 334 containers, compared to 345 containers during the same six-month period in 2007.

Liquidity and Capital Resources

     During the Partnership’s first 10 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 2008, the Partnership commenced its 13^th 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 impact of a diminishing fleet size and current market conditions on the level of gross lease revenue generated, and the level of fixed operating costs relative to this revenue. 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 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.

     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, 2008, the Partnership had $935,211 in cash and cash equivalents, an increase of $104,051 from cash balances at December 31, 2007. The Partnership invests its cash balances in money market funds.

     Cash from Operating Activities:Net cash provided by operating activities, primarily generated by net lease revenue receipts, was $806,519 during the six months ended June 30, 2008, compared to $913,830 for the same six-month period in 2007.

     Cash from Investing Activities:Net cash provided by investing activities was $576,799 during the six months ended June 30, 2008, compared to $484,076 in the corresponding period of 2007. These amounts represent sales proceeds generated from the sale of container rental equipment.

     Cash from Financing Activities: Net cash used in financing activities was $1,279,267 during the six months ended June 30, 2008, compared to $1,805,614 during the six months ended June 30, 2007. 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.

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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 policies as being significant because they 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 2007 Annual Report on Form 10-K.

Inflation

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

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 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.

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. As used herein, the term “disclosure controls and procedures” has the meaning given to the term by Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), and includes the controls and other procedures of the Partnership that are designed to ensure that information required to be disclosed by the Partnership in the reports that it files with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based upon their evaluation, the principal executive and principal financial officers of CCC have concluded that the Partnership’s disclosure controls and procedures were effective such that the information required to be disclosed by the Partnership in this report is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms applicable to the preparation of this report and is accumulated and communicated to CCC’s management, including CCC’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

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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 previously disclosed in the Partnership’s December 31, 2007 Form 10-K in response to Item 1A to Part I of 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 Securities 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 8, 2008

18

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.