e10vq

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, 2007


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 (State or other jurisdiction of incorporation or organization)		94-3230380 (I.R.S. Employer 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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer 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

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, 2007 and December 31, 2006, condensed statements of operations for the three and six months ended June 30, 2007 and 2006, and condensed statements of cash flows for the six months ended June 30, 2007 and 2006, (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 be read in conjunction with the financial statements and the notes thereto included in the Partnership’s December 31, 2006 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 operations 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, 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 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.

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,
	2007			2006			2007			2006
Net lease revenue	$	436,618		$	559,207		$	886,178		$	1,127,141

Other operating income (expenses):
Depreciation		(377,445	)		(436,217	)		(770,172	)		(877,667	)
Other general and administrative expenses		(34,499	)		(29,453	)		(61,770	)		(55,549	)
Net gain (loss) on disposal of equipment		28,500			(73,317	)		33,632			(134,443	)


		(383,444	)		(538,987	)		(798,310	)		(1,067,659	)


Income from operations		53,174			20,220			87,868			59,482

Other income:
Interest income		10,563			10,195			23,933			19,982


Net income	$	63,737		$	30,415		$	111,801		$	79,464


Allocation of net income:
General partner	$	49,134		$	27,534		$	75,255		$	53,586
Limited partners		14,603			2,881			36,546			25,878


	$	63,737		$	30,415		$	111,801		$	79,464


Limited partners’ per unit share of net income	$	0.01		$	—		$	0.02		$	0.02

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

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 organized under the laws of the State of California on September 1, 1995, for the purpose of owning and leasing marine cargo containers, special purpose containers and container related equipment worldwide to ocean carriers. 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 leases to domestic customers. The Partnership’s leases generally require all payments to be made in United States currency.

			Cronos Capital Corp. (“CCC”) is the general partner and, with its affiliate Cronos Containers Limited (the “Leasing Company”), manages the business of the Partnership. CCC and the Leasing Company also manage the container leasing business for other partnerships affiliated with CCC.

			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 sooner terminated upon the occurrence of certain events.

			The Partnership has entered into its 13^th year of operations and is in its liquidation phase, wherein CCC is focusing its attention on the retirement of the remaining equipment in the Partnership’s container fleet. At June 30, 2007, approximately 78% of the original equipment remained in the Partnership’s fleet.

	(b)		Leasing Company and Leasing Agent Agreement

			A Leasing Agent Agreement exists between the Partnership and the Leasing Company, whereby the Leasing Company has the responsibility to manage the leasing operations of all equipment owned by the Partnership. Pursuant to the Agreement, the Leasing Company is responsible for leasing, managing and re-leasing 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 Leasing Agent Agreement permits the Leasing Company to use the containers owned by the Partnership, together with other containers owned or managed by the Leasing Company and its affiliates, as part of a single fleet operated without regard to ownership. Since the Leasing Agent Agreement meets the definition of an operating lease in Statement of Financial Accounting Standards (SFAS) No. 13 “Accounting for Lease”, it is accounted for as a lease under which the Partnership is lessor and the Leasing Company is lessee.

			The Leasing Agent Agreement generally provides that the Leasing Company will make payments to the Partnership based upon rentals collected from ocean carriers after deducting direct operating expenses and management fees to the Leasing Company. The Leasing Company leases containers to ocean carriers, generally under operating leases which are either master leases or term leases (mostly one to five years). 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 based upon the number of containers used and the applicable per-diem rate.

(Continued)

CRONOS GLOBAL INCOME FUND XVI, L.P.

Notes to Unaudited Condensed Financial Statements

(b)		Leasing Company and Leasing Agent Agreement (continued)

		Accordingly, rentals under master leases are all variable and contingent upon the number of containers used. Most containers are leased to ocean carriers under master leases; leasing agreements with fixed payment terms are not material to the financial statements. Since there are no material minimum lease rentals, no disclosure of minimum lease rentals is provided in these financial statements.

(c)		Basis of Presentation

		These unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information and regulation S-X, Article 10 under the Securities Exchange Act of 1934. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP 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 accompanying notes in the Partnership’s December 31, 2006 Annual Report on Form 10-K.

		The interim financial statements presented herewith reflect, in the opinion of management, all adjustments of a normal recurring nature necessary to present fairly the results for the interim periods presented. The results of operations for such interim periods are not necessarily indicative of the results to be expected for the full year.

(d)		Use of Estimates

		The preparation of financial statements in conformity with GAAP 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. Actual results could differ from those estimates.

		The most significant estimates included within the financial statements are the container rental equipment’s estimated useful lives and residual values, and the estimate of future cash flows from container rental equipment operations, used to evaluate the carrying value of container rental equipment in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long Lived Assets”.

(e)		Container Rental Equipment

		Container rental equipment is depreciated over a 15-year life using the straight-line basis to its salvage value, estimated to be 10% of the original equipment cost. Depreciation policies are also evaluated to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

		In accordance with 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 projecting future cash flows from container rental equipment operations is prepared annually, or upon material changes in market conditions.

(Continued)

CRONOS GLOBAL INCOME FUND XVI, L.P.

Notes to Unaudited Condensed Financial Statements

(e)		Container Rental Equipment (continued)

		Current and projected utilization rates, per-diem rental rates, direct operating expenses, fleet size and container disposals are the primary variables utilized in the analysis. Additionally, the Partnership evaluates future cash flows and potential impairment by container type rather than for each 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 to the carrying value of container rental equipment for the three and six-month periods ended June 30, 2007 and 2006.

(f)		Allocation of Net Income or Loss, Partnership Distributions and Partners’ Capital Accounts

		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.

		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 person’s 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.

(Continued)

CRONOS GLOBAL INCOME FUND XVI, L.P.

Notes to Unaudited Condensed Financial Statements

(2)		Net Lease and Other Receivables Due from Leasing Company

		Net lease and other receivables due from the Leasing Company are determined by deducting direct operating payables and accrued expenses, base management fees payable, and reimbursed administrative expenses payable to CCC and its affiliates from the rental billings earned by the Leasing Company under operating leases to ocean carriers for the containers owned by the Partnership, as well as proceeds earned from container disposals. Net lease and other receivables at June 30, 2007 and December 31, 2006 were as follows:


	June 30,		December 31,
	2007		2006
Gross lease and other receivables	$	682,138	$	694,051
Less:
Direct operating payables and accrued expenses		204,650		203,928
Base management fees payable		39,006		2,472
Reimbursed administrative expenses		10,595		12,559
Allowance for doubtful accounts		53,188		69,251

		307,439		288,210


Net lease and other receivables	$	374,699	$	405,841

(3)		Net Lease Revenue

		Net lease revenue is recorded by the Partnership in each period based upon its leasing agent agreement with the Leasing Company. Net lease revenue is generally dependent upon operating lease rentals from operating lease agreements between the Leasing Company and its various lessees, less direct operating expenses, management fees and reimbursed administrative expenses incurred in respect of the containers specified in each operating lease agreement. Net lease revenue for the three and six-month periods ended June 30, 2007 and 2006 was as follows:


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2007		2006		2007		2006
Rental revenue	$	666,093	$	843,282	$	1,364,447	$	1,750,315
Less:
Rental equipment operating expenses		150,078		182,578		315,441		407,444
Base management fees		46,577		58,224		94,954		120,187
Reimbursed administrative expenses
Salaries		22,648		30,075		45,996		68,373
Other payroll related expenses		3,390		4,710		7,782		9,972
General and administrative expenses		6,782		8,488		14,096		17,198

Total reimbursed administrative expenses		32,820		43,273		67,874		95,543

		229,475		284,075		478,269		623,174


Net lease revenue	$	436,618	$	559,207	$	886,178	$	1,127,141

(Continued)

CRONOS GLOBAL INCOME FUND XVI, L.P.

Notes to Unaudited Condensed Financial Statements

(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.

		The Partnership derives revenues from dry cargo, refrigerated and tank containers used by its customers in global trade routes. As of June 30, 2007, the Partnership operated 3,379 twenty-foot, 1,121 forty-foot and 1,646 forty-foot high-cube marine dry cargo containers, as well as 75 twenty-foot and 178 forty-foot high-cube refrigerated containers, and 51 twenty-four thousand-liter tanks. A summary of gross lease revenue earned by the Leasing Company, on behalf of the Partnership, by product, for the three and six-month periods ended June 30, 2007 and 2006 follows:


	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2007		2006		2007		2006
Dry cargo containers	$	483,989	$	558,181	$	989,636	$	1,169,672
Refrigerated containers		143,664		244,130		296,271		502,149
Tank containers		38,440		40,971		78,540		78,494

Total	$	666,093	$	843,282	$	1,364,447	$	1,750,315

		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 (“SFAS 131”), “Disclosures about Segments of an Enterprise and Related Information.”

(5)		The Cronos Group

		The Cronos Group (“Parent Company”), a Luxembourg holding company, is the indirect parent of CCC, the general partner of the Partnership. The Parent Company announced on February 28, 2007 that it had entered into an Asset Purchase Agreement (“Asset Purchase Agreement”) with CRX Acquisition Ltd., a Bermuda exempted company (“CRX”) and FB Transportation Capital LLC, a Delaware limited liability company (“FB Transportation”). Under the terms of the Asset Purchase Agreement, and subject to the conditions stated therein, the Parent Company agreed to sell all of its assets to CRX and CRX agreed to assume all of the Parent Company’s liabilities. CRX and FB Transportation are affiliates of or associated with the Fortis group of companies, which include the Parent Company’s lead lender and a partner in the Parent Company’s Joint Venture Program.

		At a special meeting held August 1, 2007, Parent Company’s shareholders approved the Asset Purchase Agreement and the transactions contemplated thereunder, including Parent Company’s dissolution and liquidation. Closing of the sale of the Parent Company’s assets and liabilities to CRX occurred later that same day. The container leasing business of the Parent Company will be continued by CRX as a private company. Management of the Parent Company, which includes members of the management of CCC, are continuing as management of CRX and are acquiring an equity interest in CRX.

		CCC is now an indirect subsidiary of CRX. There have been no changes to the management of CCC or to the management of the Leasing Company as a result of the Parent Company’s sale of its assets to CRX and CRX’s assumption of the Parent Company’s liabilities. However, CCC is unable to determine the impact, if any, of CRX’s acquisition of the Parent Company’s business upon the future operating results, financial condition, and cash flows of the Partnership or CCC.

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, 2006 Annual Report on Form 10-K and the financial statements and the notes thereto appearing elsewhere in this report.

Market Overview

The expansion in the volume of world trade, continued to be the primary catalyst fueling the demand for containerized freight during the second quarter of 2007. Also contributing to the demand has been the inability of the shipping industry infrastructure to handle the increase in containerized trade, resulting in port and rail congestion, and ultimately longer turnaround times for ships and containers. As a result, the shipping lines have reduced their redeliveries of on-hire containers and have increasingly looked to container leasing in order to supplement their owned fleets of containers. Despite the high levels of utilization, the GDP growth rate for most developed countries experienced during the fourth quarter of 2006 was not sustained during the first three months of 2007, increasing the competitive pressures within the container leasing industry. During the second quarter of 2007, economists reported that GDP growth during the first quarter of 2007 was lower than the same period in 2006. GDP growth is traditionally used as an indicator of economic prosperity, and appears to indicate that consumer spending was not as robust, possibly a result of higher oil prices and other economic factors. Additionally, forecasts for containerized exports from China are expected to dip below the double digit growth rates that averaged approximately 10% over the last few years, to approximately 7% per annum in the next few years. In future periods, global economic growth and container trade are expected to have less of an impact on the Partnership’s operations than declining revenue from a smaller fleet as CCC continues its efforts to retire the Partnership’s remaining equipment.

Utilization of the Partnership’s dry cargo container fleet averaged 89% and 88% for the three and six-month periods ended June 30, 2007, respectively, remained consistent when compared to the same periods in the prior year. The utilization rate for the Partnership’s refrigerated container fleet averaged 80% and 79% for the three and six-month periods ended June 30, 2007, respectively. In comparison, refrigerated container utilization rates for the three and six-month periods ended June 30, 2006 averaged 84% and 85%, respectively. Utilization of the Partnership’s tank container fleet averaged 97% and 95% for the three and six-month periods ended June 30, 2007, respectively. In comparison, tank container utilization rates for the three and six-month periods ended June 30, 2006 averaged 88% and 89%, respectively.

The average per-diem rate for the Partnership’s dry cargo containers during the three and six-month periods ending June 30, 2007 decreased approximately 18% and 17%, respectively, when compared to the same periods in the prior year. The average per-diem rate for the Partnership’s refrigerated cargo containers for the three and six-month periods ending June 30, 2007 decreased approximately 8% and 6%, respectively, when compared to the same periods in the prior year. The average per-diem rate for the Partnership’s tank cargo containers for the three and six-month periods ending June 30, 2007 increased approximately 3% and 2%, respectively, when compared to the same periods in the prior year. The lease market for the Partnership’s older containers continues to be very competitive and, therefore, subject to significant pricing pressures. Unlike dry cargo containers, the refrigerated and tank containers are built for specific market demands. As such, the markets for the leasing of refrigerated and tank containers are narrower than the market for dry cargo containers and are subject to different trends and fluctuations than the dry cargo container market.

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 second quarter of 2007, resulting indirectly from higher prices for new cargo containers, as well as the demand for older, existing containers. Changes in future inventory levels, as well as significant fluctuations in new container prices, could adversely affect sales proceeds realized on the sale of the Partnership’s remaining containers.

The price of a new twenty-foot dry cargo container varied during 2006, ending the year at approximately $2,000, an increase from approximately $1,500 at the beginning of the year. By the second quarter of 2007, new twenty-foot dry cargo container prices fluctuated to $1,850. The volatility in new container pricing is expected throughout the remainder of 2007. Although the Partnership no longer purchases new containers, the price and production levels of new containers indirectly contributed to the Partnership’s results of operations by influencing the available supply of containers and utilization, the level of lease per-diems for existing older containers, as well as container sale prices realized upon their eventual disposal.

The Partnership’s primary lessees, the shipping lines, experienced a significant decline in profits during 2006, as additional cargo capacity created by the delivery of new containerships, resulted in a corresponding decline in freight rates. A significant number of new containerships built under various shipbuilding programs were delivered during 2006, producing an additional slot capacity of 1.85 million TEU (twenty-foot equivalent unit), an increase of approximately 55% from 2005. Containership capacity is expected to increase by approximately 15% and 14%, respectively, in 2007 and 2008, alleviating some of the near-term earnings pressure created by the excess slot capacity delivered during 2006. Industry analysts initially forecasted that the addition of new container ships and additional slot capacity would slow during 2009. However, reports indicate that the first 5 months of 2007 have already resulted in an annualized increase in containership orders of 11% over 2006. The additional orders are expected to result in additional containership deliveries during 2009, renewing the capacity concerns for the shipping industry. The financial impact of losses from shipping lines may eventually influence the demand for leased containers, as some shipping lines may experience financial difficulties, consolidate, or become insolvent. The Partnership, CCC and the Leasing Company continue to monitor the aging of lease receivables, collections and the credit exposure to various existing and new customers.

Results of Operations

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 (“Agreement”) exists between the Partnership and the Leasing Company, whereby the Leasing Company has the responsibility to manage the leasing operations of all equipment owned by the Partnership. Pursuant to the Agreement, the Leasing Company is responsible for leasing, managing and re-leasing 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 Leasing Agent Agreement permits the Leasing Company to use the containers owned by the Partnership, together with other containers owned or managed by the Leasing Company and its affiliates, as part of a single fleet operated without regard to ownership.

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 billed by the Leasing Company 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.

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

At June 30, 2007, approximately 78% of the original equipment remained in the Partnership’s fleet, compared to approximately 82% at December 31, 2006. The following table summarizes the composition of the Partnership’s fleet (based on container type) at June 30, 2007.


	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		2,470		749		1,250		48		106		28
Term lease
Short term ¹		222		107		159		2		9		8
Long term ²		472		147		66		3		34		14
Sales-type lease		2		6		4		5		1		—

Subtotal		3,166		1,009		1,479		58		150		50
Containers off lease		213		112		167		17		28		1

Total container fleet		3,379		1,121		1,646		75		178		51


1.		Short term leases represent term leases that are either scheduled for renegotiation or that may expire on or before June 2008.

2.		Long term leases represent term leases, the majority of which will expire between July 2008 and December 2011.


	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		1,174		26	%		379		25	%		104		6	%		15		17	%		122		41	%		1		2	%

Remaining fleet at June 30, 2007		3,379		74	%		1,121		75	%		1,646		94	%		75		83	%		178		59	%		51		98	%

Three Months Ended June 30, 2007 Compared to the Three Months Ended June 30, 2006

Net lease revenue was $436,618 for the three months ended June 30, 2007 compared to $559,207 for the same period in the prior year. This decline was primarily due to a $177,189 decrease in gross rental revenue (a component of net lease revenue). Gross rental revenue was impacted by the Partnership’s smaller fleet size and an 18% decline in the dry cargo container per-diem rental rates. This decline in gross rental revenue was partially offset by a reduction in rental equipment operating expenses (a component of net lease revenue) of $32,500. The decline was attributable to the Partnership’s declining fleet size and a reduction in both activity-related and inventory-related expenses associated with current levels of utilization. The Partnership’s average fleet size and utilization rates for the three-month periods ended June 30, 2007 and 2006 were as follows:


	Three Months Ended
	June 30,			June 30,
	2007			2006
Fleet size (measured in twenty-foot equivalent units (TEU))
Dry cargo containers		9,026			9,629
Refrigerated containers		440			644
Tank containers		51			52

Average utilization rates
Dry cargo containers		89	%		89	%
Refrigerated containers		80	%		84	%
Tank containers		97	%		88	%

Other components of net lease revenue, including management fees and reimbursed administrative expenses, were lower by a combined $22,100 when compared to the same period in 2006 due to the declining fleet size and lower operating performance.

Depreciation expense of $377,445 for the three months ended June 30, 2007 declined by $58,772 when compared to the corresponding period in 2006, a direct result of the Partnership’s declining fleet size.

Other general and administrative expenses amounted to $34,499 for the three-month period ended June 30, 2007, an increase of $5,046 or 17% when compared to the same period in 2006. The increase was attributable to higher professional fees for audit service and third-party investor administration services.

Net gain on disposal of equipment for the three months ended June 30, 2007 was $28,500, compared to a net loss of $73,317 for the corresponding period in 2006. The Partnership disposed of 163 containers, compared to 153 containers during the same three-month period in 2006. The net gain on container disposals in the three-month period ended June 30, 2007 was a result of various factors, including the proceeds realized from the container disposal, 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.

The level of the Partnership’s container disposals in subsequent periods, as well as the price of steel, new container prices and the current leasing market’s impact on sales prices for existing older containers such as those owned by the Partnership, will also contribute to fluctuations in the net gain or loss on disposals. There were no reductions to the carrying value of container rental equipment due to impairment during the three-month periods ended June 30, 2007 and 2006.

Six Months Ended June 30, 2007 Compared to the Six Months Ended June 30, 2006

Net lease revenue was $886,178 for the six months ended June 30, 2007 compared to $1,127,141 for the same period in the prior year. The decline was primarily due to a $385,868 decline in gross rental revenue (a component of net lease revenue). Gross lease revenue was impacted by the Partnership’s smaller fleet size and a 17% decline in the dry cargo per-diem rental rates. This decline in gross rental revenue was partially offset by a reduction in rental equipment operating expenses (a component of net lease revenue) of $92,003. This decline was attributable to the Partnership’s declining fleet size and a reduction in both activity-related and inventory-related expenses associated with current levels of utilization.

The Partnership’s average fleet size and utilization rates for the six-month periods ended June 30, 2007 and 2006 were as follows:


	Six Months Ended
	June 30,			June 30,
	2007			2006
Fleet size (measured in twenty-foot equivalent units (TEU))
Dry cargo containers		9,138			9,727
Refrigerated containers		447			655
Tank containers		51			52

Average utilization rates
Dry cargo containers		88	%		88	%
Refrigerated containers		79	%		85	%
Tank containers		95	%		89	%

Other components of net lease revenue, including management fees and reimbursed administrative expenses, were lower by a combined $52,902 when compared to the same period in 2006 due to the declining fleet size and lower operating performance.

Depreciation expense of $770,172 for the six months ended June 30, 2007 declined by $107,495 when compared to the corresponding period in 2006, a direct result of the Partnership’s declining fleet size.

Other general and administrative expenses amounted to $61,770 for the six month period ended June 30, 2007, an increase of $6,221 or 11% when compared to the same period in 2006. This increase was attributable to higher professional fees for audit service and third-party investor administration services.

Net gain on disposal of equipment for the six months ended June 30, 2007 was $33,632, as compared to a net loss of $134,443 for the corresponding period in 2006. The Partnership disposed of 345 containers, as compared to 321 containers during the same six-month period in 2006. The net gain on container disposals in the six-month period ended June 30, 2007 was a result of various factors, including the proceeds realized from the container disposal, 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.

There was no reduction to the carrying value of container rental equipment due to impairment during the six-month period ended June 30, 2007 and 2006.

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. Aside from the initial working capital reserve retained from gross subscription proceeds (equal to approximately 1% of such proceeds), the Partnership relies primarily on net lease revenue receipts to meet this objective, as well as to finance operating needs. No credit lines are maintained to finance working capital. Commencing in April 2006, 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.

The Partnership has entered its 13^th year and is currently in its liquidation phase of operations. CCC takes 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, and fixed operating costs relative to this revenue. Parallel to these considerations will be a projected increase in expenses for devoting significant resources to the additional reporting and compliance requirements of Section 404 of the Sarbanes Oxley Act of 2002, which addresses a range of corporate governance, disclosure, and accounting issues. The Partnership is required to be in compliance with Section 404 on December 31, 2008. These costs may include increased accounting and administrative expenses for additional staffing and outside professional services by accountants and consultants. 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. 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, 2007, the Partnership had $795,666 in cash and cash equivalents, a decrease of $407,708 from cash balances at December 31, 2006. The Partnership invests its working capital, as well as cash flows from operations and the sale of containers that have not yet been distributed to CCC or its limited partners in money market funds. At June 30, 2007, the Partnership had an additional $30,000 as part of its working capital for estimated expenses related to the ultimate sale of its remaining containers, final liquidation of its remaining assets and subsequent dissolution.

Cash from Operating Activities: Net cash provided by operating activities, primarily generated from the billing and collection of net lease revenue, was $913,830 during the six months ended June 30, 2007, compared to $1,168,873 for the same six-month period in 2006.

Cash from Investing Activities: Net cash provided by investing activities was $484,076 during the six months ended June 30, 2007, compared to $509,669 in the corresponding period of 2006. These amounts represent sales proceeds generated from the sale of container rental equipment.

Cash from Financing Activities: Net cash used in financing activities was $1,805,614 during the six months ended June 30, 2007, compared to $1,811,074 during the six months ended June 30, 2006. 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 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 2006 Annual Report on Form 10-K.

Inflation

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

The Cronos Group

For a discussion of the recent change in control of The Cronos Group, the indirect parent company of CCC, the general partner of the Partnership, see note 5 to the condensed financial statements of the Partnership, included in Item 1, herein.

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. The Leasing Company believes that the proportion of US dollar revenues may decrease in future years, reflecting a more diversified customer base and lease portfolio. Of the non-US dollar direct operating expenses, the majority are individually small, unpredictable and incurred in various denominations. Thus, the Leasing Company determined such amounts are not suitable for cost effective hedging. As exchange rates are outside of the control of the Partnership and Leasing Company, 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

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 quarterly report. As used herein, the term “disclosure controls and procedures” has the meaning given to the term by Rule 13a-15 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 quarterly 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.

There has been no change in the Partnership’s internal control over financial reporting (as defined in Rule 13a-15(f)) that occurred during the fiscal quarter ended June 30, 2007, that has materially affected, or is reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

Item 4T. Controls and Procedures

Not applicable.

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, 2006 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.

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.


	June 30,			December 31,
	2007			2006
Assets

Current assets:
Cash and cash equivalents, includes $780,666 at June 30, 2007 and $1,188,374 at December 31, 2006 in interest-bearing accounts	$	795,666		$	1,203,374
Net lease and other receivables due from Leasing Company		374,699			405,841


Total current assets		1,170,365			1,609,215


Container rental equipment, at cost		23,881,283			25,256,310
Less accumulated depreciation		(14,731,746	)		(14,851,810	)

Net container rental equipment		9,149,537			10,404,500


Total assets	$	10,319,902		$	12,013,715


Partners’ capital

Partners’ capital (deficit):
General partner	$	(23,266	)	$	(39,210	)
Limited partners		10,343,168			12,052,925


Total partners’ capital	$	10,319,902		$	12,013,715


	Six Months Ended
	June 30,			June 30,
	2007			2006
Net cash provided by operating activities	$	913,830		$	1,168,873

Cash flows provided by investing activities:
Proceeds from sale of container rental equipment		484,076			509,669

Cash flows from financing activities:
Distributions to general partner		(59,310	)		(71,435	)
Distributions to limited partners		(1,746,304	)		(1,739,639	)

Net cash used in financing activities		(1,805,614	)		(1,811,074	)


Net decrease in cash and cash equivalents		(407,708	)		(132,532	)

Cash and cash equivalents at the beginning of the period		1,203,374			1,048,262


Cash and cash equivalents at the end of the period	$	795,666		$	915,730


	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/ John Kallas
		John Kallas
		Chief Financial Officer and Director of Cronos Capital Corp. (“CCC”) Principal Financial and Accounting Officer of CCC



	By	/s/ Dennis J. Tietz
		Dennis J. Tietz, President and Chief Executive
		Officer of Cronos Capital Corp., General Partner of the Partnership


		/s/ John Kallas
		John Kallas, Chief Financial Officer of Cronos
		Capital Corp., General Partner of the Partnership

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	PAGE
PART I — FINANCIAL INFORMATION		3
Item 1. Financial Statements		3
Condensed Balance Sheets – June 30, 2007 and December 31, 2006 (unaudited)		4
Condensed Statements of Operations for the three and six months ended June 30, 2007 and 2006 (unaudited)		5
Condensed Statements of Cash Flows for the six months ended June 30, 2007 and 2006 (unaudited)		6
Notes to Condensed Financial Statements (unaudited)		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		12
Item 3. Quantitative and Qualitative Disclosures About Market Risk		18
Item 4. Controls and Procedures		18
Item 4T. Controls and Procedures		18
PART II — OTHER INFORMATION		19
Item 1. Legal Proceedings		19
Item 1A. Risk Factors		19
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		19
Item 3. Defaults Upon Senior Securities		19
Item 4. Submissions of Matters to a Vote of Securities Holders		19
Item 5. Other Information		19
Item 6. Exhibits		19
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32

	(i)		The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(ii)		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Partnership.