##### Table of Contents



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, 2006
 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.
  California
    
    94-3230380(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 One Front Street, Suite 925,
San Francisco, California
(Address of principal executive offices)
    
    94111(Zip Code)
 
 þ  ̈
   ̈  ̈ þ
  ̈ þ




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##### 



CRONOS GLOBAL INCOME FUND XVI, L.P.
 Report on Form 10-Q for the Quarterly Period
Ended June 30, 2006
 TABLE OF CONTENTS
 PAGEPART I  FINANCIAL INFORMATION
    
    
    3Item 1.
    
    Financial Statements
    
    
    3Condensed Balance Sheets  June 30, 2006 and December 31, 2005 (unaudited)
    
    
    4Condensed Statements of Operations for the three and six months ended June 30, 2006 and 2005 (unaudited)
    
    
    5Condensed Statements of Cash Flows for the six months ended June 30, 2006 and 2005 (unaudited)
    
    
    6Notes to Condensed Financial Statements (unaudited)
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    13Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4.
    
    Controls and Procedures
    
    
    19PART II  OTHER INFORMATION
    
    
    20Item 1.
    
    Legal Proceedings
    
    
    20Item 1A.
    
    Risk Factors
    
    
    20Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 3.
    
    Defaults Upon Senior Securities
    
    
    20Item 4.
    
    Submissions of Matters to a Vote of Securities Holders
    
    
    20Item 5.
    
    Other Information
    
    
    20Item 6.
    
    Exhibits
    
    
    20EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
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PART I  FINANCIAL INFORMATION
 
 Financial Statements
   3




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CRONOS GLOBAL INCOME FUND XVI, L.P.
 
 Condensed Balance Sheets
 (Unaudited)
 June 30,
    
    
    December 31,2006
    
    
    2005AssetsCurrent assets:Cash and cash equivalents, includes $900,730 at June
30, 2006 and
$1,033,262 at December 31, 2005 in
interest-bearing accounts
    
    $
    915,730
    
    
    $
    1,048,262Net lease and other receivables due from Leasing Company
    
    
    302,594
    
    
    
    360,227Total current assets
    
    
    1,218,324
    
    
    
    1,408,489Container rental equipment, at cost
    
    
    27,917,738
    
    
    
    29,463,629Less accumulated depreciation
    
    
    (15,661,085
    )
    
    
    (15,671,131
    )Net container rental equipment
    
    
    12,256,653
    
    
    
    13,792,498Container equipment held for sale
    
    
    65,800
    
    
    
    71,400Total assets
    
    $
    13,540,777
    
    
    $
    15,272,387Partners capitalPartners capital (deficit):General partner
    
    $
    (23,527
    )
    
    $
    (5,678
    )Limited partners
    
    
    13,564,304
    
    
    
    15,278,065Total partners capital
    
    $
    13,540,777
    
    
    $
    15,272,387
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CRONOS GLOBAL INCOME FUND XVI, L.P.
 
 Condensed Statements of Operations
 (Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Net lease revenue
    
    $
    559,207
    
    
    $
    680,868
    
    
    $
    1,127,141
    
    
    $
    1,412,594Other operating income (expenses):Depreciation
    
    
    (436,217
    )
    
    
    (464,775
    )
    
    
    (877,667
    )
    
    
    (936,629
    )Other general and
administrative expenses
    
    
    (29,453
    )
    
    
    (22,626
    )
    
    
    (55,549
    )
    
    
    (41,254
    )Asset impairment loss
    
    
    
    
    
    
    (37,972
    )
    
    
    
    
    
    
    (37,972
    )Net (loss) gain on disposal of
equipment
    
    
    (73,317
    )
    
    
    (3,829
    )
    
    
    (134,443
    )
    
    
    14,328(538,987
    )
    
    
    (529,202
    )
    
    
    (1,067,659
    )
    
    
    (1,001,527
    )Income from operations
    
    
    20,220
    
    
    
    151,666
    
    
    
    59,482
    
    
    
    411,067Other income:Interest income
    
    
    10,195
    
    
    
    3,217
    
    
    
    19,982
    
    
    
    5,058Net income
    
    $
    30,415
    
    
    $
    154,883
    
    
    $
    79,464
    
    
    $
    416,125Allocation of net income:General partner
    
    $
    27,534
    
    
    $
    21,653
    
    
    $
    53,586
    
    
    $
    67,246Limited partners
    
    
    2,881
    
    
    
    133,230
    
    
    
    25,878
    
    
    
    348,879$
    30,415
    
    
    $
    154,883
    
    
    $
    79,464
    
    
    $
    416,125Limited partners per unit share
of net income
    
    $
    
    
    
    $
    0.08
    
    
    $
    0.02
    
    
    $
    0.22
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CRONOS GLOBAL INCOME FUND XVI, L.P.
 
 Condensed Statements of Cash Flows
 (Unaudited)
 Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005Net cash provided by operating activities
    
    $
    1,168,873
    
    
    $
    1,231,274Cash flows provided by investing activities:Proceeds from sale of container rental equipment
    
    
    509,669
    
    
    
    277,579Cash flows in financing activities:Distributions to general partner
    
    
    (71,435
    )
    
    
    (63,223
    )Distributions to limited partners
    
    
    (1,739,639
    )
    
    
    (1,319,724
    )Net cash used in financing activities
    
    
    (1,811,074
    )
    
    
    (1,382,947
    )Net increase (decrease) in cash and cash equivalents
    
    
    (132,532
    )
    
    
    125,906Cash and cash equivalents at the beginning of the period
    
    
    1,048,262
    
    
    
    448,065Cash and cash equivalents at the end of the period
    
    $
    915,730
    
    
    $
    573,971
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CRONOS GLOBAL INCOME FUND XVI, L.P.
 
 Notes to Unaudited Condensed Financial Statements
 (1)
    
    Summary of Significant Accounting Policies
 (a)
    
    Nature of OperationsCronos 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.Beginning April 2006, the Partnership will commence its 11th year of operations and enter
into its liquidation phase wherein CCC will focus its attention on the retirement of the
remaining equipment in the Partnerships container fleet. At June 30, 2006, approximately
86% 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, 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. 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.(b)
    
    Leasing Company and Leasing Agent AgreementA 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, it is accounted for as a lease under which the Partnership is
lessor and the Leasing Company is lessee.
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CRONOS GLOBAL INCOME FUND XVI, L.P.
 Notes to Unaudited Condensed Financial Statements
 (b)
    
    Leasing Company and Leasing Agent Agreement (continued)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 CCC and 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. 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 AccountingThe Partnership utilizes the accrual method of accounting. 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 and management fees due in respect of the containers specified in
each operating lease agreement.(d)
    
    Use of EstimatesThe financial statements are prepared in conformity with accounting principles
generally accepted in the United States of America (GAAP), which 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 estimated useful lives and residual values, and the estimate of
future cash flows from container rental equipment operations, used to determine the
carrying value of container rental equipment in accordance with SFAS No. 144. Considerable
judgment is required in estimating future cash flows from container rental equipment
operations. Accordingly, the estimates may not be indicative of the amounts that may be
realized in future periods. As additional information becomes available in subsequent
periods, recognition of an impairment of the container rental equipment carrying values may
be necessary based upon changes in market and economic conditions.
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CRONOS GLOBAL INCOME FUND XVI, L.P.
 Notes to Unaudited Condensed Financial Statements
 (e)
    
    Container Rental EquipmentContainer 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. Current and projected utilization rates, per-diem rental rates, direct
operating expenses, fleet size and container disposals are the primary variables utilized
by 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.In June 2005 the Partnership recorded an impairment charge of $37,972 related to 111
forty-foot standard off-hire dry cargo containers located in North America (the North
American Dry Containers). The impairment charge was a result of a number of factors
identified by CCC and the Leasing Company that impacted the carrying value of the North
American Dry Containers:
 
    
    The age of the North American Dry Containers.
    
    The lack of regional market demand to lease the North American Dry Containers.
    
    The cost to reposition the North American Dry Containers to high demand markets.
    
    The strong North American container sale market.
 CCC and the Leasing Company considered the impact of these factors, and determined a
change regarding the current marketing strategy for the containers was required. CCC and
the Leasing Company concluded that effective June 1, 2005, the North American Dry
Containers would be targeted for immediate sale and committed to a plan to dispose of the
North American Dry Containers. It was concluded that the carrying value of these
containers, $193,372, exceeded fair value and accordingly, an impairment charge of $37,972,
or approximately $0.02 per limited partnership unit, was recorded to operations under
impairment losses during the three month period ended June 30, 2005. Fair value was
determined by estimating the expected amount to be received at the time of sale. The
expected sales price was estimated by evaluating the current sales price of similar
containers. During the six-month period ending June 30, 2006, the Partnership sold 4 North
American Dry Containers targeted for sale. The Partnership recognized a gain of $370 on
the sale of these containers. At June 30, 2006, 47 of the original 111 North American Containers remain in
the Partnerships fleet awaiting disposal.There were no impairment charges to the carrying value of container rental equipment during
the six-month period ended June 30, 2006.
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CRONOS GLOBAL INCOME FUND XVI, L.P.
 Notes to Unaudited Condensed Financial Statements
 (f)
    
    Allocation of Net Income or Loss, Partnership Distributions and Partners Capital
AccountsNet 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.(g)
    
    Financial Statement PresentationThese financial statements have been prepared without audit pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance with
accounting principles generally accepted in the United States of America (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, 2005
Annual Report on Form 10-K.
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CRONOS GLOBAL INCOME FUND XVI, L.P.
 Notes to Unaudited Condensed Financial Statements
 (g)
    
    Financial Statement Presentation (continued)The interim financial statements presented herewith reflect, in the opinion of
management, all adjustments of a normal recurring 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.
 (2)
    
    Net Lease and Other Receivables Due from Leasing CompanyNet 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, 2006 and December 31, 2005 were as follows:
 June 30,
    
    
    December 31,2006
    
    
    2005Gross lease and other receivables
    
    $
    757,502
    
    
    $
    809,608Less:Direct operating payables and accrued expenses
    
    
    308,730
    
    
    
    268,591Damage protection reserve
    
    
    45,909
    
    
    
    81,367Base management fees (receivable) payable
    
    
    (1,641
    )
    
    
    4,212Reimbursed administrative expenses
    
    
    13,806
    
    
    
    16,585Allowance for doubtful accounts
    
    
    88,104
    
    
    
    78,626454,908
    
    
    
    449,381Net lease and other receivables
    
    $
    302,594
    
    
    $
    360,227
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CRONOS GLOBAL INCOME FUND XVI, L.P.
 Notes to Unaudited Condensed Financial Statements
 (3)
    
    Net Lease RevenueNet lease revenue is determined by deducting direct operating expenses, base
management fees and reimbursed administrative expenses to CCC and its affiliates from the
rental revenue earned by the Leasing Company under operating leases to ocean carriers for the
containers owned by the Partnership. Net lease revenue for the three and six-month periods
ended June 30, 2006 and 2005 was as follows:
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Rental revenue
    
    $
    843,282
    
    
    $
    977,876
    
    
    $
    1,750,315
    
    
    $
    1,986,818Less:Rental equipment operating
expenses
    
    
    182,578
    
    
    
    176,065
    
    
    
    407,444
    
    
    
    328,343Base management fees
    
    
    58,224
    
    
    
    66,852
    
    
    
    120,187
    
    
    
    136,528Reimbursed administrative
expensesSalaries
    
    
    30,075
    
    
    
    39,980
    
    
    
    68,373
    
    
    
    77,934Other payroll related expenses
    
    
    4,710
    
    
    
    4,580
    
    
    
    9,972
    
    
    
    11,998General and administrative
expenses
    
    
    8,488
    
    
    
    9,531
    
    
    
    17,198
    
    
    
    19,421Total reimbursed administrative
expenses
    
    
    43,273
    
    
    
    54,091
    
    
    
    95,543
    
    
    
    109,353284,075
    
    
    
    297,008
    
    
    
    623,174
    
    
    
    574,224Net lease revenue
    
    $
    559,207
    
    
    $
    680,868
    
    
    $
    1,127,141
    
    
    $
    1,412,594
 (4)
    
    Operating SegmentAn 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 have 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, 2006, the Partnership operated 3,775
twenty-foot, 1,208 forty-foot and 1,672 forty-foot high-cube marine dry cargo containers, as
well as 85 twenty-foot and 267 forty-foot high-cube refrigerated containers, and 52 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, 2006 and 2005
follows:
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Dry cargo containers
    
    $
    558,181
    
    
    $
    672,984
    
    
    $
    1,169,672
    
    
    $
    1,357,799Refrigerated containers
    
    
    244,130
    
    
    
    262,399
    
    
    
    502,149
    
    
    
    547,635Tank containers
    
    
    40,971
    
    
    
    42,493
    
    
    
    78,494
    
    
    
    81,384Total
    
    $
    843,282
    
    
    $
    977,876
    
    
    $
    1,750,315
    
    
    $
    1,986,818
  12




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Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Market Overview
      13




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##### Table of Contents



Results of Operations
   
    
    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.
 14




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##### Table of Contents



Dry Cargo
    
    Refrigerated
    
    TankContainers
    
    Containers
    
    Containers40-Foot
    
    
    
    
    
    40-Foot20-Foot
    
    40-Foot
    
    High-Cube
    
    20-Foot
    
    High-Cube
    
    24,000-LiterContainers on lease:Master lease
    
    
    2,669
    
    
    
    701
    
    
    
    1,032
    
    
    
    48
    
    
    
    131
    
    
    
    27Term leaseShort
term1
    
    
    611
    
    
    
    329
    
    
    
    390
    
    
    
    8
    
    
    
    40
    
    
    
    11Long
term2
    
    
    224
    
    
    
    54
    
    
    
    49
    
    
    
    
    
    
    
    72
    
    
    
    9Sales-type lease
    
    
    
    
    
    
    2
    
    
    
    3
    
    
    
    3
    
    
    
    
    
    
    
    Subtotal
    
    
    3,504
    
    
    
    1,086
    
    
    
    1,474
    
    
    
    59
    
    
    
    243
    
    
    
    47Containers off lease
    
    
    271
    
    
    
    122
    
    
    
    198
    
    
    
    26
    
    
    
    24
    
    
    
    5Total container fleet
    
    
    3,775
    
    
    
    1,208
    
    
    
    1,672
    
    
    
    85
    
    
    
    267
    
    
    
    52
 
 1.
    
    Short term leases represent term leases that are either scheduled for
renegotiation or that may expire on or before June 2007.2.
    
    Long term leases represent term leases, the majority of which will expire
between July 2007 and December 2010. Dry Cargo
    
    Refrigerated
    
    TankContainers
    
    Containers
    
    Containers40-Foot20-Foot
    
    40-Foot
    
    High-Cube
    
    20-Foot
    
    40-Foot
    
    24,000-LiterUnits
    
    %
    
    Units
    
    %
    
    Units
    
    %
    
    Units
    
    %
    
    Units
    
    %
    
    Units
    
    %Total purchases
    
    
    4,553
    
    
    
    100
    %
    
    
    1,500
    
    
    
    100
    %
    
    
    1,750
    
    
    
    100
    %
    
    
    90
    
    
    
    100
    %
    
    
    300
    
    
    
    100
    %
    
    
    52
    
    
    
    100
    %Less disposals
    
    
    778
    
    
    
    17
    %
    
    
    292
    
    
    
    19
    %
    
    
    78
    
    
    
    4
    %
    
    
    5
    
    
    
    6
    %
    
    
    33
    
    
    
    11
    %
    
    
    
    
    
    
    
    %Remaining fleet at
June 30, 2006
    
    
    3,775
    
    
    
    83
    %
    
    
    1,208
    
    
    
    81
    %
    
    
    1,672
    
    
    
    96
    %
    
    
    85
    
    
    
    94
    %
    
    
    267
    
    
    
    89
    %
    
    
    52
    
    
    
    100
    %
 Three Months Ended June 30, 2006 Compared to the Three Months Ended June 30, 2005
 Net lease revenue
 Three Months EndedJune 30,
    
    
    
    
    
    June 30,2006
    
    
    
    
    
    2005Fleet size (measured in twenty-foot equivalent units (TEU))Dry cargo containers
    
    
    9,629
    
    
    
    
    
    
    
    10,541Refrigerated containers
    
    
    644
    
    
    
    
    
    
    
    676Tank containers
    
    
    52
    
    
    
    
    
    
    
    52Average utilization ratesDry cargo containers
    
    
    89
    %
    
    
    
    
    
    
    93
    %Refrigerated containers
    
    
    84
    %
    
    
    
    
    
    
    88
    %Tank containers
    
    
    88
    %
    
    
    
    
    
    
    91
    %
  15




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##### Table of Contents



Depreciation expense
 Other general and administrative expenses
 Impairment charge
 
    
    The age of the North American Dry Containers;
    
    The lack of demand for the North American Dry Containers;
    
    The cost to reposition the North American Dry Containers to high demand markets; and
    
    The strong North American container sale market.
  Net loss on disposal of equipment
  Six Months Ended June 30, 2006 Compared to the Six Months Ended June 30, 2005
 Net lease revenue
 16




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##### Table of Contents



Six Months EndedJune 30,
    
    June 30,2006
    
    2005Fleet size (measured in twenty-foot equivalent units (TEU))Dry cargo containers
    
    
    9,727
    
    
    
    10,597Refrigerated containers
    
    
    655
    
    
    
    678Tank containers
    
    
    52
    
    
    
    52Average utilization ratesDry cargo containers
    
    
    88
    %
    
    
    93
    %Refrigerated containers
    
    
    85
    %
    
    
    87
    %Tank containers
    
    
    89
    %
    
    
    90
    %
  Depreciation expense
 Other general and administrative expenses
 Impairment charges
  Net loss on disposal of equipment
  17




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##### Table of Contents



Liquidity and Capital Resources
     Cash from Operating Activities
 Cash from Investing Activities
 Cash from Financing Activities
 18




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##### Table of Contents



Critical Accounting Policies
  
    
    Container equipment  depreciable lives
    
    Container equipment  valuation
    
    Allowance for doubtful accounts
  Inflation
  
 Quantitative and Qualitative Disclosures About Market Risk
 Exchange rate risk:
 
 Controls and Procedures
   19




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Legal Proceedings
  
 Risk Factors
  
 Unregistered Sales of Equity Securities and Use of Proceeds
  
 Defaults Upon Senior Securities
  
 Submissions of Matters to a Vote of Securities Holders
  
 Other Information
  
 Exhibits
  ExhibitNo.
    
    Description
    
    Method of Filing3(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 document31.2
    
    Rule 13a-14 Certification
    
    Filed with this document32
    
    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. 20




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##### Table of Contents



SIGNATURES
  CRONOS GLOBAL INCOME FUND XVI, L.P.By
    
    Cronos Capital Corp.The General PartnerBy
    
    /s/ Dennis J. TietzDennis J. TietzPresident and Director ofCronos Capital Corp. (CCC)Principal Executive Officer of CCCBy
    
    /s/ John KallasJohn KallasChief Financial Officer andDirector of Cronos Capital Corp. (CCC)Principal Financial and Accounting Officer of CCC
  21




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description
    
    Method of Filing3(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 document31.2
    
    Rule 13a-14 Certification
    
    Filed with this document32
    
    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.