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

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

Commission file number 0-23886

CRONOS GLOBAL INCOME FUND XV, L.P.

(Exact name of registrant as specified in its charter)

California		94-3186624
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

One Front Street, Suite 925, San Francisco, California 94111

(Address of principal executive offices)   (Zip Code)

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

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

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

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

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

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

 

 

CRONOS GLOBAL INCOME FUND XV, L.P.

Report on Form 10-Q for the Quarterly Period
Ended March 31, 2011

TABLE OF CONTENTS

		PAGE
PART I — FINANCIAL INFORMATION			1
Item 1. Financial Statements			1
Unaudited Condensed Balance Sheets as of March 31, 2011 and December 31, 2010			2
Unaudited Condensed Statements of Income for the three months ended March 31, 2011 and 2010			3
Unaudited Condensed Statements of Cash Flows for the three months ended March 31, 2011 and 2010			4
Unaudited Notes to the Condensed Financial Statements			5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			11
Item 3. Quantitative and Qualitative Disclosures About Market Risk			15
Item 4. Controls and Procedures			15
PART II — OTHER INFORMATION			16
Item 1. Legal Proceedings			16
Item 1A. Risk Factors			16
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			16
Item 3. Defaults Upon Senior Securities			16
Item 4. [Removed and Reserved]			16
Item 5. Other Information			16
Item 6. Exhibits			16
EX-31.1
EX-31.2
EX-32

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Presented herein are Cronos Global Income Fund XV, L.P.’s (the “Partnership”) condensed balance sheets as of March 31, 2011 and December 31, 2010, condensed statements of income for the three months ended March 31, 2011 and 2010, and condensed statements of cash flows for the three months ended March 31, 2011 and 2010 (collectively the “Financial Statements”), prepared by the Partnership without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Partnership believes that the disclosures are adequate to make the information presented not misleading. These Financial Statements should be read in conjunction with the financial statements and the notes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2010. These Financial Statements reflect, in the opinion of the Partnership and Cronos Capital Corp., the general partner, all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the results for the interim periods. The statements of income for such interim periods are not necessarily indicative of the results for the full year.

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

Because the Partnership is a limited partnership, the Partnership is not entitled to rely upon the safe harbor provision for forward-looking statements relating to the operations of the Partnership under Section 21E of the Securities Exchange Act of 1934, as amended.

CRONOS GLOBAL INCOME FUND XV, L.P.

Condensed Balance Sheets

(Unaudited)

		March 31,				December 31,
		2011				2010
Assets
Current assets:
Cash		$	2,801,617			$	2,800,849
Net lease receivables due from Leasing Agent			500,854				544,910
Direct financing lease receivable, due from Leasing Agent within one year, net			53,720				48,249
Total current assets			3,356,191				3,394,008
Direct financing lease receivable, due from Leasing Agent after one year, net			146,818				163,707
Container rental equipment, at cost			31,111,790				32,577,888
Less accumulated depreciation			(27,690,795	)			(28,921,085	)
Net container rental equipment			3,420,995				3,656,803
Total assets		$	6,924,004			$	7,214,518
Partners’ Capital
Partners’ capital:
General partner		$	18,384			$	21,365
Limited partners			6,905,620				7,193,153
Total partners’ capital		$	6,924,004			$	7,214,518

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

CRONOS GLOBAL INCOME FUND XV, L.P.

Condensed Statements of Income

(Unaudited)

		Three Months Ended
		March 31,				March 31,
		2011				2010
Net lease revenue from Leasing Agent		$	465,050			$	458,073
Other operating (expenses) income:
Depreciation			(78,623	)			(321,009	)
Other general and administrative expenses			(95,597	)			(98,562	)
Net gain on disposal of equipment			539,932				532,055
			365,712				112,484
Net income		$	830,762			$	570,557
Allocation of net income:
General partner		$	15,762			$	22,009
Limited partners			815,000				548,548
		$	830,762			$	570,557
Limited partners’ per unit share of net income		$	0.11			$	0.08

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

CRONOS GLOBAL INCOME FUND XV, L.P.

Condensed Statements of Cash Flows

(Unaudited)

		Three Months Ended
		March 31,				March 31,
		2011				2010
Net cash provided by operating activities		$	370,823			$	259,279
Cash flows from investing activities:
Proceeds from sale of container rental equipment			751,220				844,819
Cash flows from financing activities:
Distributions to general partner			(18,742	)			(30,622	)
Distributions to limited partners			(1,102,533	)			(1,400,515	)
Net cash used in financing activities			(1,121,275	)			(1,431,137	)
Net increase (decrease) in cash			768				(327,039	)
Cash at the beginning of the period			2,800,849				2,103,099
Cash at the end of the period		$	2,801,617			$	1,776,060

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

CRONOS GLOBAL INCOME FUND XV, L.P.

Notes to Unaudited Condensed Financial Statements

(1)

Summary of Significant Accounting Policies

(a)

Nature of Operations

Cronos Global Income Fund XV, L.P. (the “Partnership”) is a limited partnership organized under the laws of the State of California on August 26, 1993, for the purpose of owning and leasing dry and specialized marine cargo containers to ocean carriers. The Partnership commenced operations on February 22, 1994, when the minimum subscription proceeds of $2,000,000 were received from over 100 subscribers (excluding from such count Pennsylvania residents, Cronos Capital Corp. (“CCC”), the general partner, and all affiliates of CCC). The Partnership offered 7,500,000 units of limited partnership interest at $20 per unit, equal to $150,000,000 in total. The offering terminated on December 15, 1995, at which time 7,151,569 limited partnership units had been sold.

CCC and its affiliate, Cronos Containers Limited (the “Leasing Agent”), manage the business of the Partnership. CCC and the Leasing Agent also manage the container leasing business for other partnerships affiliated with CCC.

In March 2011, the Partnership commenced its 18th year of operations. The Partnership is continuing its liquidation phase wherein CCC focuses its attention on the retirement of the remaining equipment in the Partnership’s container fleet. At March 31, 2011, approximately 25% of the original equipment remained in the Partnership’s fleet. CCC will take several factors into consideration when examining options for the timing of the disposal of the containers. These factors include the level of gross lease revenue generated by the diminishing fleet, the level of costs relative to this revenue, projected disposal proceeds on the disposition of the Partnership’s containers, overall market conditions and any foreseeable changes in other general and administrative expenses. During the first half of 2011, CCC may distribute a request for proposal (“RFP”) to prospective third-party container buyers. A RFP would seek to determine any interest such parties may have in purchasing the remaining containers owned by the Partnership. CCC will not make a decision relating to the final liquidation of the Partnership until any such proposals have been received and fully evaluated. If a decision is made to liquidate the Partnership, the distribution of cash from operations or sales proceeds may be suspended while the liquidation of the remaining containers in the fleet is evaluated. This is to ensure that sufficient cash reserves will be available for expenses relating to the final liquidation and subsequent dissolution of the Partnership. CCC would make one or more liquidating distributions to the Limited Partners on or before the termination of the Partnership, or reinstate the monthly cash distributions should no decision be made to liquidate the fleet in 2011.

The Partnership’s operations are subject to economic, political and business risks inherent in a business environment. The Partnership believes that the profitability of, and risks associated with, leases to foreign customers are generally the same as those to domestic customers. The Partnership’s leases generally require all payments to be made in United States dollars.

(b)

Leasing Agent

The Partnership and the Leasing Agent have entered into an agreement (the “Leasing Agent Agreement”) whereby the Leasing Agent manages the leasing operations for all equipment owned by the Partnership. In addition to responsibility for leasing and re-leasing the equipment to ocean carriers, the Leasing Agent disposes of the containers at the end of their useful economic life and has full discretion over which ocean carriers and suppliers of goods and services it may deal with. The Leasing Agent Agreement permits the Leasing Agent to use the containers owned by the Partnership, together with other containers owned or managed by the Leasing Agent and its affiliates, as part of a single fleet operated without regard to ownership. The Leasing Agent Agreement generally provides that the Leasing Agent will make payments to the Partnership based upon rentals collected from ocean carriers after deducting direct operating expenses and management fees due both to CCC and the Leasing Agent.

CRONOS GLOBAL INCOME FUND XV, L.P.

Notes to Unaudited Condensed Financial Statements

(1)

Summary of Significant Accounting Policies (continued)

(b)

Leasing Agent (continued)

The Leasing Agent leases containers to ocean carriers, generally under operating leases which are either master leases or term leases (mostly one to seven years) and occasionally under sales-type leases and direct financing leases.

Master leases do not specify the exact number of containers to be leased or the term that each container will remain on hire but allow the ocean carrier to pick up and drop off containers at various locations. Rentals are charged and recognized based upon the number of containers used and the applicable per-diem rate. Accordingly, rentals under master leases are variable and contingent upon the number of containers used.

Term leases are for a fixed quantity of containers for a fixed period of time, typically varying from three to seven years. In most cases, containers cannot be returned prior to the expiration of the lease. Term lease agreements may contain early termination penalties that apply in the event of early redelivery. Term leases provide greater revenue stability to the lessor, usually at lower lease rates than master leases. Ocean carriers use term leases to lower their operating costs when they have a need for an identified number of containers for a specified term. Rentals under term leases are charged and recognized based upon the number of containers leased, the applicable per-diem rate and the length of the lease, irrespective of the number of days which the customer actually uses the containers.

Direct financing leases are long-term in nature, usually ranging from three to seven years, and require relatively low levels of customer service. They ordinarily require fixed payments over a defined period and provide customers with an option to purchase the subject containers at the end of the lease term. Per-diem rates include an element of repayment of capital and therefore are usually higher than rates charged under either term or master leases.

(c)

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by US GAAP for annual financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2011. For further information, refer to the financial statements and footnotes thereto included in the Partnership’s Annual Report on Form 10-K for the year ended December 31, 2010 filed with the Securities and Exchange Commission (“SEC”).

(d)

Use of Estimates in Interim Financial Statements

The preparation of interim financial statements, in conformity with US GAAP and the SEC regulations for interim reporting, requires the Partnership to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. The most significant estimates are those relating to the carrying value of equipment, including estimates relating to depreciable lives and residual values, and those relating to the allowance for doubtful accounts. Actual results could differ from those estimates.

CRONOS GLOBAL INCOME FUND XV, L.P.

Notes to Unaudited Condensed Financial Statements

(1)

Summary of Significant Accounting Policies (continued)

(e)

Container Rental Equipment

Container rental equipment is depreciated over a 15-year life using the straight-line basis to a residual value of 10% of the original equipment cost. The Partnership and CCC evaluate the period of depreciation and residual values to determine whether subsequent events and circumstances warrant revised estimates of useful lives.

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 when indicators, such as material changes in market conditions, are present. Indicators of a potential impairment include a sustained decrease in utilization or operating profitability, or indications of technological obsolescence. The primary variables utilized by the analysis are current and projected utilization rates, per-diem rental rates, direct operating expenses, fleet size, container disposal proceeds and the timing of container disposals. Additionally, the Partnership evaluates future cash flows and potential impairment for its entire fleet rather than for each container type or individual container. As a result, future losses could result for individual container dispositions due to various factors, including age, condition, suitability for continued leasing, as well as the geographical location of containers when disposed. There were no impairment charges recorded against the carrying value of container rental equipment for the three-month period ended March 31, 2011 and 2010.

(f)

Allocation of Net Income or Loss, Partnership Distributions and Partners’ Capital

Net income or loss has been allocated between the general and limited partners in accordance with the Partnership Agreement. The Partnership Agreement generally provides that CCC shall at all times maintain at least a 1% interest in each item of income or loss, including the gain arising from the sale of containers. The Partnership Agreement further provides that the gain arising from the sale of containers be allocated first to the partners with capital account deficit balances in an amount sufficient to eliminate any deficit capital account balance. Thereafter, the Partnership’s gains arising from the sale of containers are allocated to the partners in accordance with their share of sale proceeds distributed. The Partnership Agreement also provides for income (excluding the gain arising from the sale of containers) for any period be allocated to CCC in an amount equal to that portion of CCC’s distributions in excess of 1% of the total distributions made to both CCC and the limited partners of the Partnership for such period, as well as other allocation adjustments.

Actual cash distributions differ from the allocations of net income or loss between the general and limited partners as presented in these financial statements. Partnership distributions are paid to the 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.

CRONOS GLOBAL INCOME FUND XV, L.P.

Notes to Unaudited Condensed Financial Statements

(1)

Summary of Significant Accounting Policies (continued)

(f)

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

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

(2)

Net Lease Receivables Due from Leasing Agent

Net lease receivables due from Leasing Agent at March 31, 2011 and December 31, 2010 comprised:

		March 31,				December 31,
		2011				2010
Gross lease receivables		$	793,394			$	1,076,823
Less:
Direct operating expenses payable			187,984				413,926
Base management fees payable			34,408				41,986
Reimbursable administrative expenses payable			11,364				12,464
Allowance for doubtful accounts			58,784				63,537
Net lease receivables due from Leasing Agent		$	500,854			$	544,910

Included within the amount of gross lease receivables are $420,102 and $242,537 in respect of amounts owed by the Leasing Agent in relation to disposal related invoices at March 31, 2011 and December 31, 2010, respectively.

At March 31, 2011 and December 31, 2010, respectively, amounts of $1,927 and $1,309 were recorded as doubtful debt expense. In addition, $2,285 was written off in the three months ended March 31, 2011. There were no write-offs in the three months ended March 31, 2010.

CRONOS GLOBAL INCOME FUND XV, L.P.

Notes to Unaudited Condensed Financial Statements

(3)

Net Lease Revenue

Net lease revenue for the three-month period ended March 31, 2011 and 2010 was as follows:

		Three Months Ended
		March 31,				March 31,
		2011				2010
Gross lease revenue		$	549,796			$	667,828
Interest income from direct financing lease			41,369				43,807
Less:
Direct operating expenses			48,418				155,474
Base management fees			41,068				47,800
Reimbursable administrative expenses
Salaries			24,269				36,995
Other payroll related expenses			5,743				4,899
General and administrative expenses			6,617				8,394
			126,115				253,562
Net lease revenue		$	465,050			$	458,073

(4)

Operating Segment

An operating segment is a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, whose operating results are regularly reviewed by the enterprise’s chief operating decision maker to make decisions about resources to be allocated to the segment and to assess its performance, and about which separate financial information is available. CCC and the Leasing Agent operate the Partnership’s container fleet as a homogenous unit and have determined that as such, it has a single reportable operating segment.

A summary of gross lease revenue earned by each Partnership container type for the periods ended March 31, 2011 and 2010 follows:

		Three Months Ended
		March 31,				March 31,
		2011				2010
Dry cargo containers		$	418,919			$	524,377
Refrigerated containers			4,738				12,256
Tank containers			126,139				131,195
Total		$	549,796			$	667,828

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.

CRONOS GLOBAL INCOME FUND XV, L.P.

Notes to Unaudited Condensed Financial Statements

(5)

Limited Partners’ Capital

Cash distributions made to the limited partners for the three-month period ended March 31, 2011 and 2010 were as follows:

		Three Months Ended
		March 31,				March 31,
		2011				2010
Cash distributions from operations		$	178,788			$	253,285
Cash distributions from sales proceeds			923,745				1,147,230
Total cash distributions		$	1,102,533			$	1,400,515

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

The limited partners’ per unit share of capital was $0.97 at March 31, 2011 and $1.01 at December 31, 2010, respectively. This is calculated by dividing the limited partners’ capital at the end of March 31, 2011 and December 31, 2010 by 7,151,569, the total number of outstanding limited partnership units.

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, 2010 Annual Report on Form 10-K and the financial statements and the notes thereto appearing elsewhere in this report.

Results of Operations

Partnership Overview

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

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

•

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

•

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

•

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

     The following table summarizes the composition of the Partnership’s operating lease fleet based on container type, and is measured in twenty foot equivalent units (TEUs) at March 31, 2011:

		Dry Cargo				Refrigerated				Tank
		Containers				Containers				Containers				Total
Container on lease:
Master lease			7,534				8				74				7,616
Term lease
Short term1			3,675				3				44				3,722
Long term2			857				1				35				893
			4,532				4				79				4,615
Subtotal			12,066				12				153				12,231
Containers off-hire			112				1				17				130
Total container fleet			12,178				13				170				12,361

     At March 31, 2011, approximately 25% of the original equipment remained in the Partnership’s operating fleet, compared to approximately 26% at December 31, 2010. The following table details the proportion of the operating lease fleet remaining by product type, and is measured in TEUs:

		Dry Cargo								Refrigerated
		Containers								Containers								Tank Containers								Total
		TEU					%			TEU					%			TEU					%			TEU					%
Total purchases			48,306				100	%			663				100	%			229				100	%			49,198				100	%
Less disposals			36,128				75	%			650				98	%			59				26	%			36,837				75	%
Remaining fleet at March 31, 2011			12,178				25	%			13				2	%			170				74	%			12,361				25	%

Market & Industry Overview

     The utilization rate for the Partnership’s container fleet was 99% at March 31, 2011. The sector as a whole continues to benefit from economic growth, which is predicted to continue at a steady pace through 2012. Lease rates remain stable as customers secure equipment to meet their demands, while a reduction in direct operating expenses is attributable primarily to the strong market and corresponding high utilization levels.

     The robust secondary market for used containers has continued into the first quarter of 2011. Strong utilization led to a reduction in containers available for sale. For the quarter, the Partnership disposed of 476 containers, compared to 939 for the same period in 2010. The average disposal proceeds per 20-foot dry cargo container, sold at the end of its economic life, in the first quarter of 2011 increased 72% to $1,415 when compared to the same period of 2010. Future proceeds and the volume of containers disposed will be highly dependent on factors such as the performance of the container leasing market, regional economics, currency fluctuations, new equipment prices and the volume of new equipment available for leasing.

     In spite of the strong market, there is still a risk of customer defaults in the future as shipping lines continue to recover from the poor market conditions of recent years.

     The Partnership’s average fleet size and utilization rates for the three-month period ended March 31, 2011 and 2010 were as follows:

		Three Months Ended
		March 31,				March 31,
		2011				2010
Average fleet size (measured in TEUs)
Dry cargo containers			12,334				15,784
Refrigerated containers			13				38
Tank containers			171				183
Utilization rates for combined fleet
Average for the period			98	%			90	%
At end of period			99	%			93	%

Three Months Ended March 31, 2011, Compared to the Three Months Ended March 31, 2010

Overview

     Net income for the three months ended March 31, 2011, was $830,762, an increase of $260,205, or 46%, when compared to the corresponding period in the prior year. The primary reasons for the change in profitability were:

§

The Partnership experienced stronger market conditions for leased containers;

§

Depreciation expense was lower than in the prior year, as the Partnership continued to sell equipment that had reached the end of its useful economic life for maritime leasing.

Analysis & Discussion

     Net lease revenue increased by $6,977 in the first quarter of 2011 when compared to the corresponding period of 2010. The increase was primarily due to:

§

a $107,056, or 69%, decline in direct operating expenses as a result of the increase in utilization and corresponding decline in inventories of off-hire equipment, which resulted in a reduction in both activity-related and inventory-related expenses, partially offset by

§

a $118,032, or 18%, reduction in gross lease revenue (a component of net lease revenue), that was attributable to the reduction in the Partnership’s fleet size.

     Other components of net lease revenue are interest income from direct financing leases, management fees and reimbursable administrative expenses. Interest income from direct financing leases decreased by $2,438. Management fees and reimbursed administrative expenses decreased by $20,391 when compared to the corresponding period of 2010, a result of the Partnership’s declining fleet size.

     Depreciation expense decreased by $242,386, or 76%, compared to the corresponding period in 2010. This is a direct result of the decline of the size of the Partnership’s fleet and the fact that some of the Partnership fleet is now fully depreciated.

     Other general and administrative expenses were $95,597 for the three-month period ended March 31, 2011, a decrease of $2,965, or 3%, when compared to the same period in 2010. This decrease was primarily attributable to lower fees for investor administrative services.

     Net gain on disposal of equipment for the three months ended March 31, 2011 was $539,932, an increase of $7,877, or 2%, when compared to the corresponding period of 2010. The increase in the net gain was due to the combined effect of lower net book values for the containers sold in 2011 compared to those sold in 2010, and an increase in the proceeds realized per container.

Liquidity and Capital Resources

     During the Partnership’s first ten years of operations, the Partnership’s primary objective was to generate cash flows from operations for distribution to its limited partners. The Partnership relied primarily on container rental receipts to meet this objective. No credit lines are maintained to finance working capital. Commencing in 2005, the Partnership’s 11th year of operations, the Partnership began to focus its attention on the disposition of its fleet in accordance with another of its original investment objectives, realizing the residual value of its containers after the expiration of their economic useful lives, estimated to be 15 years after placement in leased service.

     In March 2011, the Partnership commenced its 18th year of operations and continued its liquidation phase. At March 31, 2011, approximately 25% of the original equipment remained in the Partnership’s fleet. Future periods are expected to generate diminishing results as the Partnership’s smaller fleet now has a greater impact on its operations than global economic growth and container trade. CCC will take several factors into consideration when examining options for the timing of the disposal of the containers and the ultimate termination of the Partnership. These factors include the level of net lease revenue generated by the diminishing fleet, the level of costs relative to this revenue,

projected disposal proceeds on the disposition of the Partnership’s containers, overall market conditions and any foreseeable changes in other general and administrative expenses. During the first half of 2011, CCC may distribute a request for proposal (“RFP”) to prospective third-party container buyers. A RFP would seek to determine any interest such parties may have in purchasing the remaining containers owned by the Partnership. CCC will not make a decision relating to the final liquidation of the Partnership until any such proposals have been received and fully evaluated. If a decision is made to liquidate the Partnership, the distribution of cash from operations or sales proceeds may be suspended while the liquidation of the remaining containers in the fleet is evaluated. This is to ensure that sufficient cash reserves will be available for expenses relating to the final liquidation and subsequent dissolution of the Partnership. CCC would make one or more liquidating distributions to the Limited Partners on or before the termination of the Partnership, or reinstate the monthly cash distributions should no decision be made to liquidate the fleet in 2011. Upon the liquidation of the Partnership, CCC shall contribute to the Partnership, if necessary, an amount equal to the lesser of the deficit balance in its capital account at the time of such liquidation, or 1.01% of the excess of the limited partners’ capital contributions to the Partnership over the capital contributions previously made to the Partnership by CCC, after giving effect to the allocation of income or loss arising from the liquidation of the Partnership’s assets.

     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 March 31, 2011, the Partnership had $2,801,617 in cash, an increase of $768 from cash balances at December 31, 2010. As of March 31, 2011, the Partnership held its cash on deposit in an operating bank account. The Partnership reviews its investment strategy for cash balances on a periodic basis and will invest in short-term, interest bearing accounts as appropriate.

     Cash from Operating Activities: Net cash provided by operating activities, primarily generated by net lease revenue receipts, was $370,823 for the three months ended March 31, 2011, compared to $259,279 for the same three-month period in 2010.

     Cash from Investing Activities: Net cash provided by investing activities was $751,220 during the three months ended March 31, 2011, compared to $844,819 in the corresponding period of 2010. These amounts represent sales proceeds generated from the sale of container rental equipment.

     Cash from Financing Activities: Net cash used in financing activities was $1,121,275 for the three months ended March 31, 2011, compared to $1,431,137 for the corresponding period in 2010. These amounts represent distributions to the Partnership’s general and limited partners. The Partnership’s continuing container disposals should produce lower operating results, and consequently, lower distributions to its partners in subsequent periods.

Critical Accounting Policies

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

•

Container equipment — depreciable lives and residual values.

•

Container equipment — recoverability and valuation.

•

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 December 31, 2010 Annual Report on Form 10-K.

Inflation

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

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

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

Item 4. Controls and Procedures

     The Partnership, as such, has no officers or directors, but is managed by CCC, the general partner. The principal executive and principal financial officers of CCC have evaluated the disclosure controls and procedures of the Partnership as of the end of the period covered by this report. As used herein, the term “disclosure controls and procedures” has the meaning given to the term by Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (“Exchange Act”), and includes the controls and other procedures of the Partnership that are designed to ensure that information required to be disclosed by the Partnership in the reports that it files with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Based upon their evaluation, the principal executive and principal financial officers of CCC have concluded that the Partnership’s disclosure controls and procedures were effective such that the information required to be disclosed by the Partnership in this report is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms applicable to the preparation of this report and is accumulated and communicated to CCC’s management, including CCC’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

     There have not been any changes in the Partnership’s internal control over financial reporting identified in connection with Management’s Report in the Partnership’s December 31, 2010 Annual Report on Form 10-K that occurred during the Partnership’s first quarter ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, the Partnership’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Not applicable.

Item 1A. Risk Factors

There are no material changes from the risk factors as disclosed under Item 1A of Part I in the Partnership’s December 31, 2010 Annual Report on Form 10-K.

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

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 4. [Removed and Reserved]

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 15, 1993		*
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 ****

SIGNATURES

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

Date: May 13, 2011

EXHIBIT INDEX

Exhibit
No.		Description		Method of Filing
3(a)		Limited Partnership Agreement, amended and restated as of December 15, 1993		*
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 ****