<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

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

                        Commission File Number: 33-62526

                      COMMONWEALTH INCOME & GROWTH FUND IV
             (Exact name of registrant as specified in its charter)

         Pennsylvania                                  23-3080409
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
 incorporation or organization)

                               470 John Young Way
                                 Exton, PA 19341
          (Address, including zip code, of principal executive offices)

                                 (610) 594-9600
               (Registrant's telephone number including area code)

         Indicate by check mark whether the registrant (i) 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, and (ii) has been subject to such filing
requirements for the past 90 days: YES [X] NO [ ]

         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, to the best of Registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K:
YES [X]   NO [ ]

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12c-2 of the Act): YES [ ] NO [X]

                       DOCUMENTS INCORPORATED BY REFERENCE
 (Specific sections incorporated are identified under applicable items herein)

         Certain exhibits to the Company's Registration Statement on Form S-1
(File No. 33-62526).


<PAGE>
PART I

ITEM 1:  BUSINESS

GENERAL

         Commonwealth Income and Growth Fund IV (the "Partnership") was formed
on May 15, 2002 under the Pennsylvania Revised Uniform Limited Partnership Act.
The Partnership began offering $15,000,000 of Units of Limited Partnership
("Units") to the public on October 19, 2002 (the "Offerings"). The Partnership
raised the minimum capital required ($1,150,000) and commenced operations on
July 8, 2002. The Partnership terminated its offering of Units on September 15,
2003. As of December 31, 2003, 749,950 Units ($14,967,729) have been admitted as
Limited Partners of the Partnership.

         See "The Glossary" below for the definition of capitalized terms not
otherwise defined in the text of this report.

PRINCIPAL INVESTMENT OBJECTIVES

         The Partnership was formed for the purpose of acquiring various types
of Equipment, including computer peripheral and other similar capital equipment.
The Partnership utilized the net proceeds of the Offering to purchase IBM and
IBM compatible computer peripheral and other similar capital equipment. The
Partnership utilizes Retained Proceeds and debt financing (not to exceed 30% of
the aggregate cost of the Equipment owned or subject to Conditional Sales
Contract by the Partnership at the time the debt is incurred) to purchase
additional Equipment. The Partnership acquires and leases Equipment principally
to U.S. corporations and other institutions pursuant to Operating Leases. The
Partnership retains the flexibility to enter into Full Payout Net Leases and
Conditional Sales Contracts, but has not done so.

         The Partnership's principal investment objectives are to;

         (a) acquire, lease and sell Equipment to generate revenues from
         operations sufficient to provide annual cash distributions to Limited
         Partners;

         (b) preserve and protect Limited Partners' capital;

         (c) use a portion of Cash Flow and Net Disposition Proceeds derived
         from the sale, refinancing or other disposition of Equipment to
         purchase additional Equipment; and

         (d) refinance, sell or otherwise dispose of Equipment in a manner that
         will maximize the proceeds to the Partnership.

THERE CAN BE NO ASSURANCE THAT ANY OF THESE OBJECTIVES WILL BE ATTAINED.

         Limited Partners do not have the right to vote on or otherwise approve
or disapprove any particular investment to be made by the Partnership.

         Although the Partnership has acquired predominately new Equipment, the
Partnership may purchase used Equipment. Generally, Equipment is acquired from
manufacturers, distributors, leasing companies, agents, owner-users,
owner-lessors, and other suppliers upon terms that vary depending upon the
Equipment and supplier involved. Manufacturers and distributors usually furnish
a limited warranty against defects in material and workmanship and some purchase
agreements for Equipment provide for

                                                                               2
<PAGE>

service and replacement of parts during a limited period. Equipment purchases
are also made through lease brokers and on an ad hoc basis to meet the needs of
a particular lessee.

         As of December 31, 2003, all Equipment purchased by the Partnership is
subject to an Operating Lease or an Operating Lease was already entered into
with a third party when the Partnership acquired an item of Equipment. The
Partnership may also engage in sale/leaseback transactions, pursuant to which
the Partnership would purchase Equipment from companies that would then
immediately lease the Equipment from the Partnership. The Partnership may also
purchase Equipment which is leased under Full Payout Net Leases or sold under
Conditional Sales Contracts at the time of acquisition or the Partnership may
enter into a Full Payout Net Lease or Conditional Sales Contract with a third
party when the Partnership acquires an item of Equipment.

         The Partnership may enter into arrangements with one or more
manufacturers pursuant to which the Partnership purchases from such
manufacturers Equipment that has previously been leased directly by the
manufacturer to third parties ("vendor leasing agreements"). The Partnership and
manufacturers may agree to nonrecourse loans to the Partnership from the
manufacturers to finance the acquisition of Equipment secured by the Equipment
and the receivables due to the manufacturers from users of such Equipment. It is
expected that the manufacturers of Equipment will provide maintenance,
remarketing and other services for the Equipment subject to such agreements. As
of December 31, 2003, the Partnership has not entered into any such agreements.

         The General Partner has the discretion consistent with its fiduciary
duty to change the investment objectives of the Partnership if it determines
that such a change is in the best interest of the Limited Partners and so long
as such a change is consistent with the Partnership Agreement. The General
Partner will notify the Limited Partners if it makes such a determination to
change the Partnership's investment objectives.

TYPES OF EQUIPMENT

         Computer Peripheral Equipment. Computer peripheral equipment consists
of devices used to convey information into and out of a central processing unit
(or "mainframe") of a computer system, such as tape drives, disk drives, tape
controllers, disk controllers, printers, terminals and related control units,
all of which are in some way related to the process of storing, retrieving, and
processing information by computer.

         The Partnership acquires primarily IBM manufactured or IBM compatible
equipment. The General Partner believes that dealing in IBM or IBM compatible
equipment is particularly advantageous because of the large IBM customer base,
policy of supporting users with software and maintenance services and the large
amount of IBM and IBM compatible equipment in the marketplace.

         Computer technology has developed rapidly in recent years and is
expected to continue to do so. Technological advances have permitted continued
reductions in the cost of computer processing capacity, thereby permitting
applications not economically feasible a few years ago. Much of the older IBM
and IBM compatible computer peripheral equipment has not been retired from
service, because software is generally interchangeable between older and newer
equipment, and older equipment is capable of performing many of the same
functions as newer equipment. The General Partner believes, historically, that
the values of peripheral equipment have been affected less dramatically by
changes in technology than have the values of central processing units. An
equipment user who upgrades to a more advanced central processor generally can
continue to use his existing peripheral equipment. Peripheral equipment
nevertheless is subject to declines in value as new, improved models are
developed and become available. Technological advances and other factors,
discussed below in Management Discussion and Analysis, have at times caused
dramatic reduction in the market prices of older models of IBM and IBM
compatible computer peripheral equipment from the prices at which they were
originally introduced.

                                                                               3
<PAGE>

         Other Equipment-Restrictions. The Partnership acquires computer
peripheral equipment, such as tape drives, disk drives, tape controllers, disk
controllers, printers, terminals and related control units, all of which are in
some way related to the process of storing, retrieving and processing
information by computer. The General Partner is also authorized, but does not
presently intend, to cause the Partnership to invest in non-IBM compatible
computer peripheral, data processing, telecommunication or medical technology
equipment. The Partnership may not invest in any of such other types of
Equipment (i) to the extent that the purchase price of such Equipment, together
with the aggregate Purchase Price of all such other types of Equipment then
owned by the Partnership, is in excess of 25% of the total cost of all of the
assets of the Partnership at the time of the Partnership's commitment to invest
therein and (ii) unless the General Partner determines that such purchase is in
the best economic interest of the Partnership at the time of the purchase and,
in the case of non-IBM compatible peripheral Equipment, that such Equipment is
comparable in quality to similar IBM or IBM compatible Equipment. There can be
no assurance that any Equipment investments can be found which meet this
standard. Accordingly, there can be no assurance that investments of this type
will be made by the Partnership.

DIVERSIFICATION

         Diversification is generally desirable to minimize the effects of
changes in specific industries, local economic conditions or similar risks.
However, the extent of the Partnership's diversification, in the aggregate and
within each category of Equipment, depends in part upon the financing which can
be assumed by the Partnership or borrowed from third parties on satisfactory
terms. The Partnership's policy not to borrow on a recourse basis will further
limit its financing options. Diversification also depends on the availability of
various types of Equipment. Through December 31, 2003, the Partnership has
acquired a diversified Equipment portfolio, which it has leased to 38 different
companies located throughout the United States. The allocations are as follows:

   ----------------------------------------------------- -------------------
                     Equipment Type                         Approximate %
   ----------------------------------------------------- -------------------
                      Workstations                              31%
   ----------------------------------------------------- -------------------
                        Servers                                 29%
   ----------------------------------------------------- -------------------
               Communication Controllers                        16%
   ----------------------------------------------------- -------------------
                   High-end Printers                            14%
   ----------------------------------------------------- -------------------
                        Routers                                  7%
   ----------------------------------------------------- -------------------
                    Low-end Printers                             2%
   ----------------------------------------------------- -------------------
                    Optical Storage                              1%
   ----------------------------------------------------- -------------------
                         Total                                  100%
   ----------------------------------------------------- -------------------


         During the operational stage of the Partnership, the Partnership may
not at any one point in time lease (or sell pursuant to a Conditional Sales
Contract) more than 25% of the Equipment to a single Person or Affiliated group
of Persons.

DESCRIPTION OF LEASES

         The Partnership to date has purchased, and in the future intends to
continue to purchase only Equipment that is subject to a lease or for which a
lease or similar agreement will be entered into contemporaneously with the
consummation of the Partnership's acquisition of the Equipment. The General
Partner to date has leased and in the future intends to lease most of the
Equipment purchased by the Partnership to third parties pursuant to Operating
Leases. Operating Leases are relatively short-term (12 to 48 month) leases under
which the aggregate noncancellable rental payments during the original term of
the lease are not sufficient to permit the lessor to recover the purchase price
of the subject Equipment. The Equipment may also be leased pursuant to Full
Payout Net Leases. Full Payout Net Leases are leases under which the aggregate
noncancellable rental payments during the original term of the lease are at
least sufficient to recover the purchase price of the subject Equipment. It is
anticipated that the Partnership will enter into few, if any, Full Payout net
Leases. The General Partner may also

                                                                               4
<PAGE>

enter into Conditional Sales Contracts for Equipment. A Conditional Sales
Contract generally provides that the noncancellable payments to the seller over
the term of the contract are sufficient to recover the investment in such
Equipment and to provide a return on such investment. Under a Conditional Sales
Contract, the seller reserves title to, and retains a security interest in, the
Equipment until the Purchase Price of the Equipment is paid. As of December 31,
2003, the Partnership has not entered into any Full Payout Net Leases or
Conditional Sales Contracts for Equipment and does not presently intend to
do so.

         In general, the terms of the Partnership's leases, whether the
Equipment is leased pursuant to an Operating lease or a Full Payout Net Lease,
depend upon a variety of factors, including: the desirability of each type of
lease from both an investment and a tax point of view; the relative demand among
lessees for Operating or Full Payout Net Leases; the type and use of Equipment
and its anticipated residual value; the business of the lessee and its credit
rating; the availability and cost of financing; regulatory considerations; the
accounting treatment of the lease sought by the lessee or the Partnership; and
competitive factors.

         An Operating Lease generally represents a greater risk to the
Partnership than a Full Payout Net Lease, because in order to recover the
purchase price of the subject Equipment and earn a return on such investment, it
is necessary to renew or extend the Operating Lease, lease the Equipment to a
third party at the end of the original lease term, or sell the Equipment. On the
other hand, the term of an Operating Lease is generally much shorter than the
term of a Full Payout Net Lease, and the lessor is thus afforded an opportunity
under an Operating Lease to re-lease or sell the subject Equipment at an earlier
stage of the Equipment's life cycle than under a Full Payout Net Lease. Also,
the annual rental payments received under an Operating Lease are ordinarily
higher than those received under a Full Payout Net Lease.

         The Partnership's policy is to generally enter into "triple net leases"
(or the equivalent, in the case of a Conditional Sales Contract) which typically
provide that the lessee or some other party bear the risk of physical loss of
the Equipment; pay taxes relating to the lease or use of the Equipment; maintain
the Equipment; indemnify the Partnership-lessor against any liability suffered
by the Partnership as the result of any act or omission of the lessee or its
agents; maintain casualty insurance in an amount equal to the greater of the
full value of the Equipment and a specified amount set forth in the lease; and
maintain liability insurance naming the Partnership as an additional insured
with a minimum coverage which the General Partner deems appropriate. In
addition, the Partnership may purchase "umbrella" insurance policies to cover
excess liability and casualty losses, to the extent deemed practicable and
advisable by the General Partner. As of December 31, 2003, all leases that have
been entered into are "triple net leases".

         The General Partner has not established any standards for lessees to
whom it will lease Equipment and, as a result, there is not an investment
restriction prohibiting the Partnership from doing business with any lessees.
However, a credit analysis of all potential lessees is undertaken by the General
Partner to determine the lessee's ability to make payments under the proposed
lease. The General Partner may refuse to enter into an agreement with a
potential lessee based on the outcome of the credit analysis.

         The terms and conditions of the Partnership's leases, or Conditional
Sales Contracts, are each determined by negotiation and may impose substantial
obligations upon the Partnership. Where the Partnership assumes maintenance or
service obligations, the General Partner generally causes the Partnership to
enter into separate maintenance or service agreements with manufacturers or
certified maintenance organizations to provide such services. Such agreements
generally require annual or more frequent adjustment of service fees. As of
December 31, 2003, the Partnership has not entered into any such agreements.

         Remarketing fees are paid to the leasing companies from which the
Partnership purchases leases. These are fees that are earned by the leasing
companies when the initial terms of the lease have been met. The Partnership
believes that this is a valuable method since it entices the leasing company
from whom we have purchased the lease from to assist in the extension, or
"remarket", of the lease, or possibly sell the equipment to the lessee. This
remarketing fee is factored in when negotiating an extension or sales.

                                                                               5
<PAGE>

BORROWING POLICIES

         The General Partner, at its discretion, may cause the Partnership to
incur debt in the maximum aggregate amount of 30% of the aggregate cost of the
Equipment owned, or subject to Conditional Sales Contract, by the Partnership at
the time the debt is incurred, with monies received that is not considered
"original proceeds". The Partnership incurs only non-recourse debt, which is
secured by Equipment and lease income therefrom. Such leveraging permits the
Partnership to increase the aggregate amount of its depreciable assets, and, as
a result, potentially increases both its lease revenues and its federal income
tax deductions above those levels, which would be achieved without leveraging.
There is no limit on the amount of debt that may be incurred in connection with
the acquisition of any single item of Equipment. Any debt incurred is fully
amortized over the term of the initial lease or Conditional Sales Contract to
which the Equipment securing the debt is subject. The precise amount borrowed by
the Partnership depends on a number of factors, including the types of Equipment
acquired by the Partnership; the creditworthiness of the lessee; the
availability of suitable financing; and prevailing interest rates. The
Partnership is flexible in the degree of leverage it employs, within the
permissible limit. There can be no assurance that credit will be available to
the Partnership in the amount or at the time desired or on terms considered
reasonable by the General Partner. As of December 31, 2003, the aggregate
nonrecourse debt outstanding of $1,817,000 was 17.0% of the aggregate cost of
the Equipment owned.

         The Partnership may purchase some items of Equipment without leverage.
If the Partnership purchases an item of Equipment without leverage and
thereafter suitable financing becomes available, it may then obtain the
financing, secure the financing with the purchased Equipment to the extent
practicable and invest any proceeds from such financing in additional items of
Equipment, or it may distribute some or all of such proceeds to the Limited
Partners. Any such later financing will be on terms consistent with the terms
applicable to borrowings generally. As of December 31, 2003, the Partnership has
not exercised this option.

         To date, the General Partner has not caused the Partnership to borrow
funds at fixed interest rates and plans to continue borrowing additional funds,
to the fullest extent practicable. The Partnership may borrow funds at rates,
which vary with the "prime" or "base" rate. If lease revenues were fixed, a rise
in the "prime" or "base" rate would increase borrowing costs and reduce the
amount of the Partnership's income and cash available for distribution.
Therefore, the General Partner is permitted to borrow funds to purchase
Equipment at fluctuating rates only if the lease for such Equipment provides for
fluctuating rental payments calculated on a similar basis.

         Any additional debt incurred by the Partnership must be nonrecourse.
Nonrecourse debt, in the context of the business to be conducted by the
Partnership, means that the lender providing the funds can look for security
only to the Equipment pledged as security and the proceeds derived from leasing
or selling such Equipment. Neither the Partnership nor any Partner (including
the General Partner) would be liable for repayment of any nonrecourse debt.

         Loan agreements may also require that the Partnership maintain certain
reserves or compensating balances and may impose other obligations upon the
Partnership. Moreover, since a significant portion of the Partnership's revenues
from the leasing of Equipment will be reserved for repayment of debt, the use of
financing reduces the cash, which might otherwise be available for distributions
until the debt has been repaid and may reduce the Partnership's Cash Flow over a
substantial portion of the Partnership's operating life. As of December 31,
2003, no such agreements existed.

         The General Partner and any of its Affiliates may, but are not required
to, make loans to the Partnership on a short-term basis. If the General Partner
or any of its Affiliates makes such a short-term loan to the Partnership, the
General Partner of Affiliate may not charge interest at a rate greater that the
interest rate charged by unrelated lenders on comparable loans for the same
purpose in the same locality. In no event is the Partnership required to pay
interest on any such loan at an annual rate greater than

                                                                               6
<PAGE>

three percent over the "prime rate' from time to time announced by PNC Bank,
Philadelphia, Pennsylvania ("PNC Bank"). All payments of principal and interest
on any financing provided by the General Partner or any of its affiliates are
due and payable by the Partnership within 12 months after the date of the loan.

REFINANCING POLICIES

         Subject to the limitations set forth in "Borrowing Policies" above, the
Partnership may refinance its debt from time to time. With respect to a
particular item of Equipment, the General Partner will take into consideration
such factors as the amount of appreciation in value, if any, to be realized, the
possible risks of continued ownership, and the anticipated advantages to be
obtained for the Partnership, as compared to selling such Equipment. As of
December 31, 2003, the Partnership has no such debt.

         Refinancing, if achievable, may permit the Partnership to retain an
item of Equipment and at the same time to generate additional funds for
reinvestment in additional Equipment or for distribution to the Limited
Partners.

LIQUIDATION POLICIES

         The General Partner intends to cause the Partnership to begin disposing
of its Equipment in approximately January 2012. Notwithstanding the
Partnership's objective to sell all of its assets and dissolve by December 31,
2012, the General Partner may at any time cause the Partnership to dispose of
all its Equipment and, dissolve the Partnership upon the approval of Limited
Partners holding a Majority in Interest of Units.

         Particular items of Equipment may be sold at any time if, in the
judgment of the General Partner, it is in the best interest of the Partnership
to do so. The determination of whether particular items of Partnership Equipment
should be sold or otherwise disposed of is made by the General Partner after
consideration of all relevant factors (including prevailing general economic
conditions, lessee demand, the General Partner's views of current and future
market conditions, the cash requirements of the Partnership, potential capital
appreciation, cash flow and federal income tax considerations), with a view
toward achieving the principal investment objectives of the Partnership. As
partial payment for Equipment sold, the Partnership may receive purchase money
obligations secured by liens on such Equipment. Subject to the General Partner's
discretion the Partnership may extend beyond December 31, 2012, if deemed
beneficial to the Partnership.

MANAGEMENT OF EQUIPMENT

         Equipment management services for the Partnership's Equipment is
provided by the General Partner and its Affiliates and by persons employed by
the General Partner. Such services will consist of collection of income from the
Equipment, negotiation and review of leases, Conditional Sales Contracts and
sales agreements, releasing and leasing-related services, payment of operating
expenses, periodic physical inspections and market surveys, servicing
indebtedness secured by Equipment, general supervision of lessees to assure that
they are properly utilizing and operating Equipment, providing related services
with respect to Equipment, supervising, monitoring and reviewing services
performed by others in respect to Equipment and preparing monthly Equipment
operating statements and related reports.

COMPETITION

         The equipment leasing industry is highly competitive. The Partnership
competes with leasing companies, equipment manufacturers and their affiliated
financing companies, distributors and entities similar to the Partnership
(including other programs sponsored by the General Partner), some of which have
greater financial resources than the Partnership and more experience in the
equipment leasing

                                                                               7
<PAGE>

business than the General Partner. Other leasing companies and equipment
manufacturers, their affiliated financing companies and distributors may be in a
position to offer equipment to prospective lessees on financial terms, which are
more favorable, that those which the Partnership can offer. They may also be in
a position to offer trade-in privileges, software, maintenance contracts and
other services, which the Partnership may not be able to offer. Equipment
manufacturers and distributors may offer to sell equipment on terms (such as
liberal financing terms and exchange privileges), which will afford benefits to
the purchaser similar to those obtained through leases. As a result of the
advantages, which certain of its competitors may have, the Partnership may find
it necessary to lease its Equipment on a less favorable basis than certain of
its competitors.

         The computer peripheral equipment industry is extremely competitive.
Competitive factors include pricing, technological innovation and methods of
financing. Certain manufacturer-lessors maintain advantages through patent
protection, where applicable, and through a policy that combines service and
hardware with payment accomplished through a single periodic charge.

         The dominant firms in the computer marketplace are Dell, IBM, Hewlett
Packard, Sun Systems and Cisco. Because of the substantial resources and
dominant position of these companies, revolutionary changes with respect to
computer systems, pricing, marketing practices, technological innovation and the
availability of new and attractive financing plans would occur at any time.
Significant action in any of these areas by these firms might materially
adversely affect the partnerships' business or the other manufacturer's with
whom the General Partner might negotiate purchoase and other agreements. Any
adverse affect on these manufacturers could be reflected in the overall return
realized by the Partnership on equipment from those manufacturers.

Investments

         Through March 11, 2004, the Partnership has purchased, or has made the
commitment to purchase, the following Equipment:
<TABLE>
<CAPTION>
                                                                 EQUIPMENT              LIST        PURCHASE      MONTHLY    LEASE
            LESSEE                              MFG             DESCRIPTION            PRICE         PRICE         RENTAL     TERM
            ------                              ---             -----------            -----        --------      -------    -----
<S>          <C>                                 <C>                  <C>             <C>           <C>           <C>          <C>
            Anteon                              ICL               Routers             $16,210       $ 7,047       $  444       16
            Anteon                              ICL               Routers              15,266         8,112          437       19
            Anteon                              IBM            Communications          13,575         9,410          397       25
            Anteon                              HP                Servers              15,192        10,779          492       23
            Anteon                             Dell               Terminal             13,229        11,165          442       27
            Anteon                             Nokia              Routers              19,811        15,532          658       25
            Anteon                             Nokia              Routers              13,135        10,253          420       26
            Anteon                          Dell/Epson          Workstations           24,481        18,636          675       30
            Anteon                             Epson              Hardware             27,422        21,166          760       30
            Anteon                             Nokia                Tape                9,695         7,166          257       30
            Anteon                          Dell/Cisco      Workstations/Servers       26,924        25,068          851       32
            Anteon                             Cisco               CON-OS              18,314        14,673          485       33
            Anteon                             Dell               Software             17,804        15,527          500       34
       Daimler Chrysler                       Visara         NCT Base Ethernet      1,280,418       831,622       21,932       36
          GE Medical                           Cisco                VPN                65,215        43,277        1,141       36
          GE Medical                           Nokia             Telephone            125,200        81,388        2,194       36
      Jefferson Smurfit                        Dell             Workstations          264,425       183,385        5,119       34
 Occupational Health & Rehab               Cisco/Compaq         Workstations          367,350       249,823        7,331       36
 Occupational Health & Rehab               Cisco/Compaq            Router             348,480       236,967        7,548       36
      Preferred Freezer                        Dell               Servers              89,363        45,803        1,289       36
      Preferred Freezer                        Dell               Servers             106,704        54,092        1,522       36
      Preferred Freezer                        Dell               Servers              56,163        36,506        1,045       36
      Preferred Freezer                        Dell               Scanners              7,700         5,100          150       34
      Preferred Freezer                      Panasonic         Communications          35,845        23,591          663       36
Vatterott Educational Systems                  Dell         Workstations/Server        84,855        56,089        1,581       36
</TABLE>


                                                                               8
<PAGE>
<TABLE>
<CAPTION>
                                                                 EQUIPMENT              LIST        PURCHASE      MONTHLY    LEASE
            LESSEE                              MFG             DESCRIPTION            PRICE         PRICE         RENTAL     TERM
            ------                              ---             -----------            -----        --------      -------    -----
<S>          <C>                                 <C>                  <C>             <C>           <C>           <C>          <C>
Vatterott Educational Systems                  Dell             Workstations           55,438        36,756        1,036       36
Vatterott Educational Systems                  Dell             Workstations           37,780        25,054          705       36
Vatterott Educational Systems                  Dell             Workstations           50,475        33,465          942       36
Vatterott Educational Systems                  Dell             Workstations           23,650        14,520          409       36
Vatterott Educational Systems                  Dell             Workstations           28,030        18,584          523       36
Vatterott Educational Systems                  Dell             Workstations           19,730        13,080          369       36
Vatterott Educational Systems                  Dell             Workstations           25,800        23,741          670       36
Vatterott Educational Systems                  Dell             Workstations            8,707         5,773          163       36
  Christian Brothers College                    IBM             Workstations           69,575        49,698        1,454       34
    Datapage Technologies                      Dell             Workstation            26,000        17,706          544       32
          Paric Corp                            HP            Servers/Printers         68,900        44,035        1,648       26
          Paric Corp                            HP          Printers/Workstation       30,115        20,153          574       35
          Paric Corp                            HP          Printers/Workstation       19,626        11,197          447       24
          Paric Corp                            HP           Printers/Terminals        76,000        42,516        1,980       20
   Environmental Mgmt Corp                  Cisco-Dell      Printers/Workstation       89,500        60,344        2,110       25
       Garlich Printing                       Galaxy               Server              61,450        33,950        1,286       23
    C. Hagar & Sons Hinge                     Toshiba        Workstation/Server        22,520        10,460          424       29
    C. Hagar & Sons Hinge                      Dell        Workstation/Server          47,823        26,662          888       22
    C. Hagar & Sons Hinge                       IBM        Workstation/Server           2,234         1,382           60       25
       Marketing Direct                         IBM             Server/Tape           120,625        70,855        2,657       25
       Marketing Direct                         IBM          Server/Workstation        28,000        17,744          580       30
       Marketing Direct                         IBM          Server/Workstation        24,281        15,370          425       36
            MyCart                              IBM               Servers              19,200        12,386          393       31
          Paric Corp                           Sony                 Tape               17,300        11,379          324       35
          Paric Corp                          Gxaryte        Telecommunications        18,200        12,016          342       35
          Paric Corp                          Gxaryte        Telecommunications        30,115        20,183          574       35
    Physician First Health                 Microsystems         Workstation            15,790        11,566          320       36
Vatterott Educational Systems                  Dell             Workstation            22,125         8,547          426       18
Vatterott Educational Systems                  Dell             Workstation            28,400        11,632          532       20
Vatterott Educational Systems                  Dell             Workstation            14,460         6,152          269       21
Vatterott Educational Systems                  Dell             Workstation            23,500        10,640          450       22
Vatterott Educational Systems                  Dell             Workstation            20,792         9,885          387       24
Vatterott Educational Systems                  Dell             Workstation            14,770         7,271          275       25
Vatterott Educational Systems                  Dell             Workstation            13,938         7,311          260       27
         Westar Corp                           Cisco               Router              19,993        13,010          440       29
  Preferred Freezer Systems                    Dell          Server/Workstation       136,020        88,451        2,489       36
       Kellogg USA Inc                        Compaq            Workstation            12,727         8,758          276       28
       Kellogg USA Inc                        Compaq            Workstation            13,600         9,706          298       29
       Kellogg USA Inc                        Compaq            Workstation             8,675         6,149          184       30
       Kellogg USA Inc                        Compaq            Workstation            14,750        10,478          299       32
       Kellogg USA Inc                        Compaq            Workstation            20,300        14,407          411       32
       Kellogg USA Inc                        Compaq            Workstation            19,850        14,076          392       33
       Kellogg USA Inc                        Compaq            Workstation             7,250         5,122          201       22
       Kellogg USA Inc                        Compaq            Workstation             4,950         3,415          134       22
       Kellogg USA Inc                        Compaq            Workstation             2,350         1,648           67       21
       Kellogg USA Inc                        Compaq            Workstation             2,410         1,707           67       22
       Kellogg USA Inc                        Compaq            Workstation             3,765         2,681           75       33
       Kellogg USA Inc                        Compaq            Workstation             2,900         2,057           56       34
      GE Medical Systems                      Net App           Fiber Chanel           37,250        26,520        1,052       23
         Hertz Corp.                            HP                Servers           1,092,200       779,810       20,306       36
 Thomson Consumer Electronics             ChristieDigital       Workstation           666,440       433,190       11,486       36
         XM Satellite                           Sun             Workstation           407,140       285,000        7,973       36
      GE Medical Systems                      Compaq               Server              27,235        17,704          458       36
       Cone Mills Corp                        Nortel            Workstation            35,400        23,529          652       36
       Cone Mills Corp                        Nortel            Workstation           107,000        70,106        1,960       36
       Daimler Chrysler                       Visara           Communication           64,400        41,860        1,080       36
   Kaise Foundation Health                                        Storage           1,238,745       718,473       18,769       36
   BFS Diversified Products                   Compaq            Workstation           145,718       102,003        2,975       35
   BFS Diversified Products                   Compaq            Workstation           150,141       105,099        3,065       32
</TABLE>


                                                                               9
<PAGE>
<TABLE>
<CAPTION>
                                                                 EQUIPMENT              LIST        PURCHASE      MONTHLY    LEASE
            LESSEE                              MFG             DESCRIPTION            PRICE         PRICE         RENTAL     TERM
            ------                              ---             -----------            -----        --------      -------    -----
<S>          <C>                                 <C>                  <C>             <C>           <C>           <C>          <C>
    Occupational Health &                     Citrix               Server             400,317       280,222        8,318       36
        Rehabilitation
     Allserve System Corp                      Avaya           Communication        1,114,155       724,200       21,513       36
       Daimler Chrysler                       Visara           Communication          550,000       357,517        9,428       36
       Daimler Chrysler                       Visara           Communication          106,125        68,982        1,819       36
       Northrup Grumman                         Sun                Server             421,500       331,724       10,004       30
       Daimler Chrysler                       Visara           Communication          510,350       126,446        3,335       36
         Refco Group                            HP              Workstation           254,352       165,329        4,739       36
         Refco Group                           Dell             Workstation           303,000       196,949        5,751       36
     Walker & Assoc. Inc.                 HP / Panasonic        Workstation           180,000       135,045        3,718       36
   BFS Diversified Products                   Compaq            Workstation           465,600       302,639        8,949       36
     Allserve System Corp                     Gateway              Server             643,385       418,200       12,423       36
     Allserve System Corp                     Nortel           Communication        1,114,153       724,200       21,513       36
       Bank of America                          IBM                Server           1,106,353       731,990       22,902       27
       Bank of America                          IBM                Server              75,858        55,603        1,750       28
 Dominion Resources Services                  Fujitsu              Server              39,250        25,512        1,355       19
       Kellogg USA Inc                          IBM             Workstation           180,845       117,501        3,370       32
</TABLE>

Reserves

         Because the Partnership's leases are on a "triple-net" basis, no
permanent reserve for maintenance and repairs will be established from the
Offering proceeds. However, the General Partner, in its sole discretion, may
retain a portion of the Cash Flow and Net Disposition Proceeds available to the
Partnership for maintenance, repairs and working capital. There are no
limitations on the amount of Cash Flow and Net Disposition Proceeds that may be
retained as reserves. Since no reserve will be established if available Cash
Flow of the Partnership is insufficient to cover the Partnership's operating
expenses and liabilities, it may be necessary for the Partnership to obtain
additional funds by refinancing its Equipment or borrowing.

General Restrictions

         Under the Partnership Agreement, the Partnership is not permitted,
among other things, to:

         (a) invest in junior trust deeds unless received in connection with the
sale of an item of Equipment in an aggregate amount that does not exceed 30% of
the assets of the Partnership on the date of the investment;

         (b) invest in or underwrite the securities of other issuers;

         (c) acquire any Equipment for Units;

         (d) issue senior securities (except that the issuance to lenders of
notes or other evidences of indebtedness in connection with the financing or
refinancing of Equipment or the Partnership's business shall not be deemed to be
the issuance of senior securities);

         (e) make loans to any Person, including the General Partner or any of
its Affiliates, except to the extent a Conditional Sales Contract constitutes a
loan;

         (f) sell or lease any Equipment to, lease any Equipment from, or enter
into any sale-leaseback transactions with, the General Partner or any of its
Affiliates; or

         (g) give the General Partner or any of its Affiliates an exclusive
right or employment to sell the Partnership's Equipment.

                                                                              10
<PAGE>

         The General Partner has also agreed in the Partnership Agreement to use
its best efforts to assure that the Partnership shall not be deemed an
"investment company" as such term is detained in the Investment Company Act of
1940.

         The General Partner and its Affiliates may engage in other activities,
whether or not competitive with the Partnership. The Partnership Agreement
provides, however, that neither the General Partner nor any of its Affiliates
may receive any rebate or "give up" in connection with the Partnership's
activities or participate in reciprocal business arrangements that circumvent
the restrictions in the Partnership Agreement against dealings with Affiliates.

EMPLOYEES

         The Partnership has no employees and received administrative and other
services from a related party, CCC, which has 28 employees as of December 31,
2003.

ITEM 2:  PROPERTIES

                           NOT APPLICABLE

ITEM 3:  LEGAL PROCEEDINGS

                           NOT APPLICABLE

ITEM 4:  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

                           NOT APPLICABLE

PART II

ITEM 5:  MARKET FOR THE REGISTRANTS COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS

         There is no public market for the Units nor is it anticipated that one
will develop. As of December 31, 2003, there were 596 holders of Units. The
Units are not listed on any exchange or permitted to trade on any
over-the-counter market. In addition, there are substantial restrictions on the
transferability of Units.

GENERAL LIMITATIONS

         Units cannot be transferred without the consent of the General Partner,
which may be withheld in its absolute discretion. The General Partner monitors
transfers of Units in an effort to ensure that all transfers are within certain
safe harbors promulgated by the IRS to furnish guidance regarding publicly
traded partnerships. These safe harbors limit the number of transfers that can
occur in any one year. The General Partner intends to cause the Partnership to
comply with the safe harbor that permits nonexempt transfers and redemptions of
Units of up to five percent of the total outstanding interest in the
Partnership's capital or profits in any one year.

REDEMPTION PROVISION

         Upon the conclusion of the 30-month period following the termination of
the Offering, the Partnership may, at the sole discretion of the General
Partner, repurchase a number of the outstanding Units. After such 30-month
period, on a semi-annual basis, the General Partner, at its discretion, will
establish an amount for redemption, generally not to exceed two percent of the
outstanding Units per year,

                                                                              11
<PAGE>

subject to the General Partner's good faith determination that such redemptions
will not (a) cause the Partnership to be taxed as a corporation under Section
7704 of the Code or (b) impair the capital or operations of the Partnership.
(The Partnership may redeem Units in excess of the two percent limitation if, in
the good faith judgment of the General Partner, the conditions imposed in the
preceding sentence would remain satisfied.) The redemption price for Units will
be 105% of the selling Limited Partner's Adjusted Capital Contributions
attributable to the Units for sale. Following the determination of the annual
redemption amount, redemptions will occur on a semi-annual basis and all
requests for redemption, which must be made in writing, must be on file as of
the Record Date in which the redemption is to occur. The General Partner will
maintain a master list of requests for redemption with priority being given to
Units owned by estates, followed by IRAs and Qualified Plans. All other requests
will be considered in the order received. Redemption requests made by or on
behalf of Limited Partners who are not affiliated with the General Partner or
its Affiliates will be given priority over those made by Limited Partners who
are affiliated with the General Partner or its Affiliates. All redemption
requests will remain in effect until and unless canceled, in writing, by the
requesting Limited Partner(s).

         The Partnership will accept redemption requests beginning 30 months
following the termination of the Offering. There will be no limitations on the
period of time that a redemption request may be pending prior to its being
granted. Limited Partners will not be required to hold their interest in the
Partnership for any specified period prior to their making a redemption request.

         In order to make a redemption request, Limited Partners will be
required to advise the General Partner in writing of such request. Upon receipt
of such notification, the Partnership will provide detailed forms and
instructions to complete the request. At December 31, 2003, the General Partner
has not redeemed any Units. Additionally, no Limited Partners have requested
redemption of their Units.

EXEMPT TRANSFERS

         The following six categories of transfers are exempt transfers for
purposes of calculating the volume limitations imposed by the IRS and will
generally be permitted by the General Partner:

         (1) transfers in which the basis of the Unit in the hands of the
transferee is determined, in whole or in part, by reference to its basis in the
hands of the transferor (for example, Units acquired by corporations in certain
reorganizations, contributions to capital, gifts of Units, Units contributed to
another partnership, and nonliquidating as well as liquidating distributions by
a parent partnership to its partners of interests in a sub partnership);

         (2) transfers at death;

         (3) transfers between members of a family (which include brothers and
sisters, spouse, ancestors, and lineal descendants);

         (4) transfers resulting from the issuance of Units by the Partnership
in exchange for cash, property, or services;

         (5) transfers resulting from distributions from Qualified Plans; and

         (6) any transfer by a Limited Partner in one or more transactions
during any 30-day period of Units representing in the aggregate more than five
percent of the total outstanding interests in capital or profits of the
Partnership.

ADDITIONAL RESTRICTIONS ON TRANSFER

         Limited Partners who wish to transfer their Units to a new beneficial
owner are required to pay the Partnership up to $50 for each transfer to cover
the Partnership's cost of processing the transfer

                                                                              12
<PAGE>

application and take such other actions and execute such other documents as may
be reasonably requested by the General Partner. There is no charge for
re-registration of a certificate in the event of a marriage, divorce, death, or
trust so long as the transfer is not a result of a sale of the Units.

         In addition, the following restrictions apply to each transfer: (i) no
transfer may be made if it would cause 25% or more of the outstanding Units to
be owned by benefit plans; and (ii) no transfer is permitted unless the
transferee obtains such governmental approvals as may reasonably be required by
the General Partner, including without limitation, the written consents of the
Pennsylvania Securities Commissioner and of any other state securities agency or
commission having jurisdiction over the transfer.

ALLOCATION  AND DISTRIBUTION BETWEEN THE GENERAL PARTNER AND THE LIMITED
PARTNERS

         Cash distributions, if any, are made quarterly on March 31, June 30,
and September 30, and December 31, of each year. Distributions are made 99% to
the Limited Partners and one percent to the General Partner until the Limited
Partners have received an amount equal to their Capital Contributions plus the
Priority Return; thereafter, cash distributions will be made 90% to Limited
Partners and 10% to the General Partner. Distributions made in connection with
the liquidation of the Partnership or a Partner's Units will be made in
accordance with the Partner's positive Capital Account balance as determined
under the Partnership Agreement and Treasury Regulations.

         The Priority Return is calculated on the Limited Partners' Adjusted
Capital Contributions for their Units. The Adjusted Capital Contributions will
initially be equal to the amount paid by the Limited Partners for their Units.
If distributions at any time exceed the Priority Return, the excess will reduce
the Adjusted Capital Contributions, decreasing the base on which the Priority
Return is calculated.

         If the proceeds resulting from the sale of any Equipment are reinvested
in Equipment, sufficient cash will be distributed to the Partners to pay the
additional federal income tax resulting from such sale for a Partner in a 38.6%
federal income tax bracket or, if lower, the maximum federal income tax rate in
effect for individuals for such taxable year.

         Generally, the General Partner is allocated Net Profits equal to its
cash distributions (but not less than one percent of Net Profits) and the
balance is allocated to the Limited Partners. Net Profits arising from
transactions in connection with the termination or liquidation of the
Partnership are allocated in the following order: (1) First, to each Partner in
an amount equal to the negative amount, if any, of his Capital Account; (2)
Second, an amount equal to the excess of the proceeds which would be distributed
to the Partners based on the Operating Distributions to the Partners over the
aggregate Capital Accounts of all the Partners, to the Partners in proportion to
their respective shares of such excess, and (3) Third, with respect to any
remaining Net Profits, to the Partners in the same proportions as if the
distributions were Operating Distributions. Net Losses, if any, are in all cases
allocated 99% to the Limited Partners and one percent to the General Partner.

         Net Profits and Net Losses are computed without taking into account, in
each taxable year of the Partnership, any items of income, gain, loss or
deduction required to be specially allocated pursuant to Section 704(b) of the
Code and the Treasury Regulation promulgated thereunder. No Limited Partner is
required to contribute cash to the capital of the Partnership in order to
restore a closing Capital Account deficit, and the General Partner has only a
limited deficit restoration obligation under the Partnership Agreement.

                                                                              13
<PAGE>

Quarterly distributions in the following amounts were paid to the Limited
Partners during the period of July 8, 2002 (Commencement of Operations) through
December 31, 2003.

<TABLE>
<CAPTION>
--------------------------------------- ----------------------------------- -----------------------------------
            Quarter Ended                              2003                                2002
--------------------------------------- ----------------------------------- -----------------------------------
                <S>                                      <C>                                 <C>
               March 31                             $  103,475                                 --
--------------------------------------- ----------------------------------- -----------------------------------
               June 30                                 179,842                                 --
--------------------------------------- ----------------------------------- -----------------------------------
             September 30                              288,677                           $ 22,964
--------------------------------------- ----------------------------------- -----------------------------------
             December 31                               354,498                             63,579
--------------------------------------- ----------------------------------- -----------------------------------
                Total                               $  926,492                           $ 86,543
--------------------------------------- ----------------------------------- -----------------------------------
</TABLE>

ALLOCATIONS AND DISTRIBUTIONS AMONG THE LIMITED PARTNERS

         Except during the Offering Period, Cash Available for Distribution that
is allocable to the Limited Partners is apportioned among and distributed to
them solely with reference to the number of Units owned by each as of the Record
Date for each such distribution. During the Offering Period, Cash Available for
Distribution which is allocable to the Limited Partners was apportioned among
and distributed to them with reference to both (i) the number of Units owned by
each as of each Record Date and (ii) the number of days since the previous
Record Date (or, in the case of the first Record Date, the commencement of the
Offering Period) that the Limited Partner owned the Units.

         After the Offering Period, Net Profits, Net Losses and Cash Available
for Distribution allocable to the Limited Partners is apportioned among them in
accordance with the number of Units owned by each. A different convention was
utilized during the Offering Period, whereby Net Profits and Net Losses
allocable to Limited Partners were apportioned among them in the ratio which the
product of the number of Units owned by a Limited Partner multiplied by the
number of days in which the Limited Partner owns such Units during the period
bears to the sum of such products for all Limited Partners.

         In addition, where a Limited Partner transfers Units during a taxable
year, the Limited Partner may be allocated Net Profits for a period for which
such Limited Partner does not receive a corresponding cash distribution.

ITEM 6:  SELECTED FINANCIAL DATA

         The following tables sets forth, in summary form, selected financial
data for the Partnership as of and for the periods ended December 31, 2003 and
2002. This table is qualified in its entirety by the more detailed information
and financial statements presented elsewhere in this report, and should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the financial statements and related notes
thereto included herein.

                                                                              14
<PAGE>
<TABLE>
<CAPTION>

                                               PERIOD ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------------------------------
Statements of Operations Data:                                                    2003                              2002
------------------------------------------------------- --------------------------------- ---------------------------------
<S>                                                                           <C>                                 <C>
Lease Income                                                                  $1,645,547                          $142,205
------------------------------------------------------- --------------------------------- ---------------------------------
Net (Loss)                                                                      (994,448)                         (453,921)
------------------------------------------------------- --------------------------------- ---------------------------------
Cash Distributions                                                               935,899                            87,417
------------------------------------------------------- --------------------------------- ---------------------------------
Net (Loss) Per Limited Partner Unit                                                (1.92)                            (3.77)
------------------------------------------------------- --------------------------------- ---------------------------------
Cash Distribution Per Limited Partner Unit                                          1.80                               .72
------------------------------------------------------- --------------------------------- ---------------------------------

                                                   AS OF DECEMBER 31,
                                                   ------------------
---------------------------------------------------------------------------------------------------------------------------
Other Data:                                                                       2003                              2002
------------------------------------------------------- --------------------------------- ---------------------------------
Net cash provided by (used in) operating activities                           $2,260,738                         ($388,968)
------------------------------------------------------- --------------------------------- ---------------------------------
Net cash (used in) investing activities                                       (6,877,103)                       (2,247,159)
------------------------------------------------------- --------------------------------- ---------------------------------
Net cash provided by financing activities                                      8,749,878                         3,145,907
------------------------------------------------------- --------------------------------- ---------------------------------

                                                   AS OF DECEMBER 31,
                                                   ------------------
---------------------------------------------------------------------------------------------------------------------------
                                                                                  2003                              2002
------------------------------------------------------- --------------------------------- ---------------------------------
Total Assets                                                                 $15,032,718                        $2,782,599
------------------------------------------------------- --------------------------------- ---------------------------------
Notes Payable                                                                  1,816,668                                --
------------------------------------------------------- --------------------------------- ---------------------------------
Partners' Capital                                                             10,700,095                         2,692,986
------------------------------------------------------- --------------------------------- ---------------------------------
</TABLE>

         Net income (loss) per unit is computed based upon net income (loss)
allocated to the Limited Partners and the weighted average number of equivalent
Units outstanding during the year. Cash distribution per Unit is computed based
upon distributions allocated to the Limited Partners and the weighted average
number of equivalent Units outstanding during the year.

                                                                              15
<PAGE>

ITEM 7:  MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

         Financial Reporting Release No. 60, which was recently released by the
Securities and Exchange Commission, requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Our significant accounting policies are described in Note
1 of the Notes to the Financial Statements. The significant accounting policies
that we believe are the most critical to aid in fully understanding our reported
financial results include the following:

COMPUTER EQUIPMENT

         CCC, on behalf of the Partnership and other affiliated partnerships,
acquires computer equipment subject to associated debt obligations and lease
agreements and allocates a participation in the cost, debt and lease revenue to
the various partnerships based on certain risk factors.

REVENUE RECOGNITION

         Through December 31, 2003, the Partnership has only entered into
operating leases. Lease revenue is recognized on a monthly basis in accordance
with the terms of the operating lease agreements.

         The Partnership reviews a customer's credit history before extending
credit and may establish a provision for uncollectible accounts receivable based
upon the credit risk of specific customers, historical trends and other
information.

LONG-LIVED ASSETS

         The Partnership evaluates its long-lived assets when events or
circumstances indicate that the value of the asset may not be recoverable. The
Partnership determines whether impairment exists by estimating the undiscounted
cash flows to be generated by each asset. If the estimated undiscounted cash
flows are less than the carrying value of the asset then impairment exists. The
amount of the impairment is determined based on the difference between the
carrying value and the fair value. Fair value is determined based on estimated
discounted cash flows to be generated by the asset.

         Depreciation on computer equipment for financial statement purposes is
based on the straight-line method over estimated useful lives of four years.

REIMBURSABLE EXPENSES

         Reimbursable expenses, which are charged to the Partnership by CCC in
connection with the administration and operation of the Partnership, are
allocated to the Partnership based upon several factors including, but not
limited to, the number of investors, compliance issues, and the number of
existing leases.

LIQUIDITY AND CAPITAL RESOURCES

         For the year ended December 31, 2003, the Partnership generated cash
flow from operating activities of $2,261,000, which includes net loss of
$994,000, reduced by depreciation and amortization expenses of $1,266,000 and an
increase of accounts payable of $2,300,000 relating to computer equipment. Other
noncash activities included in the determination of the net loss include direct
payments of lease income by lessees to banks of $428,000 for the year ended
December 31, 2003.

         The Partnership's primary sources of capital for the year ended
December 31, 2003 and for the period of July 8, 2002 (Commencement of
Operations) through December 31, 2002, were contributions of limited partners of
approximately $11,341,000 and $3,627,000, respectively and proceeds from the
sale of computer equipment of approximately $14,000 and $101,000, respectively.
The primary uses of cash for the year ended December 31, 2003 and for the period
of July 8, 2002 (Commencement of Operations)

                                                                              16
<PAGE>

through December 31, 2002, were for capital expenditures for new equipment
totaling $6,401,000 and $2,225,000, respectively, an advance to CCC in the
amount of approximately $230,000 for the year ended December 31, 2003,
acquisition fees of approximately $490,000 and $123,000, respectively, offering
costs of approximately $1,404,000 and $393,000, respectively and for the payment
of distributions to partners totaling $936,000 and $87,000, respectively.

         Cash is invested in money market accounts that invest directly in
treasury obligations pending the Partnership's use of such funds to purchase
additional computer equipment, to pay Partnership expenses or to make
distributions to the Partners. At December 31, 2003 and 2002, the Partnership
had approximately $4,510,000 and $338,000, respectively, invested in these money
market accounts.

         As of December 31, 2003, the Partnership has a non-interest bearing
receivable from CCC, a related party to the Partnership, in the amount of
approximately $230,000, which originated in 2003. CCC, through its indirect
subsidiaries, including the General Partner of the Partnership, earns fees based
on revenues and new lease purchases from this fund. CCC intends to repay these
receivables, through acquisition fees, debt placement fees and reimbursement of
expenses, with a minimum amount of $12,500 per quarter, commencing the quarter
ending March, 2004.

         The Partnership's investment strategy of acquiring computer equipment
and generally leasing it under triple-net leases to operators who generally meet
specified financial standards minimizes the Partnership's operating expenses. As
of December 31, 2003, the Partnership had future minimum rentals on
noncancellable operating leases of $3,315,000 for the year ended 2004 and
$4,282,000 thereafter. The Partnership incurred debt during 2003 in the amount
of $2,184,000. No debt was incurred in 2002. As of December 31, 2003, the
outstanding debt was $1,817,000, with a weighted average interest rate of 5.67%
and will be payable through August 2006.

         CCC, on behalf of the Partnership and other affiliated partnerships,
acquires computer equipment subject to associated debt obligations and lease
agreements and allocates a participation in the cost, debt and lease revenue to
the various partnerships based on certain risk factors.

         The Partnership's cash flow from operations is expected to continue to
be adequate to cover all operating expenses, liabilities, and distributions to
Partners during the next 12-month period. If available Cash Flow or Net
Disposition Proceeds are insufficient to cover the Partnership expenses and
liabilities on a short and long term basis, the Partnership will attempt to
obtain additional funds by disposing of or refinancing Equipment, or by
borrowing within its permissible limits. The Partnership may also reduce the
distributions to its Partners if it deems necessary. Since the Partnership's
leases are on a "triple-net" basis, no reserve for maintenance and repairs are
deemed necessary.

RESULTS OF OPERATIONS

         For the year ended December 31, 2003 and the period of July 8, 2002
(Commencement of Operations) through December 31, 2002, the Partnership
recognized income of $1,679,000, and $150,000 respectively and expenses of
$2,673,000, and $604,000 respectively resulting in net loss of $994,000, and
$454,000 respectively in 2003 and the period of July 8, 2002 (Commencement of
Operations) through December 31, 2002.

         For the year ended December 31, 2003 and the period of July 8, 2002
(Commencement of Operations) through December 31, 2002, lease income was
$1,646,000 and $142,000, respectively. For the year ended December 31, 2003 the
Partnership entered into approximately 87 leases, and for the period of July 8,
2002 (Commencement of Operations) through December 31, 2002, the Partnership
entered into approximately 33 leases.

         For the year ended December 31, 2003 and the period of July 8, 2002
(Commencement of Operations) through December 31, 2002, the Partnership
recognized interest income of $27,000, and

                                                                              17
<PAGE>

$8,000, respectively as a result of monies being invested in money market
accounts that invest directly in treasury obligations pending the Partnership's
use of such funds to purchase additional computer equipment, to pay Partnership
expenses or to make distributions to the Partners

         For the year ended December 31, 2003 the Partnership sold equipment
with a net book value of $14,000 for a net gain of approximately $400. For the
period of July 8, 2002 (Commencement of Operations) through December 31, 2002,
the Partnership sold equipment with a net book value of $106,000 for net loss of
approximately $6,000.

         For the year ended December 31, 2003 and the period of July 8, 2002
(Commencement of Operations) through December 31, 2002, operating expenses,
excluding depreciation, consist of accounting, legal, outside service fees and
reimbursement of expenses to CCC for administration and operation of the
Partnership. The operating expenses totaled approximately $1,180,000 and
$443,000, respectively. There was an increase in reimbursable expenses with the
administration and operation of the Partnership charged by CCC, a related party,
of approximately $119,000, an increase in legal fees of approximately $25,000,
an increase in travel expenses of approximately $50,000, an increase in
insurance of approximately $7,000, an increase in conventions of approximately
$23,000, an increase in postage of approximately $32,000, an increase in
printing services of approximately $74,000, an increase in accounting fees of
approximately $71,000, an increase in outside office services of approximately
$36,000, an increase in office supplies of approximately $15,000, an increase in
advertising of approximately $37,000, an increase in due diligence of
approximately $109,000 and an increase in miscellaneous administrative expenses
of approximately $30,000.

         For the year ended December 31, 2003 and the period of July 8, 2002
(Commencement of Operations) through December 31, 2002, organizational costs
were approximately $103,000 and $38,000, respectively.

         The equipment management fee is approximately 5% of the gross lease
revenue attributable to equipment that is subject to operating leases. For the
year ended December 31, 2003 and the period of July 8, 2002 (Commencement of
Operations) through December 31, 2002, the equipment management fee was
approximately $81,000 and $7,000 respectively.

         For the year ended December 31, 2003 interest expense was approximately
$42,000, as a result of new leases with associated debt obligations purchased
during the first quarter of 2003. There was no interest expense incurred during
the period of July 8, 2002 (Commencement of Operations) through December 31,
2002.

         Depreciation and amortization expenses consist of depreciation on
computer equipment and amortization of equipment acquisition fees. For the year
ended December 31, 2003 and the period of July 8, 2002 (Commencement of
Operations) through December 31, 2002, these expenses totaled approximately
$1,266,000 and $110,000, respectively.

         The Partnership identified specific computer equipment and associated
equipment acquisition costs, which were reevaluated due to technological
changes. The Partnership determined that no impairment had occurred for the year
ended December 31, 2003, and the period of July 8, 2002 (Commencement of
Operations) through December 31, 2002.

NET LOSS

         For the year ended December 31, 2003 and the period of July 8, 2002
(Commencement of Operations) through December 31, 2002, net loss was $994,000
and $454,000, respectively.

                                                                              18
<PAGE>

COMMITMENTS AND CONTINGENCIES

         Contractual Cash Obligations

         The following table presents our contractual cash obligations as of
December 31, 2003:

                                                 Payments due by period

                                         Total           2004        2005-2006
                                       ---------------------------------------
Installment notes payable due 2004:

     Principal                         $   56,857      $ 56,857       $     --

     Interest                               1,715         1,715             --

Installment notes payable due 2005:

     Principal                            396,330       273,214        123,116

     Interest                              19,552        16,778          2,774

Installment notes payable due 2006:

     Principal                          1,363,481       567,768        795,713

     Interest                              91,844        59,493         32,351
------------------------------------------------------------------------------

Total                                  $1,929,779      $975,825       $953,954
==============================================================================

                        RECENT ACCOUNTING PRONOUNCEMENTS

                              Interpretation No. 45

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, including Indirect Guarantees of
Indebtedness of Others" ("Interpretation No. 45"). Interpretation No. 45
elaborates on the existing disclosure requirements for most guarantees,
including loan guarantees such as standby letters of credit. It also clarifies
that at any time a company issues a guarantee, the company must recognize the
initial liability for the fair market value of the obligations it assumes under
the guarantee and must disclose that information in its interim and annual
financial statements. The initial recognition and measurement provisions of
Interpretation No. 45 apply on a prospective basis to guarantees issued or
modified after December 31, 2002. Interpretation No. 45 did not have an effect
on our financial statements.

                              Interpretation No. 46

In January 2003, FASB issued Interpretation No. 46, "Consolidation of Variable
Interest Entities" ("Interpretation No. 46"), which clarifies the application of
Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from the other parties.

                                                                              19
<PAGE>

Interpretation No. 46 is applicable immediately for variable interest entities
created after January 31, 2003. For variable interest entities created before
January 31, 2003, the provisions of Interpretation No. 46, the provisions of
Interpretation No. 46 have been deferred to the first quarter of 2004. The
adoption of Interpretation No. 46 did not have an impact on the financial
position and results of operations.

                                    SFAS 150

         In May 2003, the FASB issued FASB Statement No. 150, Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity, which establishes standards on how an issuer classifies and measures
certain financial instruments with characteristics of liabilities and equity. It
requires that an issuer classify a financial instrument that is within its scope
as a liability (or an asset in some circumstances). Many of those instruments
entered into or modified after May 31, 2003 and otherwise shall be effective at
the beginning of the first interim period beginning after June 15, 2003. The
adoption of SFAS 150 did not have an impact on its financial position and
results of operations.

ITEM 7.A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Partnership believes its exposure to market risk is not material
due to the fixed interest rate of its long-term debt and its associated fixed
revenue streams.

ITEM 8:  FINANCIAL STATEMENTS

         See financial statements commencing in part IV Item 14.

ITEM 9:  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE

         NONE

ITEM 9A: CONTROLS AND PROCEDURES

         Our management, under the supervision and with the participation of the
principal executive officer and principal financial offer, have evaluated the
effectiveness of our controls and procedures related to our reporting and
disclosure obligations as of December 31, 2003, which is the end of the period
covered by this Annual Report on Form 10-K. Based on that evaluation, the
principal executive officer and principal financial officer have concluded that
our disclosure controls and procedures are sufficient to provide that (a)
material information relating to us, including our consolidated subsidiaries, is
made known to these officers by our and our consolidated subsidiaries other
employees, particularly material information related to the period for which
this periodic report is being prepared; and (b) this information is recorded,
processed, summarized, evaluated and reported, as applicable, within the time
periods specified in the rules and forms promulgated by the Securities and
Exchange Commission.

ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

GENERAL

         The General Partner, a wholly owned subsidiary of Commonwealth of
Delaware, Inc., a Delaware corporation, which is in turn a wholly-owned
subsidiary of CCC, a Pennsylvania corporation, was incorporated in Pennsylvania
on August 26, 1993. The General Partner also acts as the General Partner for
Commonwealth Income and Growth Fund I, Commonwealth Income and Growth Fund II
and Commonwealth Income & Growth Fund III. The principal business office of the
General Partner is 470 John Young Way, Suite 300, Exton, PA 19341, and its
telephone number is 610-594-9600. The General Partner manages and controls the
affairs of the Partnership and has sole responsibility for all aspects of the
Partnership's operations. The officers of the General Partner devote such time
to the affairs of the Partnership as in the opinion of the General Partner is
necessary to enable it to perform its function as

                                                                              20
<PAGE>

General Partner. The officers of the General Partner are not required to spend
their full time in meeting their obligations to the Partnership.

The directors and officers of the General Partner and key employees of CCC are
as follows:

NAME                       TITLE
----                       -----
George S. Springsteen      Chairman of the Board of Directors and President of
                           the General Partner and CCC

Kimberly A. Springsteen    Executive Vice President, Chief Operating Officer and
                           Secretary of the General Partner and CCC

Henry J. Abbott            Senior Vice President, Director and Portfolio Manager
                           of the General Partner & CCC

Jay Dugan                  Senior Vice President & IT Manager of the General
                           Partner & CCC

Salvatore R. Barila        Vice President and Controller of the General Partner
                           and CCC

Michelle Onuffer           Assistant Vice President and Accounting Manager of
                           the General Partner and CCC

Dorothy A. Ferguson        Assistant Vice President & Compliance Manager of the
                           General Partner & CCC

Karen Tramontano           Assistant Vice President & Marketing Manager of the
                           General Partner & CCC

David Borham               Assistant Vice President & Investor Relations Manager
                           of the General Partner & CCC

         George S. Springsteen, age 68, is President of both CCC and the General
Partner. Mr. Springsteen is also President of the general partners or
controlling entities of several prior programs sponsored by CCC with objectives
similar to the Partnership's. He has been the sole shareholder and director of
CCC since its formation in 1978. From 1971 to 1978, Mr. Springsteen was involved
in the computer leasing business of Granite Computer Corporation. Mr.
Springsteen served as Vice President of Marketing, in addition to other
capacities, and managed a portfolio of approximately $120,000,000 of IBM
computers and peripherals. In 1978, Granite Computer Corporation sold its
equipment portfolio and left the equipment leasing business. Mr. Springsteen
acquired a portion of Granite's portfolio, client base, employees and corporate
offices in Jenkintown, Pennsylvania. The new company began operations as CCC in
May of 1978. Mr. Springsteen received a Bachelor of Science degree from the
University of Delaware in 1957.

         Kimberly A. Springsteen, age 44, is Executive Vice President, Chief
Operating Officer and Secretary of CCC and the General Partner and joined CCC in
1997. She is also the President of Commonwealth Capital Securities Corp. From
1980 to 1997, Ms. Springsteen was employed with Wheat First Butcher Singer, a
broker/dealer headquartered in Richmond, Virginia. While at Wheat First Butcher
Singer, Ms. Springsteen, Senior Vice President, served as Marketing Manager for
the Direct Investments Department, with over $450,000,000 of investments under
management in real estate, equipment leasing and energy-related industries. Ms.
Springsteen holds Series 7, 63 and 39 NASD licenses and is a member of the
Equipment Leasing Association, Investment Partnership Association, and
International Association for Financial Planning.

                                                                              21
<PAGE>

         Henry J. Abbott, age 53, is Senior Vice President and Portfolio Manager
of CCC and has been employed by CCC since 1998. Mr. Abbot has been active in the
commercial lending industry, working primarily on asset-backed transactions for
more than twenty-seven years. Prior to joining CCC Mr. Abbott was a founding
partner of Westwood Capital LLC, in New York. Prior to that, as Senior Vice
President for IBJ Schroder Leasing Corporation where Mr. Abbott managed a group
specializing in providing operating lease financing programs in the high
technology sector. Mr. Abbott brings extensive knowledge and experience in all
facets of asset-backed financing and has successfully managed $1.5 billion of
secured transactions. Mr. Abbott attended St. John's University. Mr. Abbott is a
member of the Equipment Leasing Association.

         Jay Dugan, age 55, is Senior Vice President and Information Technology
Manager of the General Partner and CCC and has been employed by CCC since 2002.
Mr. Dugan is responsible for computer network and information systems for the
General Partner and its affiliates. Mr. Dugan was a registered securities
representative from 1988 until 1998. During that period, Mr. Dugan founded First
Securities USA, a NASD member firm, and operated that firm through 1998. From
1999 until joining CCC in 2002, Mr. Dugan was an independent due diligence
consultant.

         Salvatore R. Barila, age 33, is Vice President and Controller of the
General Partner and CCC and certain of its subsidiaries where he has been
employed since 2001. From 1992 to 2001, Mr. Barila was employed as Corporate
Accounting Manager of RCG Information Technology, Inc., whereby he was
responsible for the preparation of the monthly financial statements, budgeting
and forecasting for multiple divisions and the consolidated entity. Mr. Barila
received a B.B.A. degree in Accounting from Pace University in 1992. Mr. Barila
is a member of the Equipment Leasing Association.

         Michelle Onuffer, age 32, is Assistant Vice President and Accounting
Manager of the General Partner and CCC and certain of its subsidiaries where she
has been employed since 2004. Prior to CCC, she was employed by Dutch State
Minds as an Accounting Manager, whereby she was responsible for month-end
reporting, monthly financial statements, budgeting, and cash management. Ms.
Onuffer was a registered securities representative from 1995 to 1999. She brings
4 years of securities experience and over 5 years of accounting experience. Ms.
Onuffer has a B.B. in Financial Management from Goldey-Beacon College and an MBA
in Accounting from the University of Phoenix.

         Dorothy A. Ferguson, age 61, is Assistant Vice President of CCC and has
been employed by CCC since 1995. She brought with her over 20 years experience
in commercial banking and finance. Prior to joining Commonwealth, she held
positions as a Banking Officer and Administrative Assistant to the Chairman of a
large Philadelphia based bank, as well as Executive Secretary to the CEO of an
international manufacturing management group.

         Karen Tramontano, age 51, Assistant Vice President & Marketing Manger,
joined Commonwealth in 2000, brining with her over a decade of experience of
international marketing and customer relations. Ms. Tramontano is responsible
for the generation and distribution of all marketing materials for the Manager's
investment programs. Prior to joining Commonwealth, Ms. Tramontano served from
1973 to 1983 as executive liaison to the President of V&V Noordland, Inc., an
international commercial company, and served as an office manager for a small
business in Florida from 1998 to 2000. Ms. Tramontano coordinates Commonwealth's
home office marketing department, which serves our broker dealer community and
registered representatives across the country. Ms. Tramontano attended Suffolk
College in New York, with a Major in Advertising/Promotion.

         David Borham, age 26, Assistant Vice President & Marketing Manager,
joined Commonwealth in 2000, bringing with him 2 years of Customer Service
experience. Mr. Borham holds a Series 22 NASD license and is responsible for the
management of investor database maintenance and all investor inquiries and
correspondence. Prior to joining Commonwealth, Mr. Borham served as a Customer
Relations Representative in the food service industry for Dilworth Town Inn from
1996 to 2000. Mr. Borham attended Delaware County Community College

                                                                              22
<PAGE>

         The directors and officers of the General Partner are required to spend
only such time on the Partnership's affairs as is necessary in the sole
discretion of the directors of the General Partner for the proper conduct of the
Partnership's business. A substantial amount of time of such directors and
officers is expected to be spent on matters unrelated to the Partnership,
particularly after the Partnership's investments have been selected. Under
certain circumstances, such directors and officers are entitled to
indemnification from the Partnership.

ITEM 11: EXECUTIVE COMPENSATION

         The following table summarizes the types, amounts and recipients of
compensation to be paid by the Partnership directly or indirectly to the General
Partner and its Affiliates. Some of these fees are paid regardless of the
success or profitability of the Partnership's operations and investments. While
such compensation and fees were established by the General Partner and are not
based on arm's-length negotiations, the General Partner believes that such
compensation and fees are comparable to those that would be charged by an
unaffiliated entity or entities for similar services. The Partnership Agreement
limits the liability of the General Partner and its Affiliates to the
Partnership and the Limited Partners and provides indemnification to the General
Partner and its Affiliates under certain circumstances.

<TABLE>
<CAPTION>
                                                                                      AMOUNT            AMOUNT
      ENTITY RECEIVING                                                               INCURRED          INCURRED
        COMPENSATION                         TYPE OF COMPENSATION                  DURING 2003        DURING 2002
      ----------------                       --------------------                  -----------        -----------

                                       OFFERING AND ORGANIZATION STAGE

<S>                           <C>                                                        <C>              <C>
The General Partner           Organizational  Fee. An  Organization  Fee equal to     $291,000         $109,000
                              three percent of the first  $10,000,000  of Limited
                              Partners' Capital  Contributions and two percent of
                              the  Limited  Partners'  Capital   Contribution  in
                              excess  of  $10,000,000,  as  compensation  for the
                              organization of the Partnership.  It is anticipated
                              that  all   Organizational  and  Offering  Expenses
                              which  include   legal,   accounting  and  printing
                              expenses;  various  registration  and filing  fees;
                              miscellaneous  expenses related to the organization
                              and  formation of the  Partnership;  other costs of
                              registration;  and  costs  incurred  in  connection
                              with the preparation,  printing and distribution of
                              this  Report  and  other  sales   literature.   The
                              General   Partner  pays  all   Organizational   and
                              Offering   Expenses,   other   than   Underwriter's
                              Commissions   and   a    non-accountable    expense
                              allowance  payable  to the Dealer  Manager  that is
                              equal  to the  lesser  of (i)  one  percent  of the
                              Offering proceeds or (ii) $50,000.

The General Partner's         Selling  Commissions  and Dealer  Manager Fees. The    $1,318,000        $323,000
Affiliates                    amount of underwriting  commissions  (which include
                              selling  commissions  and dealer manager fees) will
                              range  between  four and nine  percent  of  capital
                              contributions  based  upon  the  quantity  of units
                              sold to a single  investor. The  units  are   being
                              offered to the public through  Commonwealth Capital
                              Securities  Corp.,  which   will  receive   selling
                              commissions  of up to eight percent on all sales of
                              units and will  act as the dealer manager for which
                              it  will  receive  a  dealer  manager  fee  of  one
                              percent  on   all  sales  of  units.  In  addition,
                              during    2003,    the    Partnership   paid    CCC
                              approximately $156,000 for additional  underwriting
                              expenses.

                                             OPERATIONAL AND SALE
                                             OR LIQUIDATION STAGES

The General Partner           Equipment    Acquisition    Fee.    An    Equipment      $490,000         $123,000
                              Acquisition  Fee of four  percent  of the  Purchase
                              Price  of  each  item  of  Equipment  purchased  as
                              compensation    for   the    negotiation   of   the
                              acquisition  of the Equipment and the lease thereof
                              or sale under a  Conditional  Sales  Contract.  The
                              fee was paid  upon  each  closing  of the  Offering
                              with  respect  to the  Equipment  purchased  by the
                              Partnership  with the net  proceeds of the Offering
                              available  for  investment  in  Equipment.  If  the
                              Partnership   acquires   Equipment   in  an  amount
                              exceeding   the  net   proceeds  of  the   Offering
                              available  for  investment  in  Equipment,  the fee
                              will be paid when such  Equipment is  acquired.  Of
                              this amount,  approximately $89,000 has been earned
                              by  the  General  Partner   relating  to  equipment
                              acquired  in  2003.   The   remaining   balance  of
                              approximately   $34,000   will   be   earned   with
                              acquisitions in future periods.
</TABLE>

                                                                              23
<PAGE>
<TABLE>
<CAPTION>
                                                                                      AMOUNT            AMOUNT
      ENTITY RECEIVING                                                               INCURRED          INCURRED
        COMPENSATION                         TYPE OF COMPENSATION                  DURING 2003        DURING 2002
      ----------------                       --------------------                  -----------        -----------

                                             OPERATIONAL AND SALE
                                             OR LIQUIDATION STAGES
<S>                           <C>                                                        <C>              <C>
The General Partner and its   Reimbursable   Expenses.   The   General   and  its      $673,000         $366,000
Affiliates                    Affiliates  Partner are  entitled to  reimbursement
                              by the Partnership for the cost of goods,  supplies
                              or  services  obtained  and  used  by  the  General
                              Partner in connection with the  administration  and
                              operation  of the  Partnership  from third  parties
                              unaffiliated   with   the   General   Partner.   In
                              addition,  the  General  Partner and its affiliates
                              are entitled  to  reimbursement of certain expenses
                              incurred  by the General Partner and its affiliates
                              in   connection   with   the   administration   and
                              operation  of  the  Partnership.  The  amounts  set
                              forth  on  this  table  do  not  include   expenses
                              incurred in the offering of Units.

The General Partner           Debt Placement Fee. As  compensation  for arranging      $22,000             $0
                              Term Debt to finance the  acquisition  of Equipment
                              to the  Partnership,  a fee equal to one percent of
                              such  indebtedness;  provided,  however,  that such
                              fee  is  reduced  to  the  extent  the  Partnership
                              incurs such fees to third  Parties,  un  affiliated
                              with  the  General  Partner  or  the  lender,  with
                              respect  to such  indebtedness  and no such  fee is
                              paid with  respect to  borrowings  from the General
                              Partner or its Affiliates.

The General Partner           Equipment  Management  Fee. A monthly  fee equal to      $82,000           $7,000
                              the lesser of (I) the fees  which  would be charged
                              by an independent  third party for similar services
                              for  similar  equipment  or (ii) the sum of (a) two
                              percent   of   (1)   the   Gross   Lease   Revenues
                              attributable  to Equipment which is subject to Full
                              Payout  Net   Leases   which   contain   net  lease
                              provisions  plus  (2) the  purchase  price  paid on
                              Conditional  Sales  Contracts  as  received  by the
                              Partnership  and  (b)  five  percent  of the  Gross
                              Lease Revenues  attributable  to Equipment which is
                              subject to Operating Leases.

The General Partner           Re-Lease   Fee.  As   Compensation   for  providing         $0               $0
                              re-leasing  services  for any  Equipment  for which
                              the General  Partner has,  following the expiration
                              of, or  default  under,  the most  recent  lease of
                              Conditional  Sales Contract,  arranged a subsequent
                              lease of Conditional  Sales Contract for the use of
                              such  Equipment to a lessee or other  party,  other
                              than the  current  or most  recent  lessee of other
                              operator  of  such   equipment  or  its  Affiliates
                              ("Re-lease"),  the General Partner will receive, on
                              a  monthly  basis,  a  Re3-lease  Fee  equal to the
                              lesser of (a) the fees  which  would be  charged by
                              an independent  third party of comparable  services
                              for  comparable  equipment  or (b) two  percent  of
                              Gross Lease Revenues  derived from such Re-lease.

The General Partner           Equipment  Liquidation  Fee.  With  respect to each        $1,000          $3,000
                              item  of  Equipment  sold  by the  General  Partner
                              (other than in connection with a Conditional  Sales
                              Contract),  a fee equal to the lesser of (i) 50% of
                              the  Competitive  Equipment Sale Commission or (ii)
                              three   percent   of  the  sales   price  for  such
                              Equipment.  The payment of such fee is subordinated
                              to the  receipt by the  Limited  Partners  of (i) a
                              return  of  their  Capital  Contributions  and  10%
                              annum  cumulative  return,   compounded  daily,  on
                              Adjusted    Capital    Contributions     ("Priority
                              Return")  and  (ii)  the Net  Disposition  Proceeds
                              from such sale in accordance  with the  Partnership
                              Agreement.  Such fee is  reduced  to the extent any
                              liquidation    or   resale   fees   are   paid   to
                              unaffiliated parties.
</TABLE>

                                                                              24
<PAGE>
<TABLE>
<CAPTION>
                                                                                      AMOUNT            AMOUNT
      ENTITY RECEIVING                                                               INCURRED          INCURRED
        COMPENSATION                         TYPE OF COMPENSATION                  DURING 2003        DURING 2002
      ----------------                       --------------------                  -----------        -----------

                                             OPERATIONAL AND SALE
                                             OR LIQUIDATION STAGES
<S>                           <C>                                                        <C>              <C>
The General Partner           Partnership  Interest.  The  General  Partner has a      $9,407             $874
                              present  and  continuing  one  percent  interest of
                              $1,000 in the Partnership's  item of income,  gain,
                              loss,  deduction,  credit,  and tax preference.  In
                              addition,  the General Partner receives one percent
                              of  Cash  Available  for  Distribution   until  the
                              Limited  Partners  have received  distributions  of
                              Cash  Available  for  Distribution  equal  to their
                              Capital  Contributions plus the 10% Priority Return
                              and  thereafter,  the General  Partner will receive
                              10% of Cash Available for Distribution.
</TABLE>

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         NOT APPLICABLE

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The Partnership is subject to various conflicts of interest arising out
of its relationships with the General Partner and its Affiliates. These
conflicts include the following:

COMPETITION WITH GENERAL PARTNER AND AFFILIATES: COMPETITION FOR MANAGEMENT'S
TIME

         The General Partner and its Affiliate sponsor other investor programs,
which are in potential competition with the Partnership in connection with the
purchase of Equipment as well as opportunities to lease and sell such Equipment.
Competition for Equipment has occurred and is likely to occur in the future. The
General Partner and its Affiliates may also form additional investor programs,
which may be competitive with the Partnership.

         If one or more investor programs and the Partnership are in a position
to acquire the same Equipment, the General Partner will determine which program
will purchase the Equipment based upon the objectives of each and the
suitability of the acquisition in light of those objectives. The General Partner
will generally afford priority to the program or entity that has had funds
available to purchase Equipment for the longest period of time. If one or more
investor programs and the Partnership are in a position to enter into lease with
the same lessee or sell Equipment to the same purchaser, the General Partner
will generally afford priority to the Equipment which has been available for
lease or sale for the longest period of time.

         Certain senior executives of the General Partner and its Affiliates
also serve as officers and directors of the other programs and are required to
apportion their time among these entities. The Partnership is, therefore, in
competition with the other programs for the attention and management time of the
General Partner and Affiliates. The officers and directors of the General
Partner are not required to devote all or substantially all of their time to the
affairs of the Partnership.

ACQUISITIONS

         CCC and the General Partner or other Affiliates of the General Partner
may acquire Equipment for the Partnership provided that (i) the Partnership has
insufficient funds at the time the Equipment is acquired, (ii) the acquisition
is in the best interest of the partnership and (iii) no benefit to the General
Partner or its Affiliates arises from the acquisition except for compensation
paid to CCC, the General Partner or such other Affiliate as disclosed in this
Report. CCC, the General Partner or their Affiliates will not hold Equipment for
more than 60 days prior to transfer to the Partnership. If sufficient funds
become available to the Partnership within such 60 day period, such Equipment
may be resold to the Partnership for a price not in excess of the sum of the
cost of the Equipment to such entity and any

                                                                              25
<PAGE>

accountable Acquisition Expenses payable to third parties which are incurred by
such entity and interest on the Purchase Price from the date of purchase to the
date of transfer to the Partnership. CCC, the General Partner or such other
Affiliate will retain any rent or other payments received for the Equipment, and
bear all expenses and liabilities, other than accountable Acquisition Expenses
payable to third parties with respect to such Equipment, for all periods prior
to the acquisition of the Equipment by the Partnership. Except as described
above, there will be no sales of Equipment to or from any Affiliate of CCC.

         In certain instances, the Partnership may find it necessary, in
connection with the ordering and acquisition of Equipment, to make advances to
manufacturers or vendors with funds borrowed from the General Partner for such
purpose. The Partnership does not borrow money from the General Partner or any
of its Affiliates with a term in excess of twelve months. Interest is paid on
loans or advances (in the form of deposits with manufacturers or vendors of
Equipment or otherwise) from the General Partner of its Affiliates from their
own funds at a rate equal to that which would be charged by third party
financing institutions on comparable loans from the same purpose in the same
geographic area, but in no event in excess of the General Partner's or
Affiliate's own cost of funds. In addition, if the General Partner or its
Affiliates borrow money and loan or advance it on a short-term basis to or on
behalf of the Partnership, the General Partner or such affiliates shall receive
no greater interest rate and financing charges from the Partnership than that
which unrelated lender charge on comparable loans. The Partnership will not
borrow money from the General Partner or any of its affiliates for a term in
excess of twelve months.

         If the General Partner or any of its Affiliates purchases Equipment in
its own name and with its own funds in order to facilitate ultimate purchase by
the Partnership, the purchaser is entitled to receive interest on the funds
expended for such purchase on behalf of the Partnership. Simple interest on any
such temporary purchases is charged on a floating rate basis not in excess of
three percent over the "prime rate" from time to time announced by PNC Bank,
from the date of initial acquisition to the date of repayment by the
Partnership/ownership transfer.

         The Partnership does not invest in equipment Limited Partnerships,
general partnerships or joint ventures, except that (a) the Partnership may
invest in general partnerships or joint ventures with persons other that
equipment Programs formed by the General Partner or its Affiliates, which
partnerships or joint ventures own specific equipment; provided that (i) the
Partnership has or acquires a controlling interest in such ventures or
partnerships, (ii) the non-controlling interest is owned by a non-Affiliated,
and (iii) the are no duplicate fees; and (b) the Partnership may invest in joint
venture arrangements with other equipment Programs formed by the General Partner
or its Affiliates if such action is in the best interest of all Programs and if
all the following conditions are met: (i) all the Programs have substantially
identical investment objectives; (ii) there are no duplicate fees; (iii) the
sponsor compensation is substantially identical in each Program; (iv) the
Partnership has a right of first refusal to buy another Program's interest in a
joint venture if the other Program wishes to sell equipment held in the joint
venture; (v) the investment of each Program is on substantially the same terms
and conditions; and (vi) the joint venture is formed either for the purpose of
effecting appropriated diversification for the Programs or for the purpose of
relieving the General Partner or its Affiliates from a commitment entered into
pursuant to certain provisions of the Partnership Agreement.

GLOSSARY

The following terms used in this Report shall (unless otherwise expressly
provided herein or unless the context otherwise requires) have the meanings set
forth below.

"Acquisition Expenses" means expenses relating to the prospective selection and
acquisition of or investment in Equipment by the Partnership, whether or not
actually acquired, including, but not limited to, legal fees and expenses,
travel and communication expenses, costs of appraisal, accounting fees and
expenses and other related expenses.

                                                                              26
<PAGE>

"Acquisition Fees" means the total of all fees and commissions paid by any party
in connection with the initial purchase of Equipment acquired by the
Partnership. Included in the computation of such fees or commissions shall be
the Equipment Acquisition Fee and any commission, selection fee, construction
supervision fee, financing fee, non-recurring management fee or any fee of a
similar nature, however designated.

"Adjusted Capital Contributions" means Capital Contributions of the Limited
Partners reduced by any cash distribution received by the Limited Partners
pursuant to the Partnership Agreement, to the extent such distributions exceed
any unpaid Priority Return as of the date such distributions were made.

"Affiliate" means, when used with reference to a specified Person, (i) any
person, that directly or indirectly through one or more intermediaries controls
or is controlled by or is under common control with the specified Person,
(ii) any Person that is a director or an executive officer of, partner in, or
serves in a similar capacity to, the specified Person, or any Person of which
the specified Person is an executive officer or partner or with respect to which
the specified Person serves in a similar capacity, (iii) any Person owning or
controlling 10% or more of the outstanding voting securities of such specified
Person, or (iv) if such Person is an officer, director or partner, any entity
for which such Person acts in such capacity.

"Capital Account" means the bookkeeping account maintained by the Partnership
for each Partner.

"Capital Contributions" means in the case of the General Partner, the total
amount of money contributed to the Partnership by the General Partner, and in
the case of Limited Partners, $20 for each Unit, or where the context requires,
the total Capital Contributions of all the Partners.

"Cash Available for Distribution" means Cash Flow plus Net Disposition Proceeds
plus cash funds available for distribution from Partnership reserves, less such
amounts as the General Partner, in accordance with the Partnership Agreement,
causes the Partnership to reinvest in Equipment or interests therein, and less
such amounts as the General Partner, in its sole discretion, determines should
be set aside for the restoration or enhancement of Partnership reserves.

"Cash Flow" for any fiscal period means the sum of (i) cash receipts from
operations, including, but not limited to, rents or revenues arising from the
leasing or operation of the Equipment and interest, if any, earned on funds on
deposit for the Partnership, but not including Net Disposition Proceeds, minus
(ii) all cash expenses and costs incurred and paid in connection with the
ownership, lease, management, use and/or operation of the Equipment, including,
but not limited to, fees for handling and storage; all interest expenses paid
and all repayments of principal regarding borrowed funds; maintenance; repair
costs; insurance premiums; accounting and legal fees and expenses; debt
collection expenses; charges, assessments or levies imposed upon or against the
Equipment; ad valorem, gross receipts and other property taxes levied against
the Equipment; and all costs of repurchasing Units in accordance with the
Partnership Agreement; but not including depreciation or amortization of fees or
capital expenditures, or provisions for future expenditures, including, without
limitation, Organizational and Offering Expenses.

"Closing Date" means October 23, 2003.

"Code" means the Internal Revenue Code of 1986, as amended, and as may be
amended from tine to time by future federal tax statutes.

"Competitive Equipment Sale Commission" means that brokerage fee paid for
services rendered in connection with the purchase or sale of Equipment, which is
reasonable, customary, and competitive in light of the size, type, and location
of the Equipment.

                                                                              27
<PAGE>

"Conditional Sales Contract" means an agreement to sell Equipment to a buyer in
which the seller reserves title to, and retains a security interest in, the
Equipment until the Purchase Price of the Equipment is paid.

"Effective Date" means October 19, 2002, the date on which the Partnership's
Registration Statement on Form S-1 was declared effective by the United States
Securities and Exchange Commission.

"Equipment" means each item of and all of the computer peripheral and other
similar capital equipment purchased, owned, operated, and/or leased by the
Partnership or in which the Partnership has acquired a direct or indirect
interest, together with all appliances, parts, instruments, accessories,
furnishings, or other equipment included therein and all substitutions,
renewals, or replacements of, and all additions, improvements, and accessions
to, any and all thereof.

"Full Payout Net Lease" means an initial Net Lease of the Equipment under which
the non-cancelable rental payments due (and which can be calculated at the
commencement of the Net Lease) during the initial noncancelable fixed term (not
including any renewal or extension period of the lease or other contract for the
use of the Equipment are at least sufficient to recover the Purchase Price of
the Equipment.

"General Partner" means Commonwealth Income & Growth Fund, Inc. and any
additional, substitute or successor general partner of the Partnership.

"Gross Lease Revenues" means Partnership gross receipts from leasing or other
operation of the Equipment, except that, to the extent the Partnership has
leased the Equipment from an unaffiliated party, it shall mean such receipts
less any lease expense.

"Initial Closing" means July 8, 2003, the date after the Minimum Subscription
Amount was received on which funds to acquire Units were released from the
Escrow Account and distributed to the Partnership for the acquisition of Units
by Limited Partners.

"IRS" means the Internal Revenue Service.

"Limited Partner" means a person who acquires Units and who is admitted to the
Partnership as a limited partner in accordance with the terms of the Partnership
Agreement.

"Majority in Interest" means, with respect to the Partnership, Limited Partners
holding more than 50% of the outstanding Units held by all Limited Partners at
the Record Date for any vote or consent of the Limited Partners.

"Minimum Subscription Amount" means an aggregate of $1,150,000 in Subscriptions.

"Net Dispositions Proceeds" means the net proceeds realized by the Partnership
from the refinancing, sale or other disposition of Equipment, including
insurance proceeds or lessee indemnity payments arising from the loss or
destruction of Equipment, less such amounts as are used to satisfy Partnership
liabilities.

"Net Lease" means a lease or other contract under which the owner provides
equipment to a lessee or other operator in return for a payment, and the lessee
assumes all obligations and pays for the operation, repair, maintenance and
insuring of the equipment.

"Net Profits" or "Net Losses" shall be computed in accordance with Section
703(a) of the Code (including all items of income, gain, loss or deduction
required to be stated separately pursuant to Section 703(a) (1) of the Code) for
each taxable year of the Partnership or shorter period prior to an interim
closing of the Partnership's books with the following adjustments: (I) any
income of the Partnership that is exempt from federal income tax and not
otherwise taken into account in computing Net Profits and Net Loss pursuant

                                                                              28
<PAGE>

to this definition shall be added to such taxable income or shall reduce such
taxable loss; (ii) any expenditure of the Partnership described in Code Section
705(a) (2) (B) or treated as Code Section 705(a) (2) (B) expenditures pursuant
to Treasury Regulations section 1.704-1(b) (2) (iv) (i) and not otherwise taken
into account in computing Net Profits and Net Losses pursuant to this definition
shall be subtracted from such taxable income or loss; (iii) items of income,
gain, loss and deduction specially allocated pursuant to Section 7.3 of the
Partnership Agreement shall not be included in the computation of Net Profits or
Net Loss; and if property is reflected on the books of the Partnership at a book
value that differs from the adjusted tax basis of the property in accordance
with Treasury Regulation Section 1.704-1(b) (2) (iv) (d) or (f), depreciation,
amortization, and gain or loss with respect to such property shall be determined
by reference to such book value in a manner consistent with Treasury Regulation
Section 1.704-1(b) (2) (iv) (g). The terms "Net Profit" or "Net Losses" shall
include the Partnership's distributive share of the profit or loss of any
partnership or joint venture in which it is a partner or joint venturer.

"Offering" means the initial public offering of Units in the Partnership.

"Offering Period" means the period commencing the Effective Date and ending the
last day of the calendar month in which the Closing Date occurs.

"Operating Distributions" means the quarterly distributions made to the Partners
pursuant to Article 8 of the Partnership Agreement.

"Operating Lease" means a lease or other contractual arrangement under which an
unaffiliated party agrees to pay the Partnership, directly or indirectly, for
the use of the Equipment, and which is not a Full Payout Net Lease.

"Organizational and Offering Expenses" means the expenses incurred in connection
with the organization of the Partnership and in preparation of the Offering,
including Underwriting Commissions, listing fees and advertising expenses
specifically incurred in connection with the distribution of the Units.

"Partner (s)" means any one or more of the General Partner and the Limited
Partners.

"Partnership" means Commonwealth Income & Growth Fund IV, a Pennsylvania limited
partnership.

"Partnership Agreement" means that Limited Partnership Agreement of Commonwealth
Income & Growth Fund IV by and among the General Partner and the Limited
Partners, pursuant to which the Partnership is governed.

"Person" means an individual, partnership, limited liability company, joint
venture, corporation, trust, estate or other entity.

"Priority Return" means an amount equal to a return at a rate of 10% per annum,
compounded daily, on the Adjusted Capital Contribution for all outstanding
Units, which amount shall begin accruing at the end of the calendar quarter in
which such Units are sold by the Partnership.

"Proceeds" means proceeds from the sale of the Units.

"Program" means a limited or general partnership, joint venture, unincorporated
association or similar organization, other than a corporation formed and
operated for the primary purpose of investment in and the operation of or gain
from an interest in Equipment.

"Purchase Price" means, with respect to any Equipment, an amount equal to the
sum of (i) the invoice cost of such Equipment or any other such amount paid to
the seller, (ii) any closing, delivery and installation charges associated
therewith not included in such invoice cost and paid by or on behalf of the
Partnership, (iii) the cost of any capitalized modifications or upgrades paid by
on or behalf of the Partnership in

                                                                              29
<PAGE>

connection with its purchase of the Equipment, and (iv) solely for purposes of
the definition of Full Payout Net Lease, the amount of the Equipment Acquisition
Fee and any other Acquisition Fees.

"Retained Proceeds" means Cash Available for Distribution, which instead of
being distributed to the Partners is retained by the Partnership for the purpose
of acquiring or investing in Equipment.

"Term Debt" means debt of the Partnership with a term in excess of twelve
months, incurred with respect to acquiring or investing in Equipment, or
refinancing non-Term Debt, but not debt incurred with respect to refinancing
existing Partnership Term Debt.

Unit" means a Limited Partnership interest in the Partnership.

PART IV

ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
         FORM 10-K

(a) (1)  Financial Statements

         Commonwealth Income & Growth Fund IV

         Report of Independent Certified Public Accountant

         Balance Sheets as of December 31, 2003 and 2002

         Statements of Operations for the period of July 8, 2002 (Commencement
           of Operations) through the year ended December 31, 2003

         Statements of Partners' Capital for the years ended December 31, 2003
           and 2002

         Statements of Cash Flows for the period of July 8, 2002 (Commencement
           of Operations) through the year ended December 31, 2003

         Notes to Financial Statements

(a) (2)  Schedules.

         Schedules are omitted because they are not applicable, not required, or
because the required information is included in the financial statements and
notes thereto.

(a) (3) Exhibits.

         * 3.1    Certificate of Limited Partnership

         * 3.2    Agreement of Limited Partnership

         27       Financial Data Schedule

         * Incorporated by reference from the Partnership's Registration
Statement on Form S-1 (Registration No. 333-62526)

(b) Reports on Form 8-K

(c) Exhibits.

                                                                              30
<PAGE>

SIGNATURES

         Pursuant to the requirements of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf March 30, 2003 by the undersigned thereunto duly authorized.

                                 COMMONWEALTH INCOME & GROWTH FUND IV
                                       By:   COMMONWEALTH INCOME &
                                             GROWTH FUND, INC., General Partner

                                 By:   /s/ George S. Springsteen
                                       ------------------------------------
                                           George S. Springsteen, President

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 30, 2004:

SIGNATURE                                            CAPACITY
---------                                            --------

/s/ GEORGE S. SPRINGSTEEN           Chairman, President and Sole Director of
-------------------------           Commonwealth Income & Growth Fund, Inc.
George S. Springsteen

/s/ KIMBERLY A. SPRINGSTEEN         Executive Vice President Chief Operating
---------------------------         Officer and Secretary
Kimberly A. Springsteen

<PAGE>

                                                             Commonwealth Income
                                                                & Growth Fund IV


             For the year ended December 31, 2003 and the period of July 8, 2002
                          (Commencement of Operations) through December 31, 2002




<PAGE>

                                                             Commonwealth Income
                                                                & Growth Fund IV



--------------------------------------------------------------------------------



                                                            Financial Statements
             For the year ended December 31, 2003 and the period of July 8, 2002
                          (Commencement of Operations) through December 31, 2002




<PAGE>


                                            Commonwealth Income & Growth Fund IV

                                                                        Contents


--------------------------------------------------------------------------------

      Report of Independent Certified Public Accountants                       3

      Financial statements
          Balance sheets                                                     4-5
          Statements of operations                                             6
          Statements of partners' capital                                      7
          Statements of cash flows                                           8-9

      Notes to financial statements                                        10-21


                                                                               2
<PAGE>

Report of Independent Certified Public Accountants



The Partners
Commonwealth Income & Growth Fund IV
Exton, Pennsylvania

We have audited the accompanying balance sheets of Commonwealth Income & Growth
Fund IV as of December 31, 2003 and 2002, the related statements of operations
and cash flows for the year ended December 31, 2003 and the period of July 8,
2002 (Commencement of Operations) through December 31, 2002 and the related
statements of partners' capital for the year ended December 31, 2003 and 2002.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Commonwealth Income & Growth
Fund IV at December 31, 2003 and 2002, and the results of its operations and its
cash flows for the year ended December 31, 2003 and the period of July 8, 2002
(Commencement of Operations) through December 31, 2002, in conformity with
accounting principles generally accepted in the United States.


                                                            /s/ BDO Seidman, LLP


Philadelphia, Pennsylvania
March 12, 2004

                                                                               3
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------

December 31,                                                                             2003                2002
-----------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>                 <C>
Assets

Cash and cash equivalents                                                         $ 4,644,293         $   510,780
Lease income receivable                                                                88,996              30,957
Accounts receivable, affiliated limited partnerships                                   52,902               6,000
Other receivables                                                                       3,737                  --
Deferred revenue                                                                        2,438                  --
Refundable deposits                                                                     1,130                  --
Receivables from sales of equipment                                                        --             103,610
-----------------------------------------------------------------------------------------------------------------

                                                                                    4,793,496             651,347
-----------------------------------------------------------------------------------------------------------------

Computer equipment, at cost                                                        10,738,728           2,110,606
Accumulated depreciation                                                           (1,285,576)            (92,931)
-----------------------------------------------------------------------------------------------------------------

                                                                                    9,453,152           2,017,675
-----------------------------------------------------------------------------------------------------------------

Equipment acquisition costs and deferred expenses, net
     of accumulated amortization of $72,840 and
     $4,753, respectively                                                             378,428              79,672
Prepaid acquisition fees, General Partner                                             177,841              33,905
Accounts receivable, Commonwealth Capital Corp                                        229,801                  --
-----------------------------------------------------------------------------------------------------------------

                                                                                      786,070             113,577
-----------------------------------------------------------------------------------------------------------------

Total assets                                                                      $15,032,718         $ 2,782,599
=================================================================================================================
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                                                                             Commonwealth Income & Growth Fund IV


                                                                                         Statements of Operations


-----------------------------------------------------------------------------------------------------------------

December 31,                                                                             2003                2002
-----------------------------------------------------------------------------------------------------------------
<S>                                                                              <C>                 <C>
Liabilities and Partners' Capital

Liabilities
     Accounts payable, primarily for equipment purchases                          $ 2,325,446         $    20,486
     Accounts payable, General Partner                                                 71,024                 806
     Other accrued expenses                                                            17,000                  --
     Accounts payable, Commonwealth Capital Corp.                                          --              61,807
     Unearned lease income                                                            102,485               6,514
     Notes payable                                                                  1,816,668                  --
-----------------------------------------------------------------------------------------------------------------

Total liabilities                                                                   4,332,623              89,613
-----------------------------------------------------------------------------------------------------------------

Partners' capital
     General Partner                                                                    1,000               1,000
     Limited Partners                                                              10,699,095           2,691,986
-----------------------------------------------------------------------------------------------------------------

Total partners' capital                                                            10,700,095           2,692,986
-----------------------------------------------------------------------------------------------------------------


Total liabilities and partners' capital                                           $15,032,718         $ 2,782,599
=================================================================================================================
</TABLE>

                                 See accompanying notes to financial statements.

                                                                               4
<PAGE>
<TABLE>
<CAPTION>
                                                                             Commonwealth Income & Growth Fund IV


                                                                                         Statements of Operations


------------------------------------------------------------------------------------------------------------------------

                                                                                                       For the period
                                                                                                        July 8, 2002
                                                                                                     (Commencement of
                                                                                                    Operations) through
                                                                                                         December 31,
Year ended December 31,                                                                    2003            2002 (1)
------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                   <C>
Income
     Lease                                                                         $  1,645,547          $   142,205
     Interest and other                                                                  32,719                8,329
     Gain on sale of computer equipment                                                     384                   --
--------------------------------------------------------------------------------------------------------------------

Total income                                                                          1,678,650              150,534
--------------------------------------------------------------------------------------------------------------------

Expenses
     Operating, excluding depreciation                                                1,180,077              443,358
     Organizational costs                                                               103,146               38,079
     Equipment management fee, General Partner                                           81,840                7,111
     Interest                                                                            42,366                   --
     Depreciation                                                                     1,196,712              100,702
     Amortization of equipment acquisition costs and deferred expenses                   68,957                9,319
     Loss on sale of computer equipment                                                      --                5,886
--------------------------------------------------------------------------------------------------------------------

Total expenses                                                                        2,673,098              604,455
--------------------------------------------------------------------------------------------------------------------

Net (loss)                                                                         $   (994,448)         $  (453,921)
=====================================================================================================================

Net (loss) per equivalent limited partnership unit                                 $      (1.92)         $     (3.77)
Weighted average number of equivalent
     limited partnership units outstanding during the year                              515,678              120,510
====================================================================================================================
</TABLE>

                                 See accompanying notes to financial statements.

(1) Although the Partnership was formed on May 15, 2001, the Partnership did not
    commence operations until July 8, 2002.

                                                                               5
<PAGE>
<TABLE>
<CAPTION>
                                                                              Commonwealth Income & Growth Fund IV


                                                                                   Statements of Partners' Capital

------------------------------------------------------------------------------------------------------------------


                                         General       Limited
                                         Partner       Partner        General           Limited
                                           Units         Units        Partner          Partners              Total
------------------------------------------------------------------------------------------------------------------
<S>                                     <C>          <C>             <C>          <C>                <C>
Balance, December 31, 2001 (1)                50            --        $ 1,000      $         --       $      1,000

Contributions                                 --       181,566             --         3,626,554          3,626,554
Offering costs                                --            --             --          (393,230)          (393,230)
Net income (loss) (2)                         --            --            874          (454,795)          (453,921)
Distributions                                 --            --           (874)          (86,543)           (87,417)
-------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2002                    50       181,566        $ 1,000      $  2,691,986       $  2,692,986

Contributions                                 --       568,384             --        11,341,175         11,341,175
Offering costs                                --            --             --        (1,403,719)        (1,403,719)
Net income (loss)                             --            --          9,407        (1,003,855)          (994,448)
Distributions                                 --            --         (9,407)         (926,492)          (935,899)
------------------------------------------------------------------------------------------------------------------

Balance, December 31, 2003                    50       749,950        $ 1,000      $ 10,699,095       $ 10,700,095
==================================================================================================================
</TABLE>

                                 See accompanying notes to financial statements.

(1) The General Partner contributed $1,000 in exchange for 50 units of the
    Partnership when the Partnership was organized in May 2001.

(2) Net income (loss) is for the period July 8, 2002 (Commencement of
    Operations) through December 31, 2002.

                                                                               6
<PAGE>
<TABLE>
<CAPTION>
                                                                         Commonwealth Income & Growth Fund IV


                                                                                     Statements of Cash Flows

-------------------------------------------------------------------------------------------------------------


Year ended December 31,                                                           2003                   2002
-------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                     <C>
Cash flows from operating activities
     Net (loss)                                                           $   (994,448)           $  (453,921)
     Adjustments to reconcile net (loss) to net
         cash provided by (used in) operating activities
              Depreciation and amortization                                  1,265,669                110,021
              (Gain) loss on sale of computer
                  equipment                                                       (384)                 5,886
              Other noncash activities included in
                  determination of net (loss)                                 (427,805)                    --
              Changes in assets and liabilities
                  (Increase) decrease in assets
                      Lease income receivable                                  (58,039)               (30,957)
                      Accounts receivable,
                           affiliated limited partnerships                     (46,902)                (6,000)
                      Other receivables                                         99,873               (103,610)
                      Deferred revenue                                          (2,438)                    --
                      Refundable deposits                                       (1,130)                    --
                  Increase (decrease) in liabilities
                      Accounts payable                                       2,304,960                 20,486
                      Accounts payable, General
                           Partner                                              70,218                    806
                      Accounts payable,
                           Commonwealth Capital Corp.                          (61,807)                61,807
                      Other accrued expenses                                    17,000                     --
                      Unearned lease income                                     95,971                  6,514
-------------------------------------------------------------------------------------------------------------

Net cash provided by (used in) operating activities                          2,260,738               (388,968)
-------------------------------------------------------------------------------------------------------------
</TABLE>

                                                                               7
<PAGE>
<TABLE>
<CAPTION>
                                                                         Commonwealth Income & Growth Fund IV


                                                                                     Statements of Cash Flows

-------------------------------------------------------------------------------------------------------------


Year ended December 31,                                                           2003                   2002
-------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                     <C>
Cash flows from investing activities
      Capital expenditures                                                $ (6,401,395)          $ (2,224,765)
      Prepaid acquisition fees to the General Partner                         (143,936)               (33,905)
      Net proceeds from sale of computer
          equipment                                                             14,063                100,502
      Equipment acquisition fees to the General
         Partner                                                              (345,835)               (88,991)
-------------------------------------------------------------------------------------------------------------

Net cash (used in) investing activities                                     (6,877,103)            (2,247,159)
-------------------------------------------------------------------------------------------------------------

 Cash flows from financing activities
      Contributions                                                         11,341,175              3,626,554
      Offering costs                                                        (1,403,719)              (393,230)
      Distributions to partners                                               (935,899)               (87,417)
      Other receivable, Commonwealth Capital Corp.                            (229,801)                    --
      Debt placement fee to the General
          Partner                                                              (21,878)                    --
 ------------------------------------------------------------------------------------------------------------

 Net cash provided by financing activities                                   8,749,878              3,145,907
 ------------------------------------------------------------------------------------------------------------

 Net increase in cash and cash equivalents                                   4,133,513                509,780

 Cash and cash equivalents at beginning of year                                510,780                  1,000
 ------------------------------------------------------------------------------------------------------------

 Cash and cash equivalents at end of year                                 $  4,644,293           $    510,780
 ============================================================================================================
</TABLE>

                                 See accompanying notes to financial statements.


                                                                               8
<PAGE>
                                            Commonwealth Income & Growth Fund IV


                                                   Notes to Financial Statements

--------------------------------------------------------------------------------

1. Business             Commonwealth Income & Growth Fund IV (the "Partnership")
                        is a limited partnership organized in the Commonwealth
                        of Pennsylvania on May 15, 2001. The Partnership is
                        offering for sale up to 750,000 units of the limited
                        partnership at the purchase price of $20 per unit (the
                        "Offering"). The Partnership reached the minimum amount
                        in escrow and commenced operations on July 8, 2002. As
                        of September 15, 2003, the Partnership had reached full
                        subscription, receiving $14,968,729 in contributions
                        from limited and general partners, amounting to 750,000
                        units.

                        The Partnership uses the proceeds of the Offering to
                        acquire, own and lease various types of computer
                        peripheral equipment and other similar capital
                        equipment, which will be leased primarily to U.S.
                        corporations and institutions. Commonwealth Capital Corp
                        ("CCC"), on behalf of the Partnership and other
                        affiliated partnerships, will acquire computer equipment
                        subject to associated debt obligations and lease
                        agreements and allocate a participation in the cost,
                        debt and lease revenue to the various partnerships based
                        on certain risk factors

                        The Partnership's General Partner is Commonwealth Income
                        & Growth Fund, Inc. (the "General Partner"), a
                        Pennsylvania corporation that is an indirect wholly
                        owned subsidiary of CCC. CCC is a member of the
                        Investment Program Association (IPA), Financial Planning
                        Association (FPA), and the Equipment Leasing Association
                        (ELA). Approximately ten years after the commencement of
                        operations, the Partnership intends to sell or otherwise
                        dispose of all of its computer equipment, make final
                        distributions to partners, and to dissolve. Unless
                        sooner terminated, the Partnership will continue until
                        December 31, 2012.

                        Allocations of income and distributions of cash are
                        based on the Partnership's Limited Partnership Agreement
                        (the "Agreement"). The various allocations under the
                        Agreement prevent any limited partner's capital account
                        from being reduced below zero and ensure the capital
                        accounts reflect the anticipated sharing ratios of cash
                        distributions, as defined in the Agreement. During 2003,
                        annual cash distributions to limited partners were made
                        at a rate of approximately 10% of their original
                        contributed capital. Distributions during 2003 reflect
                        an annual return of capital in the amount of
                        approximately $1.80 per weighted average number of
                        limited partnership units outstanding during the year.
                        During 2002, annual cash distributions to limited
                        partners were made at a rate of approximately 10% of
                        their original contributed capital. Distributions during
                        2002 reflect an annual return of capital in the amount
                        of approximately $.72 per weighted average number of
                        limited partnership units outstanding during the year.

                                                                               9
<PAGE>
                                            Commonwealth Income & Growth Fund IV


                                                   Notes to Financial Statements

--------------------------------------------------------------------------------

2. Summary of           Revenue Recognition
   Significant
   Accounting           Through December 31, 2003, the Partnership has only
   Policies             entered into operating leases. Lease revenue is
                        recognized on a monthly basis in accordance with the
                        terms of the operating lease agreements.

                        The Partnership reviews a customer's credit history
                        before extending credit and may establish a provision
                        for uncollectible accounts receivable based upon the
                        credit risk of specific customers, historical trends and
                        other information.

                        Use of Estimates

                        The preparation of financial statements in conformity
                        with generally accepted accounting principles requires
                        management 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 reporting
                        period. Actual results could differ from those
                        estimates.

                        Long-Lived Assets

                        The Partnership evaluates its long-lived assets when
                        events or circumstances indicate that the value of the
                        asset may not be recoverable. The Partnership determines
                        whether impairment exists by estimating the undiscounted
                        cash flows to be generated by each asset, including cash
                        flows from lease revenues and proceeds from the sale of
                        equipment. If the estimated undiscounted cash flows are
                        less than the carrying value of the asset then
                        impairment exists. The amount of the impairment is
                        determined based on the difference between the carrying
                        value and the fair value. The fair value is determined
                        based on estimated discounted cash flows to be generated
                        by the asset.

                                                                              10
<PAGE>
                                            Commonwealth Income & Growth Fund IV


                                                   Notes to Financial Statements

--------------------------------------------------------------------------------

                        Depreciation on computer equipment for financial
                        statement purposes is based on the straight-line method
                        over estimated useful lives of four years.

                        Intangible Assets

                        Equipment acquisition costs and deferred expenses, are
                        amortized on a straight-line basis over two- to-four
                        year lives. Unamortized acquisition costs and deferred
                        expenses are charged to amortization expense when the
                        associated leased equipment is sold.

                        Cash and Cash Equivalents

                        The Partnership considers all highly liquid investments
                        with a maturity of three months or less to be cash
                        equivalents. Cash equivalents have been invested in a
                        money market fund investing directly in Treasury
                        obligations.

                        Income Taxes

                        The Partnership is not subject to federal income taxes;
                        instead, any taxable income (loss) is passed through to
                        the partners and included on their respective income tax
                        returns.

                        Taxable income differs from financial statement net
                        income as a result of reporting certain income and
                        expense items for tax purposes in periods other than
                        those used for financial statement purposes, principally
                        relating to depreciation, amortization, and lease
                        income.

                        Offering Costs

                        Offering costs are payments for selling commissions,
                        dealer manager fees, professional fees and other
                        offering expenses relating to the syndication. Selling
                        commissions are 8% of the partners' contributed capital
                        and dealer manager fees are 1% of the partners'
                        contributed capital. These costs have been deducted from
                        partnership capital in the accompanying financial
                        statements.

                                                                              11
<PAGE>
                                            Commonwealth Income & Growth Fund IV


                                                   Notes to Financial Statements

--------------------------------------------------------------------------------

                        Net Income (Loss) Per Equivalent Limited Partnership
                        Unit

                        The net income (loss) per equivalent limited partnership
                        unit is computed based upon net income (loss) allocated
                        to the limited partners and the weighted average number
                        of equivalent limited partner units outstanding during
                        the year.

                        Reimbursable Expenses

                        Reimbursable expenses, which are charged to the
                        Partnership by CCC in connection with the administration
                        and operation of the Partnership, are allocated to the
                        Partnership based upon several factors including, but
                        not limited to, the number of investors, compliance
                        issues, and the number of existing leases.

                        Recent Accounting Pronouncements

                                        Interpretation No. 45

                        In November 2002, the FASB issued Interpretation No. 45,
                        "Guarantor's Accounting and Disclosure Requirements for
                        Guarantees, including Indirect Guarantees of
                        Indebtedness of Others" ("Interpretation No. 45").
                        Interpretation No. 45 elaborates on the existing
                        disclosure requirements for most guarantees, including
                        loan guarantees such as standby letters of credit. It
                        also clarifies that at any time a company issues a
                        guarantee, the company must recognize the initial
                        liability for the fair market value of the obligations
                        it assumes under the guarantee and must disclose that
                        information in its interim and annual financial
                        statements. The initial recognition and measurement
                        provisions of Interpretation No. 45 apply on a
                        prospective basis to guarantees issued or modified after
                        December 31, 2002. Interpretation No. 45 did not have an
                        effect on our financial statements.

                                        Interpretation No. 46

                        In January 2003, FASB issued Interpretation No. 46,
                        "Consolidation of Variable Interest Entities"
                        ("Interpretation No. 46"), which clarifies the
                        application of Accounting Research Bulletin No. 51,
                        "Consolidated Financial Statements," to certain entities
                        in which equity investors do not have the
                        characteristics of a controlling financial interest or
                        do not have sufficient equity at risk for the entity to
                        finance its activities without additional subordinated
                        financial support from the other parties. Interpretation
                        No. 46 is applicable immediately for variable interest
                        entities created after January 31, 2003. For variable
                        interest entities created before January 31, 2003, the
                        provisions of Interpretation No. 46, the provisions of
                        Interpretation No. 46 have been deferred to the first
                        quarter of 2004. The adoption of Interpretation No. 46
                        did not have an impact on the financial position and
                        results of operations.

                                                                              12
<PAGE>
                                            Commonwealth Income & Growth Fund IV


                                                   Notes to Financial Statements

--------------------------------------------------------------------------------

                                                SFAS 150

                        In May 2003, the FASB issued FASB Statement No. 150,
                        Accounting for Certain Financial Instruments with
                        Characteristics of both Liabilities and Equity, which
                        establishes standards on how an issuer classifies and
                        measures certain financial instruments with
                        characteristics of liabilities and equity. It requires
                        that an issuer classify a financial instrument that is
                        within its scope as a liability (or an asset in some
                        circumstances). Many of those instruments entered into
                        or modified after May 31, 2003 and otherwise shall be
                        effective at the beginning of the first interim period
                        beginning after June 15, 2003. The adoption of SFAS 150
                        did not have an impact on its financial position and
                        results of operations.

3. Computer             The Partnership is the lessor of equipment under
   Equipment            operating leases with periods ranging from 16 to 36
                        months. In general, associated costs such as repairs and
                        maintenance, insurance and property taxes are paid by
                        the lessee.

                        The following is a schedule of future minimum rentals on
                        noncancelable operating leases at December 31, 2003:

                        Year ending December 31,                     Amount
                        ------------------------------------------------------

                            2004                                   $ 3,315,000
                            2005                                     2,915,000
                            2006                                     1,367,000
                        ------------------------------------------------------

                                                                   $ 7,597,000
                        ======================================================

                                                                              13
<PAGE>
                                            Commonwealth Income & Growth Fund IV


                                                   Notes to Financial Statements

--------------------------------------------------------------------------------

                        Lease income from two lessees, exceeding 10% of lease
                        revenue, represented approximately 34% of lease income
                        for the period ended December 31, 2003. Lease income
                        from five lessees, each exceeding 10% of lease revenue,
                        represented approximately 85% of lease income for the
                        period ended December 31, 2002.

                        As of December 31, 2003, four lessees comprised
                        approximately 81% of the Partnership's accounts
                        receivable. As of December 31, 2002, two lessees
                        comprised approximately 96% of the Partnership's
                        accounts receivable.

4. Related Party        Organizational Fee
   Transactions
                        The General Partner is entitled to be paid an
                        Organizational Fee equal to three percent of the first
                        $10,000,000 of Limited Partners' Capital Contributions
                        and two percent of the Limited Partners' Capital
                        Contributions in excess of $10,000,000, as compensation
                        for the organization of the Partnership. During 2003 and
                        2002, the Partnership has paid approximately $291,000
                        and $109,000, respectively, in organizational fees.

                        Selling Commission and Dealer Manager Fees

                        The Partnership will pay to Commonwealth Capital
                        Securities Corp. (CCSC), an affiliate of Commonwealth
                        Capital Corp., an aggregate of up to 9% of the partners'
                        contributed capital as selling commissions and dealer
                        manager reallowance fees, after the required $1,150,000
                        minimum subscription amount has been sold. During 2003
                        and 2002, selling commissions and dealer manager fees of
                        approximately $ 1,162,000 and $323,000, respectively,
                        were paid to CCSC. In addition, during 2003, the
                        Partnership paid CCC approximately $156,000 for
                        additional underwriting expenses.

                                                                              14
<PAGE>
                                            Commonwealth Income & Growth Fund IV


                                                   Notes to Financial Statements

--------------------------------------------------------------------------------

                        Reimbursable Expenses

                        The General Partner and its affiliates are entitled to
                        reimbursement by the Partnership for the cost of
                        supplies or services obtained and used by the General
                        Partner in connection with the administration and
                        operation of the Partnership from third parties
                        unaffiliated with the General Partner. In addition, the
                        General Partner and its affiliates are entitled to
                        reimbursement for certain expenses incurred by the
                        General Partner and its affiliates in connection with
                        the administration and operation of the Partnership. An
                        understanding exists between CCC and the Partnership,
                        whereby CCC will not be reimbursed for the
                        administration of the Partnership for as long as the
                        Partnership has not broken escrow. When the Partnership
                        reached the minimum amount to break escrow, the
                        Partnership reimbursed CCC for its share of the expenses
                        to administer the Partnership retroactively from the
                        effective date through the date of the first closing.
                        During 2003 and 2002, the Partnership recorded $673,000
                        and $366,000, respectively, for reimbursement of
                        expenses to the General Partner. This amount includes
                        approximately $103,000 that was incurred by CCC on
                        behalf of the Partnership through the date the
                        Partnership broke escrow, July 8, 2002.

                        Equipment Acquisition Fee

                        The General Partner is entitled to be paid an equipment
                        acquisition fee of 4% of the purchase price of each item
                        of equipment purchased as compensation for the
                        negotiation of the acquisition of the equipment and
                        lease thereof or sale under a conditional sales
                        contract. The fee was paid upon each closing of the
                        Offering with respect to the equipment to be purchased
                        by the Partnership with the net proceeds for the
                        Offering available for investment in equipment. If the
                        Partnership acquires equipment in an amount exceeding
                        the net proceeds of the Offering available for
                        investment in equipment, the fee will be paid when such
                        equipment is acquired. During 2003, equipment
                        acquisition fees of approximately $490,000 were paid to
                        the General Partner. Approximately $346,000 has been
                        earned by the General Partner relating to equipment
                        acquired in 2003, including $34,000 which was paid to
                        the General Partner during 2002. The balance of
                        approximately $178,000 will be earned with acquisitions
                        in future periods. During 2002, equipment acquisition
                        fees of approximately $123,000 were paid to the General
                        Partner. Of this amount, approximately $89,000 has been
                        earned by the General Partner relating to equipment
                        acquired in 2002.

                                                                              15
<PAGE>
                                            Commonwealth Income & Growth Fund IV


                                                   Notes to Financial Statements

--------------------------------------------------------------------------------

                        Debt Placement Fee

                        As compensation for arranging term debt to finance the
                        acquisition of equipment by the Partnership, the General
                        Partner is paid a fee equal to 1% of such indebtedness;
                        provided, however, that such fee shall be reduced to the
                        extent the Partnership incurs such fees to third
                        parties, unaffiliated with the General Partner or the
                        lender, with respect to such indebtedness and no such
                        fee will be paid with respect to borrowings from the
                        General Partner or its affiliates. During 2003, the
                        Partnership paid approximately $22,000 in debt placement
                        fees to the General Partner. There were no debt
                        placement fees paid to the General Partner during 2002.

                        Equipment Management Fee

                        The General Partner is entitled to be paid a monthly fee
                        equal to the lesser of (i) the fees which would be
                        charged by an independent third party for similar
                        services for similar equipment or (ii) the sum of (a)
                        two percent of (1) the gross lease revenues attributable
                        to equipment which is subject to full payout net leases
                        which contain net lease provisions plus (2) the purchase
                        price paid on conditional sales contracts as received by
                        the Partnership and (b) 5% of the gross lease revenues
                        attributable to equipment which is subject to operating
                        leases. During 2003 and 2002, equipment management fees
                        of approximately $82,000 and $7,000, respectively, were
                        paid to the General Partner as determined pursuant to
                        section (ii) above.

                        Release Fee

                        As compensation for providing releasing services for any
                        equipment for which the General Partner has, following
                        the expiration of, or default under, the most recent
                        lease or conditional sales contract, arranged a
                        subsequent lease or conditional sales contract for the
                        use of such equipment to a lessee or other party, other
                        than the current or most recent lessee or other operator
                        of such equipment or its affiliates ("Release"), the
                        General Partner shall receive, on a monthly basis, a
                        Release Fee equal to the lesser of (a) the fees which
                        would be charged by an independent third party for
                        comparable services for comparable equipment or (b) two
                        percent of gross lease revenues derived from such
                        Release. There were no such fees paid to the General
                        Partner in 2003 and 2002.

                                                                              16
<PAGE>
                                            Commonwealth Income & Growth Fund IV


                                                   Notes to Financial Statements

--------------------------------------------------------------------------------

                        Equipment Liquidation Fee

                        With respect to each item of equipment sold by the
                        General Partner (other than in connection with a
                        conditional sales contract), a fee equal to the lesser
                        of (i) 50% of the competitive equipment sale commission
                        or (ii) three percent of the sales price for such
                        equipment is payable to the General Partner. The payment
                        of such fee is subordinated to the receipt by the
                        limited partners of the net disposition proceeds from
                        such sale in accordance with the Partnership Agreement.
                        Such fee will be reduced to the extent any liquidation
                        or resale fees are paid to unaffiliated parties. During
                        2003 and 2002, the General Partner earned equipment
                        liquidation fees of approximately $1,000 and $3,000,
                        respectively.

                        Accounts Receivable - Commonwealth Capital Corp

                        As of December 31, 2003, the Partnership has a
                        non-interest bearing receivable from CCC, a related
                        party to the Partnership, in the amount of approximately
                        $230,000, which originated in 2003. CCC, through its
                        indirect subsidiaries, including the General Partner of
                        the Partnership, earns fees based on revenues and new
                        lease purchases from this fund. CCC intends to repay
                        these receivables, through acquisition fees, debt
                        placement fees and reimbursement of expenses, with a
                        minimum amount of $12,500 per quarter, commencing the
                        quarter ending March, 2004.

                                                                              17
<PAGE>
                                            Commonwealth Income & Growth Fund IV


                                                   Notes to Financial Statements

--------------------------------------------------------------------------------

5. Notes Payable        Notes payable consisted of the following:
<TABLE>
<CAPTION>
                        December 31,                                           2003           2002
                        ----------------------------------------------------------------------------
<S>                                                                       <C>              <C>
                        Installment notes payable to banks; interest
                        ranging from 5.75% to 7.75%, due in monthly
                        installments ranging from $60 to $1,980,
                        including interest, with final payments from
                        June through December 2004.                        $    56,857      $     --

                        Installment notes payable to banks; interest
                        ranging from 5.00% to 6.75%, due in monthly
                        installments ranging from $151 to $4,212,
                        including interest, with final payments from
                        January through December 2005.                         396,330            --

                        Installment notes payable to banks; interest
                        ranging from 4.85% to 6.00%, due in monthly
                        installments ranging from $155 to $22,902,
                        including interest, with final payments from
                        January through August 2006.                         1,363,481            --
                        ----------------------------------------------------------------------------
                                                                           $ 1,816,668      $     --
                        ============================================================================
</TABLE>
                        These notes are secured by specific computer equipment
                        and are nonrecourse liabilities of the Partnership.
                        Aggregate maturities of notes payable for each of the
                        years subsequent to December 31, 2003 are as follows:

                        Year ending December 31,                         Amount
                        -------------------------------------------------------

                            2004                                    $   897,838
                            2005                                        716,219
                            2006                                        202,611
                        -------------------------------------------------------
                                                                    $ 1,816,668
                        =======================================================

                                                                              18
<PAGE>
                                            Commonwealth Income & Growth Fund IV


                                                   Notes to Financial Statements

--------------------------------------------------------------------------------

6. Supplemental         Other noncash activities included in the determination
   Cash Flow            of net loss are as follows:
   Information
<TABLE>
<CAPTION>
Year ended December 31,                                                     2003       2002
-------------------------------------------------------------------------------------------
<S>                                                                   <C>           <C>
Lease income, net of interest expense on
     notes payable realized as a result of direct payment of
     principal by lessee to bank                                       $ 347,571     $   --

Lease income paid to original lessor in lieu
     of cash payment for computer equipment acquired                      80,234         --
-------------------------------------------------------------------------------------------

Total adjustment to net (loss) from other noncash activities           $ 427,805     $   --
===========================================================================================
</TABLE>
                        No interest or principal on notes payable was paid by
                        the Partnership because direct payment was made by
                        lessee to the bank in lieu of collection of lease income
                        and payment of interest and principal by the
                        Partnership.

                        Noncash investing and financing activities include the
                        following:
<TABLE>
<CAPTION>
Year ended December 31,                                                     2003       2002
-------------------------------------------------------------------------------------------
<S>                                                                   <C>           <C>

Debt assumed in connection with purchase
     of computer equipment                                           $ 2,164,000   $     --
===========================================================================================
</TABLE>

                                                                              19
<PAGE>
                                            Commonwealth Income & Growth Fund IV


                                                   Notes to Financial Statements

--------------------------------------------------------------------------------

7. Reconciliation of Net (Loss)
   Reported for Financial
   Reporting Purposes to Taxable
   (Loss) on the Federal
   Partnership Return
<TABLE>
<CAPTION>
Year ended December 31,                                                      2003                  2002
-------------------------------------------------------------------------------------------------------
<S>                                                                 <C>                  <C>
Net (loss) for financial reporting
      purposes                                                       $   (994,448)         $   (453,921)
      Adjustments
          (Loss) on sale of computer equipment                                 --               (12,336)
          Depreciation                                                 (2,548,774)             (611,138)
          Amortization                                                     39,289                 7,002
          Organizational costs                                            149,424                38,079
          Unearned lease income                                            97,584                 3,506
          Other                                                           120,188                50,883
 ------------------------------------------------------------------------------------------------------
 Taxable (loss) on the Federal
      Partnership return                                             $ (3,136,737)         $   (977,925)
 ======================================================================================================
</TABLE>

                        The "Adjustments - Other" includes financial statement
                        adjustments reflected on the tax return in the
                        subsequent year.

                        Adjustment for (loss) on sale of equipment is due to
                        longer useful lives for tax reporting purposes.

                                                                              20

<PAGE>
                                            Commonwealth Income & Growth Fund IV


                                                   Notes to Financial Statements

--------------------------------------------------------------------------------

8. Quarterly Results    Summarized quarterly financial data for the year ended
   of Operation         December 31, 2003 is as follows:
   (Unaudited)
<TABLE>
<CAPTION>
                                                                         Quarter ended
                                             --------------------------------------------------------------------
                                               March 31          June 30         September 30        December 31
-----------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>                <C>                 <C>
2003

Revenues
     Lease and other                           $  271,842       $  318,179         $   396,443         $  691,802
     Gain on sale of computer equipment
                                                       --               --                  --                384
-----------------------------------------------------------------------------------------------------------------
Total revenues                                    271,842          318,179             396,443            692,186

Total costs and expenses                          481,373          711,654             767,544            712,527
-----------------------------------------------------------------------------------------------------------------

Net (loss)                                     $ (209,531)      $ (393,475)        $  (371,101)        $  (20,341)
=================================================================================================================

(Loss) per limited partner unit                $    (0.94)      $    (0.99)        $     (0.55)        $    (0.03)
=================================================================================================================
</TABLE>

                                                                              21


<PAGE>
                                            Commonwealth Income & Growth Fund IV


                                                   Notes to Financial Statements

--------------------------------------------------------------------------------

                        Summarized quarterly financial data for the year ended
                        December 31, 2002 is as follows:
<TABLE>
<CAPTION>
                                                                         Quarter ended
                                             --------------------------------------------------------------------
                                               March 31          June 30         September 30        December 31
-----------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>                <C>                 <C>
2002

Revenues                                       $       --       $       --         $    19,444         $  131,090
-----------------------------------------------------------------------------------------------------------------

Costs and expenses
         Costs and expenses                            --               --             227,245            371,324
         Loss on sale of computer
                  equipment                            --               --                  --              5,886
-----------------------------------------------------------------------------------------------------------------

Total costs and expenses                               --               --             227,245            377,210
-----------------------------------------------------------------------------------------------------------------

Net (loss)                                     $       --       $       --         $  (207,801)          (246,120)
=================================================================================================================

(Loss) per limited partner unit                $       --       $       --         $     (2.56)        $    (1.57)
=================================================================================================================
</TABLE>

                                                                              22