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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)



| | x |  | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| | - |  | ---------------------------------------------------------------------------------------



For the quarterly period ended June 30, 2004 or



| |  ̈ |  | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| | - |  | ----------------------------------------------------------------------------------------



For the transition period from
to



Commission file number 0-30287



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WELLS REAL ESTATE FUND XII, L.P.

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Georgia                                                        |  | 58-2438242                          
|(State of other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|6200 The Corners Parkway,Norcross, Georgia                     |  | 30092-3365                          
|(Address of principal executive offices)                       |  | (Zip Code)                          
|                                                               | 
|Registrants telephone number, including area code             |  | (770) 449-7800                      



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(Former name, former address and former fiscal year, if changed since last report)



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



Yes  x     No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).



Yes ̈No  x



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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS



Certain statements contained in this Form 10-Q of Wells Real Estate Fund XII, L.P. (the
Partnership) other than historical facts may be considered forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements include, in
particular, statements about our plans, strategies, and prospects and are subject to certain risks and uncertainties, as well as known and unknown risks, which could cause actual results to differ materially from those projected or anticipated.
Therefore, such statements are not intended to be a guarantee of our performance in future periods. Such forward looking statements can generally be identified by our use of forward looking terminology such as may, will,
expect, intend, anticipate, estimate, believe, continue, or other similar words. Specifically, among others, we consider statements concerning projections of future operating
results and cash flows, our ability to meet future obligations, and the amount and timing of future distributions to limited partners to be forward-looking statements.



Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date that this report is
filed with the Securities and Exchange Commission. Neither the Partnership nor the general partners make any representations or warranties (expressed or implied) about the accuracy of any such forward-looking statements. Actual results could differ
materially from any forward-looking statements contained in this Form 10-Q, and we do not intend to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.



Any such forward-looking statements are subject to known and unknown risks, uncertainties and
other factors and are based on a number of assumptions involving judgments with respect to, among other things, future economic, competitive, and market conditions, all of which are difficult or impossible to predict accurately. To the extent that
our assumptions differ from actual results, our ability to meet such forward-looking statements, including our ability to generate positive cash flow from operations; provide distributions to limited partners; and maintain the value of our real
estate properties, may be significantly hindered. Some of the risks and uncertainties, although not all risks and uncertainties, which could cause actual results to differ materially from those presented in certain forward-looking statements follow:



General economic risks



| |  |  | Adverse changes in general or local economic conditions;
| | - |  | --------------------------------------------------------



| |  |  | Adverse economic conditions affecting the particular industry of one or more of our tenants;
| | - |  | --------------------------------------------------------------------------------------------



Real estate risks inherent in properties owned through joint ventures



| |  |  | Ability to achieve appropriate occupancy levels resulting in sufficient rental amounts;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | Supply of or demand for similar or competing rentable space, which may adversely impact retaining or obtaining new tenants upon lease expiration at acceptable rental amounts;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Tenant ability or willingness to satisfy obligations relating to our existing lease agreements;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | Potential need to fund tenant improvements, lease-up costs, or other capital expenditures out of operating cash flow;
| | - |  | ---------------------------------------------------------------------------------------------------------------------



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| |  |  | Increases in property operating expenses, including property taxes, insurance, and other costs not recoverable from tenants;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------



| |  |  | Ability to secure adequate insurance at reasonable and appropriate rates to avoid uninsured losses or losses in excess of insured amounts;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Discovery of previously undetected environmentally hazardous or other undetected adverse conditions;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | Unexpected costs of capital expenditures related to tenant build-out projects or other unforeseen capital expenditures;
| | - |  | -----------------------------------------------------------------------------------------------------------------------



| |  |  | Ability to sell a property when desirable at an acceptable return, including the ability of the purchaser to satisfy any continuing obligations.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



Other operational risks



| |  |  | Our dependency on Wells Capital, Inc. (Wells Capital), the corporate general partner of one of our General Partners, its key personnel, and its affiliates for various
administrative services;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Wells Capitals ability to attract and retain high-quality personnel who can provide acceptable service levels to us and generate economies of scale for us over time;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Increases in our administrative operating expenses, including increased expenses associated with operating as a public company in the current regulatory environment;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Changes in governmental, tax, real estate, environmental, and zoning laws and regulations and the related costs of compliance;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------



| |  |  | Our ability to prove compliance with any governmental, tax, real estate, environmental, and zoning in the event that any such position is questioned by the respective authority; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Actions of our joint venture partners including potential bankruptcy, business interests differing from ours, or other actions that may adversely impact the operations of joint
ventures.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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WELLS REAL ESTATE FUND XII, L.P.



TABLE OF CONTENTS



|         |  |                       |  |                                                                                                                         |  |         
|-------- |  | --------------------- |  | ----------------------------------------------------------------------------------------------------------------------- |  | --------
|         |  |                       |  |                                                                                                                         |  | Page No.
|PART I.  |  | FINANCIAL INFORMATION |  |                                                                                                                        
|         |  |                       | 
|         |  | Item 1                |  | Financial Statements                                                                                                    |  |         
|         |  |                       | 
|         |  |                       |  | Balance SheetsJune 30, 2004 (unaudited) and December 31, 2003                                                          |  | 5       
|         |  |                       | 
|         |  |                       |  | Statements of Operations for the Three Months and Six Months Ended June 30, 2004 (unaudited) and 2003 (unaudited)       |  | 6       
|         |  |                       | 
|         |  |                       |  | Statements of Partners Capital for the Year Ended December 31, 2003 and the Six Months Ended June 30, 2004 (unaudited) |  | 7       
|         |  |                       | 
|         |  |                       |  | Statements of Cash Flows for the Six Months Ended June 30, 2004 (unaudited) and 2003 (unaudited)                        |  | 8       
|         |  |                       | 
|         |  |                       |  | Condensed Notes to Financial Statements (unaudited)                                                                     |  | 9       
|         |  |                       | 
|         |  | Item 2.               |  | Managements Discussion and Analysis of Financial Conditions and Results of Operations                                  |  | 13      
|         |  |                       | 
|         |  | Item 3                |  | Quantitative and Qualitative Disclosures about Market Risks                                                             |  | 19      
|         |  |                       | 
|         |  | Item 4.               |  | Controls and Procedures                                                                                                 |  | 19      
|         |  |                      
|PART II. |  | OTHER INFORMATION     |  | 20                                                                                                                     



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WELLS REAL ESTATE FUND XII, L.P.



BALANCE SHEETS



ASSETS



|                                                                                     |  |                           |            |                   |   |           
|------------------------------------------------------------------------------------ |  | ------------------------- | ---------- | ----------------- | - | ----------
|                                                                                     |  | June 30, 2004 (unaudited) |            | December 31, 2003
|Investments in joint ventures                                                        |  | $                         | 27,331,775 |                   | $ | 27,894,505
|Cash and cash equivalents                                                            |  |                           | 175,430    |                   |   | 14,922    
|Due from joint ventures                                                              |  |                           | 527,862    |                   |   | 658,908   
|Accounts receivable                                                                  |  |                           | 0          |                   |   | 1,377     
|                                                                                     |  |                           |            |                   |   |           
|Total assets                                                                         |  | $                         | 28,035,067 |                   | $ | 28,569,712
|                                                                                     |  |                           |            |                   |   |           
|                                                                                    
|LIABILITIES AND PARTNERS CAPITAL                                                   
|Liabilities:                                                                         |  |                           |            |                   |   |           
|Accounts payable and accrued expenses                                                |  | $                         | 14,563     |                   | $ | 17,948    
|Partnership distributions payable                                                    |  |                           | 440,107    |                   |   | 660,161   
|                                                                                     |  |                           |            |                   |   |           
|Total liabilities                                                                    |  |                           | 454,670    |                   |   | 678,109   
|                                                                                     |  |                          
|Partners capital:                                                                   |  |                           |            |                   |   |           
|Limited partners:                                                                    |  |                           |            |                   |   |           
|Cash Preferred2,934,050 units outstanding as of June 30, 2004 and December 31, 2003 |  |                           | 25,708,964 |                   |   | 25,536,652
|Tax Preferred627,069 units outstanding as of June 30, 2004 and December 31, 2003    |  |                           | 1,871,433  |                   |   | 2,354,951 
|General partners                                                                     |  |                           | 0          |                   |   | 0         
|                                                                                     |  |                           |            |                   |   |           
|Total partners capital                                                              |  |                           | 27,580,397 |                   |   | 27,891,603
|                                                                                     |  |                           |            |                   |   |           
|Total liabilities and partners capital                                              |  | $                         | 28,035,067 |                   | $ | 28,569,712
|                                                                                     |  |                           |            |                   |   |           



See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.



STATEMENTS OF OPERATIONS

(unaudited)



|                                                                          |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|------------------------------------------------------------------------- |  | --------------------------- | --------- | - | ------------------------- | - | --------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                                                          |  | Three Months Ended June 30, |           |   | Six Months Ended June 30, |  
|                                                                          |  | 2004                        |           |   | 2003                      |   |           | 2004 |  |   | 2003      |  
|EQUITY IN INCOME OF JOINT VENTURES (Note 2)                               |  | $                           | 438,162   |   |                           | $ | 395,535   |      |  | $ | 851,308   |   |  | $ | 824,646   |  
|                                                                          |  |                             |           |  
|EXPENSES:                                                                 |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Partnership administration                                                |  |                             | 67,023    |   |                           |   | 85,277    |      |  |   | 82,750    |   |  |   | 115,311   |  
|Legal and accounting                                                      |  |                             | 9,936     |   |                           |   | 5,961     |      |  |   | 18,729    |   |  |   | 9,944     |  
|Other general and administrative                                          |  |                             | 701       |   |                           |   | 2,196     |      |  |   | 983       |   |  |   | 3,546     |  
|                                                                          |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|Total expenses                                                            |  |                             | 77,660    |   |                           |   | 93,434    |      |  |   | 102,462   |   |  |   | 128,801   |  
|OTHER INCOME                                                              |  |                             | 115       |   |                           |   | 0         |      |  |   | 115       |   |  |   | 262       |  
|                                                                          |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|NET INCOME                                                                |  | $                           | 360,617   |   |                           | $ | 302,101   |      |  | $ | 748,961   |   |  | $ | 696,107   |  
|                                                                          |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|NET INCOME ALLOCATED TO CASH PREFERRED LIMITED PARTNERS                   |  | $                           | 638,965   |   |                           | $ | 580,370   |      |  | $ | 1,305,535 |   |  | $ | 1,252,474 |  
|                                                                          |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|NET LOSS ALLOCATED TO TAX PREFERRED LIMITED PARTNERS                      |  | $                           | (278,348  | ) |                           | $ | (278,269  | )    |  | $ | (556,574  | ) |  | $ | (556,367  | )
|                                                                          |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|NET INCOME (LOSS) PER WEIGHTED-AVERAGE LIMITED PARTNER UNIT:              |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|CASH PREFERRED                                                            |  | $                           | 0.22      |   |                           | $ | 0.20      |      |  | $ | 0.45      |   |  | $ | 0.44      |  
|                                                                          |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|TAX PREFERRED                                                             |  | $                           | (0.44     | ) |                           | $ | (0.40     | )    |  | $ | (0.88     | ) |  | $ | (0.79     | )
|                                                                          |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|DISTRIBUTION OF OPERATING CASH PER WEIGHTED-AVERAGE LIMITED PARTNER UNIT: |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|CASH PREFERRED                                                            |  | $                           | 0.15      |   |                           | $ | 0.21      |      |  | $ | 0.36      |   |  | $ | 0.42      |  
|                                                                          |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|TAX PREFERRED                                                             |  | $                           | 0.00      |   |                           | $ | 0.00      |      |  | $ | 0.00      |   |  | $ | 0.00      |  
|                                                                          |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|WEIGHTED-AVERAGE LIMITED PARTNER UNITS OUTSTANDING:                       |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|CASH PREFERRED                                                            |  |                             | 2,934,050 |   |                           |   | 2,858,396 |      |  |   | 2,929,050 |   |  |   | 2,858,396 |  
|                                                                          |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  
|TAX PREFERRED                                                             |  |                             | 627,069   |   |                           |   | 702,723   |      |  |   | 632,069   |   |  |   | 702,723   |  
|                                                                          |  |                             |           |   |                           |   |           |      |  |   |           |   |  |   |           |  



See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.



STATEMENTS OF PARTNERS CAPITAL



FOR THE
YEAR ENDED DECEMBER 31, 2003 AND

FOR THE SIX MONTHS ENDED JUNE 30, 2004 (unaudited)



|                                     |  |                  |   |  |                  |            |                         |       |         |   |         |   |            |   |  |   |   |  |   |            |  
|------------------------------------ |  | ---------------- | - |  | ---------------- | ---------- | ----------------------- | ----- | ------- | - | ------- | - | ---------- | - |  | - | - |  | - | ---------- | -
|                                     |  | Limited Partners |   |  | General Partners |            | Total Partners Capital |      
|                                     |  | Cash Preferred   |   |  | Tax Preferred    |            |                         |      
|                                     |  | Units            |   |  | Amounts          |            |                         | Units |         |   | Amounts |   |            |  
|BALANCE, December 31, 2002           |  | 2,856,396        |   |  | $                | 25,158,289 |                         |       | 704,723 |   |         | $ | 3,800,870  |   |  | $ | 0 |  | $ | 28,959,159 |  
|                                     |  |                  |   |  |                  |           
|Net income (loss)                    |  | 0                |   |  |                  | 2,563,592  |                         |       | 0       |   |         |   | (1,112,820 | ) |  |   | 0 |  |   | 1,450,772  |  
|Distributions of operating cash flow |  | 0                |   |  |                  | (2,518,328 | )                       |       | 0       |   |         |   | 0          |   |  |   | 0 |  |   | (2,518,328 | )
|Tax preferred conversion elections   |  | 77,654           |   |  |                  | 333,099    |                         |       | (77,654 | ) |         |   | (333,099   | ) |  |   | 0 |  |   | 0          |  
|                                     |  |                  |   |  |                  |            |                         |       |         |   |         |   |            |   |  |   |   |  |   |            |  
|BALANCE at December 31, 2003         |  | 2,934,050        |   |  |                  | 25,536,652 |                         |       | 627,069 |   |         |   | 2,354,951  |   |  |   | 0 |  |   | 27,891,603 |  
|                                     |  |                  |   |  |                  |           
|Net income (loss)                    |  | 0                |   |  |                  | 1,305,535  |                         |       | 0       |   |         |   | (556,574   | ) |  |   | 0 |  |   | 748,961    |  
|Distributions of operating cash flow |  | 0                |   |  |                  | (1,060,167 | )                       |       | 0       |   |         |   | 0          |   |  |   | 0 |  |   | (1,060,167 | )
|Cash preferred conversion elections  |  | (10,000          | ) |  |                  | (130,553   | )                       |       | 10,000  |   |         |   | 130,553    |   |  |   | 0 |  |   | 0          |  
|Tax preferred conversion elections   |  | 10,000           |   |  |                  | 57,497     |                         |       | (10,000 | ) |         |   | (57,497    | ) |  |   | 0 |  |   | 0          |  
|                                     |  |                  |   |  |                  |            |                         |       |         |   |         |   |            |   |  |   |   |  |   |            |  
|BALANCE, June 30, 2004               |  | 2,934,050        |   |  | $                | 25,708,964 |                         |       | 627,069 |   |         | $ | 1,871,433  |   |  | $ | 0 |  | $ | 27,580,397 |  
|                                     |  |                  |   |  |                  |            |                         |       |         |   |         |   |            |   |  |   |   |  |   |            |  



See accompanying notes.



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WELLS REAL ESTATE FUND XII, L.P.



STATEMENTS OF CASH FLOWS

(unaudited)



|                                                                                  |  |                           |            |   |      |   |            |  
|--------------------------------------------------------------------------------- |  | ------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                                                  |  | Six Months Ended June 30, |           
|                                                                                  |  | 2004                      |            |   | 2003 |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                             |  |                           |            |   |      |   |            |  
|Net income                                                                        |  | $                         | 748,961    |   |      | $ | 696,107    |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                           |            |   |      |   |            |  
|Equity in income of joint ventures                                                |  |                           | (851,308   | ) |      |   | (824,646   | )
|Operating distributions received from joint ventures                              |  |                           | 1,545,084  |   |      |   | 1,544,727  |  
|Changes in operating assets and liabilities:                                      |  |                           |            |   |      |   |            |  
|Accounts receivable                                                               |  |                           | 1,377      |   |      |   | (1,280     | )
|Accounts payable and accrued expenses                                             |  |                           | (3,385     | ) |      |   | 20,329     |  
|                                                                                  |  |                           |            |   |      |   |            |  
|Total adjustments                                                                 |  |                           | 691,768    |   |      |   | 739,130    |  
|                                                                                  |  |                           |            |   |      |   |            |  
|Net cash provided by operating activities                                         |  |                           | 1,440,729  |   |      |   | 1,435,237  |  
|                                                                                  |  |                           |            |   |      |   |            |  
|                                                                                  |  |                          
|CASH FLOWS FROM FINANCING ACTIVITIES:                                             |  |                           |            |   |      |   |            |  
|Distributions paid to limited partners                                            |  |                           | (1,280,221 | ) |      |   | (1,285,481 | )
|                                                                                  |  |                           |            |   |      |   |            |  
|NET INCREASE IN CASH AND CASH EQUIVALENTS                                         |  |                           | 160,508    |   |      |   | 149,756    |  
|                                                                                  |  |                          
|CASH AND CASH EQUIVALENTS, beginning of period                                    |  |                           | 14,922     |   |      |   | 30,471     |  
|                                                                                  |  |                           |            |   |      |   |            |  
|CASH AND CASH EQUIVALENTS, end of period                                          |  | $                         | 175,430    |   |      | $ | 180,227    |  
|                                                                                  |  |                           |            |   |      |   |            |  
|SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:           |  |                           |            |   |      |   |            |  
|Partnership distributions payable                                                 |  | $                         | 440,107    |   |      | $ | 589,544    |  
|                                                                                  |  |                           |            |   |      |   |            |  



See accompanying notes.

.



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WELLS REAL ESTATE FUND XII, L.P.



CONDENSED NOTES TO FINANCIAL STATEMENTS



JUNE
30, 2004 (unaudited)



|1. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- |  | ------------------------------------------



|(a) |  | Organization and Business
|--- |  | -------------------------



Wells Real Estate Fund XII, L.P. (the Partnership) is a Georgia public limited partnership with Leo F. Wells, III and Wells Partners, L.P. (Wells
Partners), a Georgia nonpublic limited partnership, as the general partners (collectively, the General Partners). The Partnership was formed on September 15, 1998 for the purpose of acquiring, developing, constructing, owning,
operating, improving, leasing, and managing income-producing commercial properties for investment purposes. Upon subscription, limited partners elect to have their units treated as Cash Preferred Units or Tax Preferred Units. Thereafter, the limited
partners have the right to change their prior elections to have some or all of their units treated as Cash Preferred Units or Tax Preferred Units one time during each quarterly accounting period. The limited partners may vote to, among other things:
(a) amend the partnership agreement, subject to certain limitations; (b) change the business purpose or investment objectives of the Partnership; (c) remove a General Partner; (d) elect a new General Partner; (e) dissolve the Partnership; and (f)
approve a sale involving all or substantially all of the Partnerships assets, subject to certain limitations. The majority vote on any of the matters described above will bind the Partnership without the concurrence of the General Partners.
Each limited partnership unit has equal voting rights regardless of class.



On
March 22, 1999, the Partnership commenced a public offering of up to $70,000,000 of limited partnership units pursuant to a Registration Statement on filed Form S-11 under the Securities Act of 1933. The Partnership commenced active operations on
June 1, 1999, upon receiving and accepting subscriptions for 125,000 units. The offering was terminated on March 21, 2001, at which time the Partnership had sold 2,688,861 Cash Preferred Units and 872,258 Tax Preferred Units to 1,227 and 106 Cash
Preferred and Tax Preferred Limited Partners, respectively, for total limited partner Capital Contributions of $35,611,192. Limited partners have the right to change their prior elections to have some or all of their units treated as Cash Preferred
Units or Tax Preferred Units one time during each quarterly accounting period.



The Partnership owns interests in all of its real estate assets through joint ventures with other entities affiliated with the General Partners. During the periods presented, the Partnership owned interests in the following seven properties
through the affiliated joint ventures listed below (the Joint Ventures):



|                                                                                  |  |                                                                                                                   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Joint Venture                                                                     |  | Joint Venture Partners                                                                                            |  | Properties                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|The Wells Fund XI  Fund XII  REIT Joint Venture (Fund XI-XII-REIT Associates) |  |    Wells Real Estate Fund XI, L.P.
   Wells Real Estate Fund XII, L.P.    Wells Operating Partnership, L.P.(1) |  | 1. 111 Southchase Boulevard (formerly known as the EYBL
CarTex Building) A two-story manufacturing and office building located in Fountain Inn, South Carolina 2. 20/20 Building (formerly known as the Sprint Building) A three-story office building located in Leawood, Kansas 3. Johnson Matthey Building A two-story office building and warehouse located in Wayne, Pennsylvania 4. Gartner Building A two-story office building
located in Ft. Myers, Florida



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|                                                                           |  |                                                                               |  |                                                                                                                                                                                                                                                                                       
|-------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Joint Venture                                                              |  | Joint Venture Partners                                                        |  | Properties                                                                                                                                                                                                                                                                            
|Wells Fund XII-REIT Joint Venture Partnership (Fund XII-REIT Associates) |  |    Wells Real Estate Fund XII, L.P.
   Wells Operating Partnership, L.P.(1) |  | 5. Siemens Building A three-story office building located in Troy, Michigan 6. AT&T Oklahoma Building A one-story office building and a two-story office building located in Oklahoma City, Oklahoma 7. Comdata Building A three-story office building
located in Brentwood, Tennessee



|(1) |  | Wells Operating Partnership, L.P. is a Delaware
limited partnership with Wells Real Estate Investment Trust, Inc. (Wells REIT) serving as its General Partner; Wells REIT is a Maryland corporation that qualifies as a real estate investment trust.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Each of the aforementioned properties was
acquired on an all-cash basis. The investment objectives of each of the joint venture partners listed in the above table are substantially identical to those of the Partnership. Approval of the other joint venture partners is required for any major
decision or any action that would materially affect the Joint Ventures, or their real property investments.For further information regarding the Joint Ventures and foregoing properties, refer to the report filed for the Partnership on Form
10-K for the year ended December 31, 2003.



|(b) |  | Basis of Presentation
|--- |  | ---------------------



The financial statements of the Partnership have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission, including the
instructions to Form 10-Q and Article 10 of Regulation S-X, and in accordance with such rules and regulations, do not include all of the information and footnotes required by accounting principles generally accepted in the United States
(GAAP) for complete financial statements. In the opinion of the General Partners, the statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary to fairly
present the results for these periods. Results for interim periods are not necessarily indicative of full-year results. For further information, refer to the financial statements and footnotes included in the Partnerships Form 10-K for the
year ended December 31, 2003.



|(c) |  | Allocations of Net Income, Net Loss, and Gain on Sale
|--- |  | -----------------------------------------------------



For purpose of determining allocations per the partnership agreement, net income is defined as net income recognized by the Partnership, excluding deductions for
depreciation, amortization, and cost recovery and the gain on the sale of assets. Net income, as defined, of the Partnership is generally allocated each year in the same proportions that net cash from operations is distributed to the limited
partners holding Cash Preferred Units and the General Partners. To the extent the Partnerships net income in any year exceeds net cash from operations, it will be allocated 99% to the limited partners and 1% to the General Partners.



Net loss, depreciation, amortization, and cost recovery deductions for each
fiscal year will be allocated as follows: (a) 99% to the limited partners holding Tax Preferred Units and 1% to the General Partners until their capital accounts are reduced to zero; (b) then to any partner having a positive balance in his capital
account in an amount not to exceed such positive balance; and (c) thereafter to the General Partners.



Gains on the sale or exchange of the Partnerships properties will be allocated generally in the same manner that the net proceeds from such sale are distributed to partners after the following allocations are
made, if applicable: (a) allocations



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##### Table of Contents

made pursuant to the qualified income offset provisions of the partnership agreement; (b) allocations to partners having
negative capital accounts until all negative capital accounts have been restored to zero; and (c) allocations to limited partners holding Tax Preferred Units in amounts equal to the deductions for depreciation, amortization, and cost recovery
previously allocated to them with respect to the specific partnership property sold, but not in excess of the amount of gain on sale recognized by the Partnership with respect to the sale of such property.



|(d) |  | Distribution of Net Cash From Operations
|--- |  | ----------------------------------------



Cash from operations, if available, is generally distributed quarterly to the limited partners as follows:



| |  |  | First, to all Cash Preferred limited partners until each limited partner has received distributions equal to a 10% per annum return on his respective net capital contributions, as
defined.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Second, to the General Partners until the General Partners receive distributions equal to 10% of the total cumulative distributions paid by the Partnership to date.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Third, to the Cash Preferred limited partners and the General Partners allocated on a basis of 90% and 10%, respectively.
| | - |  | -------------------------------------------------------------------------------------------------------------------------



No distributions will be made to the limited partners holding Tax Preferred Units.



|(e) |  | Distribution of Sale Proceeds
|--- |  | -----------------------------



Upon the sale of properties, the net sale proceeds will be distributed in the following order:



| |  |  | In the event that the particular property sold is sold for a price less than the original property purchase price, to the limited partners holding Cash Preferred Units until each
limited partner has received an amount equal to the excess of the original property purchase price over the price for which the property was sold, limited to the amount of depreciation, amortization, and cost recovery deductions taken by the limited
partners holding Tax Preferred Units with respect to such property;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To limited partners holding units which at any time have been treated as Tax Preferred Units until each limited partner has received an amount necessary to equal the net cash
available for distribution received by the limited partners holding Cash Preferred Units on a per-unit basis;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To limited partners on a per-unit basis until each limited partner has received 100% of his net capital contributions, as defined;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------



| |  |  | To all limited partners on a per-unit basis until each limited partner has received a cumulative 10% per annum return on his net capital contributions, as defined;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To limited partners on a per-unit basis until each limited partner has received an amount equal to his preferential limited partner return (defined as the sum of a 10% per annum
cumulative return on net capital contributions for all periods during which the units were treated as Cash Preferred Units and a 15% per annum cumulative return on net capital contributions for all periods during which the units were treated as Tax
Preferred Units);
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To the General Partners until they have received 100% of their capital contributions, as defined;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | Then, if limited partners have received any excess limited partner distributions (defined as distributions to limited partners over the life of their investment in the Partnership
in excess of their net capital contributions, as defined, plus their preferential limited partner return), to the General Partners until they have received distributions equal to 20% of the sum of any such excess limited partner distributions plus
distributions made to the General Partners pursuant to this provision;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Thereafter, 80% to the limited partners on a per-unit basis and 20% to the General Partners.
| | - |  | --------------------------------------------------------------------------------------------



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##### Table of Contents

|(f) |  | Reclassifications
|--- |  | -----------------



Certain prior year amounts have been reclassified to conform with the current year financial statement presentation.



|2. |  | INVESTMENTS IN JOINT VENTURES
|-- |  | -----------------------------



|(a) |  | Basis of Presentation
|--- |  | ---------------------



The Partnership owned interests in seven properties during the periods presented through its ownership in the Joint Ventures. The Partnership does not have control over
the operations of the Joint Ventures; however, it does exercise significant influence. Approval of the Partnership as well as the other joint venture partners is required for any major decision or any action that would materially affect the Joint
Ventures, or their real property investments.Accordingly, the Partnerships investments in the Joint Ventures are recorded using the equity method of accounting, whereby original investments are recorded at cost and subsequently
adjusted for contributions, distributions, and net income (loss) attributable to the Partnership. For further information regarding investments in the Joint Ventures, refer to the financial statements and footnotes included in the Partnerships
Form 10-K for the year ended December 31, 2003.



|(b) |  | Summary of Operations
|--- |  | ---------------------



The following information summarizes the operations of the Joint Ventures for the three months and the six months ended June 30, 2004 and 2003, respectively:



|                            |  |                             |           |                             |   |           |  |      |           |  |   |          
|--------------------------- |  | --------------------------- | --------- | --------------------------- | - | --------- |  | ---- | --------- |  | - | ---------
|                            |  | Total Revenues              |           | Net Income                 
|                            |  | Three Months Ended June 30, |           | Three Months Ended June 30,
|                            |  |                            
|                            |  | 2004                        |           | 2003                        |   | 2004      |  | 2003
|Fund XII-REIT Associates    |  | $                           | 1,537,782 |                             | $ | 1,513,109 |  | $    | 778,163   |  | $ | 782,611  
|Fund XI-XII-REIT Associates |  |                             | 929,288   |                             |   | 716,841   |  |      | 515,428   |  |   | 254,280  
|                            |  |                             |           |                             |   |           |  |      |           |  |   |          
|                            |  | $                           | 2,467,070 |                             | $ | 2,229,950 |  | $    | 1,293,591 |  | $ | 1,036,891
|                            |  |                             |           |                             |   |           |  |      |           |  |   |          



|                            |  |                           |           |                           |   |           |  |      |           |  |   |          
|--------------------------- |  | ------------------------- | --------- | ------------------------- | - | --------- |  | ---- | --------- |  | - | ---------
|                            |  | Total Revenues            |           | Net Income               
|                            |  | Six Months Ended June 30, |           | Six Months Ended June 30,
|                            |  |                          
|                            |  | 2004                      |           | 2003                      |   | 2004      |  | 2003
|Fund XII-REIT Associates    |  | $                         | 3,125,111 |                           | $ | 3,039,851 |  | $    | 1,583,794 |  | $ | 1,580,111
|Fund XI-XII-REIT Associates |  |                           | 1,649,086 |                           |   | 1,531,674 |  |      | 812,163   |  |   | 665,841  
|                            |  |                           |           |                           |   |           |  |      |           |  |   |          
|                            |  | $                         | 4,774,197 |                           | $ | 4,571,525 |  | $    | 2,395,957 |  | $ | 2,245,952
|                            |  |                           |           |                           |   |           |  |      |           |  |   |          



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##### Table of Contents

|3. |  | RELATED-PARTY TRANSACTIONS
|-- |  | --------------------------



|(a) |  | Management and Leasing Fees
|--- |  | ---------------------------



Wells Management Company, Inc. (Wells Management), an affiliate of the General Partners, receives compensation for supervising the management and leasing of
the Partnerships properties owned through the Joint Ventures equal to the lesser of (a) of the gross revenues collected monthly, 2.5% of the gross revenues for management and 2% of the gross revenues for leasing (aggregate maximum of 4.5%)
plus a separate competitive fee for the one-time initial lease-up of newly constructed properties in an amount not to exceed the fee customarily charged in arms-length transactions by others rendering similar services in the same geographic
area for similar properties or (b) in the case of commercial properties which are leased on a long-term net basis (ten or more years), the maximum property management fee from such leases shall be 1% of the gross revenues generally paid over the
life of the leases except for a one-time initial leasing fee of 3% of the gross revenues on each lease payable over the first five full years of the original lease term. The Partnerships share of management and leasing fees and lease
acquisition costs incurred through the Joint Ventures was $28,994 and $36,472 for the three months ended June 30, 2004 and 2003, respectively, and $72,612 and $71,995 for the six months ended June 30, 2004 and 2003, respectively.



|(b) |  | Administration Reimbursements
|--- |  | -----------------------------



Wells Capital, the general partner of Wells Partners, one of our General Partners, and its affiliates perform certain administrative services for the Partnership, such as
accounting, property management and other partnership administration, and incur the related expenses. Such expenses are allocated among various other entities affiliated with the General Partners (the Wells Real Estate Funds) based on
time spent on each fund by individual administrative personnel. In the opinion of management, this allocation is a reasonable estimation of such expenses. The Partnership reimbursed Wells Capital $25,028 and $11,434 for the three months ended June
30, 2004 and 2003, respectively, and $41,959 and $22,658 for the six months ended June 30, 2004 and 2003, respectively, for these services and expenses.



|(c) |  | Conflicts of Interest
|--- |  | ---------------------



The General Partners are also general partners of other Wells Real Estate Funds. As such, there may exist conflicts of interest where the General Partners in their
capacity as general partners of other Wells Real Estate Funds may be in competition with the Partnership in connection with property acquisitions or for tenants in similar geographic markets.



|4. |  | CONTINGENCIES
|-- |  | -------------



By Order dated June 3, 2004, the Superior Court of Gwinnett County, Georgia, dismissed, without prejudice, the putative class action complaint filed on or about March 12, 2004 against Leo F. Wells, III, Wells Capital,
and certain affiliates of Wells Capital relating to Wells Real Estate Fund I, an affiliate of the General Partners (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett County, Georgia, Civil Action No. 04-A-2791 2).



|ITEM 2. |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|------- |  | -------------------------------------------------------------------------------------



The following discussion and analysis should be read in conjunction with the accompanying financial statements and notes thereto.



|(a) |  | Overview
|--- |  | --------



Management believes that the Partnership typically operates through the following five key life cycle phases. The time spent in each phase is dependent upon various economic, industry, market, and other
internal/external factors. Some overlap naturally exists in the transition from one phase to the next.



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##### Table of Contents

| |  |  | Fundraising phase
| | - |  | -----------------



The period during which the Partnership is raising capital through the sale and issuance of limited partner units to the public



| |  |  | Investing phase
| | - |  | ---------------

The period during which the
Partnership invests the capital raised during the fundraising phase, less upfront fees, into the acquisition of real estate assets



| |  |  | Holding phase
| | - |  | -------------

The period during which real
estate assets are owned and operated by the Partnership during the initial lease terms of the tenants



| |  |  | Positioning-for-sale phase
| | - |  | --------------------------

The period during
which the leases in place at the time of acquisition expire and, thus, the Partnership expends time, effort, and funds to re-lease such space to existing and/or new tenants. Following the holding phase, the Partnership continues to own and operate
the real estate assets, evaluate various options for disposition, and market the real estate assets for sale.



| |  |  | Disposition and Liquidation phase
| | - |  | ---------------------------------

The period
during which the Partnership sells its real estate investments and distributes net sales proceeds to the partners



Portfolio Overview



The Partnership is in the holding phase of its life cycle. The Partnership owns interests in seven properties. Five of the properties are 100% leased to tenants in the
beginning to middle of their lease terms. The 111 Southchase Boulevard building is 100% vacant, and Sprint exercised an early lease termination option at the 20/20 Building (formerly known as the Sprint Building), effective in May 2004. Our focus at
this time involves leasing these two vacant properties in the portfolio and maximizing operating performance in the remaining assets in order to deliver what we believe will be the best overall performance for our investors.



While the portfolio enjoys a relatively high overall occupancy level currently, we do face
some near-term leasing issues with the two vacant properties. While these leasing challenges may impact operating performance, we are aggressively working with existing and potential tenants in these markets to minimize any negative effects to the
extent possible.



The second quarter 2004 operating distributions to the Cash
Preferred unit holders were 6.0%, a decline from the first quarter distribution rate of 8.5%. The General Partners anticipate that operating distributions may decline in the near term as the Partnership absorbs its pro-rata share of several
potential capital needs, including: (i) re-leasing costs for the 20/20 Building and 111 Southchase Boulevard; and (ii) other capital improvements for the Gartner Building, the Johnson Matthey Building, the Comdata Building, and the 20/20 Building.



As of June 30, 2004, current Cash Preferred unit holders have received
cumulative net operating cash flows of approximately $11.8 million, as compared to approximately $29.3 million originally invested, or approximately 40% of the dollars invested since inception. No operating distributions have been made to investors
holding Tax Preferred units or to the General Partners, in line with the partnership agreement.



Property Summary



| |  |  | The AT&T Oklahoma Building is located in Oklahoma City, Oklahoma. This asset is fully leased to two tenants, with lease expirations in 2008 and 2010.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | The Comdata Building in Brentwood, Tennessee, outside Nashville, is 100% leased through 2016.
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | The 111 Southchase Boulevard building in Greenville, South Carolina, is currently vacant. We are pursuing a number of market opportunities for this asset.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Gartner Building is located in Fort Myers, Florida, and is currently 100% leased through January 2008.
| | - |  | ----------------------------------------------------------------------------------------------------------



| |  |  | The Johnson Matthey Building is located in Wayne, Pennsylvania, a submarket of Philadelphia. This asset is fully leased through June 2007.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Siemens Building is located in Detroit, Michigan. The property is 100% leased, and the lease extends to 2010.
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | As noted above, Sprint exercised an early termination option at the 20/20 Building, effective in May 2004. The tenant has vacated the property, and we have engaged our local leasing
team to begin the marketing effort.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



As we continue to operate in
the holding phase, we will continue to focus on re-leasing vacant space and space that may become vacant upon the expiration of our current leases. In doing so, we will seek to maximize returns to the limited partners by negotiating long-term leases
at market rental rates while attempting to minimize down time, re-leasing expenditures, ongoing property level costs and portfolio costs. Later as we move into the positioning-for-sale and disposition and liquidation phases, our attention will shift
to locating suitable buyers, negotiating purchase-sale contracts that will attempt to maximize the total return to the limited partners, and minimize contingencies and our post-closing involvement with the buyer.



Industry Factors



Our results continue to be impacted by a number of factors influencing the real estate industry.



General Economic and Real Estate Market Commentary



The U.S. economy appears to be on the road to recovery. The economy has
shown signs of growth recently, as companies have recommenced making investments in new employees. Job growth is the most significant demand driver for office markets. Market fundamentals are improving, and new office jobs are slowly being created.
In general, the real estate office market lags behind the overall economic recovery and, therefore, recovery is not expected until late 2004 or 2005 at the earliest, and then will vary by market.



Overall, real estate market fundamentals are weak; however, capital
continues to flow into this asset class. The increase in capital drives the prices of many properties upward and investor returns downward. There is a significant pricing differential in the underwriting parameters of well-leased assets with credit
tenants and those with either existing vacancies or substantial near-term tenant rollover. Properties with long-term leases to strong credit tenants have seen an increase in value.



The office market has significant excess space. Vacancy levels are believed to have peaked, and are expected to trend
downward moderately through the end of 2004. There is some encouraging news in that construction continues to taper off and has come to a complete halt in many markets. As a result of the slowdown in new construction and the modest decline in
sublease space, net absorption has turned positive. Many industry professionals believe office market fundamentals have bottomed-out; however, a recovery cannot be expected until job growth and corresponding demand for office space continue to
increase.



Wells Real Estate Funds with Current Vacancy
or Near-term Rollover Exposure



Real estate funds,
such as the Partnership, that invest in properties with current vacancies or near-term tenant rollover may face a challenging leasing environment. In connection with re-leasing vacant space, the properties within these funds will encounter lower
market rental rates and higher concession packages to tenants.



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##### Table of Contents

From a valuation standpoint, it is generally preferable to either re-new an existing tenant lease or
re-lease the property prior to marketing it for sale. Generally, buyers will heavily discount their offering price to compensate for the existing or pending vacancies.



|(b) |  | Results of Operations
|--- |  | ---------------------



Equity in Income of Joint Ventures



Equity in income of the Joint Ventures was $438,162 and $395,535 for the three months ended June 30, 2004 and 2003, respectively, and $851,308 and $824,646 for the six
months ended June 30, 2004 and 2003, respectively. The 2004 increases are primarily attributable to the recognition of a lease termination fee for the sole tenant of the 20/20 Building, partially offset by a decline in operating income following the
termination effective May 2004.



Expenses of the Partnership



Total expenses of the Partnership were $77,660 and $93,434 for the
three months ended June 30, 2004 and 2003, respectively, and $102,462 and $128,801 for the six months ended June 30, 2004 and 2003, respectively. The 2004 decreases are primarily attributable to an decrease in Tennessee partnership tax expenses due
to the 2002 fourth quarter estimate payment being made in the first quarter of 2003, partially offset by an increase in administrative salaries and accounting and legal fees associated with increased reporting and regulatory requirements. We
anticipate additional increases related to implementing and adhering to such reporting and regulatory requirements going forward.



|(c) |  | Liquidity and Capital Resources
|--- |  | -------------------------------



Our operating strategy entails funding expenses related to the recurring operations of the properties and the portfolio with operating cash flows, including distributions
received from the Joint Ventures, and assessing the amount of remaining cash flows that will be required to fund known re-leasing costs and other capital improvements. Any residual operating cash flows are considered available for distribution to
the limited partners and are generally paid quarterly. As a result, the ongoing monitoring of the Partnerships cash position is critical to ensuring that adequate liquidity and capital resources are available. Economic downturns in one or more
of our core markets could adversely impact the ability of our tenants to honor lease payments and our ability to re-lease space on favorable terms as leases expire or space otherwise becomes vacant. In the event of either situation, cash flows and,
consequently, our ability to provide funding for capital needs would be adversely affected.



Short-Term Liquidity



During the
six months ended June 30, 2004 and 2003, we generated net operating cash flows, including distributions received from the Joint Ventures, of approximately $1.4 million. Distributions from the Joint Ventures are generally representative of rental
revenues and tenant reimbursements, less property operating expenses, management fees, general administrative expenses, and capital expenditures. The majority of such operating cash flows were used to pay operating distributions to limited partners.



Reductions in distributions to the limited partners are anticipated for the
remainder of 2004 in connection with funding the Partnerships pro rata portion of capital expenditures and re-leasing costs associated the properties discussed below. Future operating distributions paid to limited partners will be largely
dependent upon the amount of cash generated from the Joint Ventures, our expectations of future cash flows and determination of near-term cash needs for tenant re-leasing costs and other capital improvements.



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##### Table of Contents

We believe that the cash on hand and distributions due from the Joint Ventures are sufficient to cover the
Partnerships working capital needs, including liabilities of approximately $455,000 as of June 30, 2004. During the remainder of 2004, the General Partners anticipate that the Partnership will fund (i) its proportionate share of costs related
to re-leasing 111 Southchase Boulevard and the 20/20 Building, both of which are currently vacant, (ii) roof replacement costs for the Comdata Building, and (iii) building improvements for the Gartner Building, the Johnson Matthey Building, and the
20/20 Building.



Long-Term Liquidity



We expect that our future sources of capital will be primarily derived from operating cash
flows generated from the Joint Ventures and net proceeds generated from the selective and strategic sale of properties. Our future long-term liquidity requirements will include, but not be limited to, tenant improvements, renovations, expansions and
other significant capital improvements necessary for properties owned through the Joint Ventures. We expect to continue to use substantially all future net cash flows from operations, including distributions received from the Joint Ventures, less,
expenses related to the recurring operations of the properties and the portfolio and reserves for known capital expenditures, to pay operating distributions to the limited partners.



Capital Resources



The Partnership is an investment vehicle formed for the purpose of acquiring, owning, and operating income-producing real properties and has invested all of the
partners original capital contributions. Thus, it is unlikely that we will acquire interests in any additional properties. Historically, our investment strategy has generally involved acquiring properties that are pre-leased to creditworthy
tenants on an all-cash basis through joint ventures with affiliated partnerships.



We incur capital expenditures primarily in the form of building improvements for the purpose of maintaining the quality of our properties, and tenant improvements for the purpose of readying our properties for re-leasing. As leases expire,
we typically attempt to re-lease space to an existing tenant or market the space to prospective new tenants. Generally, tenant improvements funded in connection with lease renewals require less capital than those funded in connection with new
leases. However, external conditions, such as the supply of and demand for comparable space available within a given market, drive capital costs as well as rental rates.



Operating cash flows, if available, are generally distributed from the Joint Ventures to the Partnership during the second month following
each calendar quarter-end. However, the Joint Ventures will reserve operating distributions, or a portion thereof, as needed in order to fund known capital and other expenditures. Our cash management policy typically includes first utilizing current
period operating cash flow until depleted, at which point operating reserves are utilized to fund capital and other required expenditures. In the event that current and prior period accumulated operating cash flows are insufficient to fund such
costs, net property sale proceeds reserves, if available, would then be utilized.



|(d) |  | Related-Party Transactions and Agreements
|--- |  | -----------------------------------------



The Partnership and the Joint Ventures have entered into agreements with Wells Capital, the General Partner of Wells Partners, L.P., and its affiliates, whereby the
Partnership or the Joint Ventures pay certain fees or reimbursements to Wells Capital or its affiliates (e.g., property management and leasing fees, administrative salary reimbursements, etc.). See Note 3 to the Partnerships financial
statements included in this report for a discussion of the various related-party transactions, agreements, and fees.



|(e) |  | Inflation
|--- |  | ---------



The real estate market has not been affected significantly by inflation in the past three years due to the relatively low inflation rate. However, there are provisions in the majority of tenant leases, which would
protect the Partnership from the impact of inflation. These provisions include reimbursement billings for operating expense pass-through charges, real estate tax, and insurance reimbursements on a per-square-foot basis, or in some cases, annual
reimbursement of operating expenses above a certain per-square-foot allowance. There is no assurance, however, that the Partnership would be able to replace existing leases with new leases at higher base rental rates.



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##### Table of Contents

|(f) |  | Application of Critical Accounting Policies
|--- |  | -------------------------------------------



The Partnerships accounting policies have been established to conform with GAAP. The preparation of financial statements in conformity with GAAP requires management
to use judgment in the application of accounting policies, including making estimates and assumptions. These judgments affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the
financial statements and the reported amounts of revenue and expenses during the reporting periods. If managements judgment or interpretation of the facts and circumstances relating to various transactions had been different, it is possible
that different accounting policies would have been applied, thus resulting in a different presentation of the financial statements. Additionally, other companies may utilize different estimates that may impact comparability of the Partnerships
results of operations to those of companies in similar businesses.



Below is a
discussion of the accounting policies that management considers to be critical in that they may require complex judgment in their application or require estimates about matters that are inherently uncertain.



Investment in Real Estate Assets



Management is required to make subjective assessments as to the useful lives of its
depreciable assets. Management considers the period of future benefit of the asset to determine the appropriate useful lives. These assessments have a direct impact on net income. The estimated useful lives of the Joint Ventures assets by
class are as follows:



|                      |  |                                      
|--------------------- |  | -------------------------------------
|Buildings             |  | 25 years                             
|Building improvements |  | Remaining useful life of the building
|Land improvements     |  | 20 years                             
|Tenant improvements   |  | Lease term                           



In the event that management uses
inappropriate useful lives or methods for depreciation, the Partnerships net income would be misstated.



Valuation of Real Estate Assets



Management continually monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate assets in which the Partnership has an ownership interest, either directly or through investments in the
Joint Ventures, may not be recoverable. When indicators of potential impairment are present which indicate that the carrying amounts of real estate assets may not be recoverable, management assesses the recoverability of the real estate assets by
determining whether the carrying value of the real estate assets will be recovered through the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition. In the event that such expected undiscounted
future cash flows do not exceed the carrying value, management adjusts the real estate assets to the fair value and recognizes an impairment loss. Management has determined that there has been no impairment in the carrying value of real estate
assets held by the Partnership as of June 30, 2004.



Projections of expected
future cash flows require management to estimate future market rental income amounts subsequent to the expiration of current lease agreements, property operating expenses, discount rates, the number of months it takes to re-lease the property, and
the number of years the property is held for investment. The use of inappropriate assumptions in the future cash flow analysis would result in an incorrect assessment of the propertys future cash flows and fair value, and could result in the
overstatement of the carrying value of real estate assets held by the Joint Ventures and net income of the Partnership.



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##### Table of Contents

|(g) |  | Certain Litigation Involving Our General Partners
|--- |  | -------------------------------------------------



By Order dated June 3, 2004, the Superior Court of Gwinnett County, Georgia, dismissed, without prejudice, the putative class action complaint filed on or about March 12,
2004 against Leo F. Wells, III, Wells Capital, and certain affiliates of Wells Capital relating to Wells Real Estate Fund I, an affiliate of the General Partners (Hendry et al. v. Leo F. Wells, III et al., Superior Court of Gwinnett County, Georgia,
Civil Action No. 04-A-2791 2).



|ITEM 3. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
|------- |  | -----------------------------------------------------------



Since the Partnership does not borrow any money, make any foreign investments, or invest in any market risk-sensitive instruments, it is not subject to risks relating to
interest rates, foreign current exchange rate fluctuations, or the other market risks contemplated by Item 305 of Regulation S-K.



|ITEM 4. |  | CONTROLS AND PROCEDURES
|------- |  | -----------------------



The Partnership carried out an evaluation, under the supervision and with the participation of management of Wells Capital, the corporate general partner of one of the
General Partners of the Partnership, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of the Partnerships disclosure controls and procedures as of the end of the period
covered by this report pursuant to the Securities Exchange Act of 1934. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded that the Partnerships disclosure controls and procedures were
effective.



There were no significant changes in the Partnerships
internal controls or other factors that could significantly affect such controls subsequent to the date of their evaluation.



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##### Table of Contents

PART II.    OTHER INFORMATION



|ITEM 6. |  | EXHIBITS AND REPORTS ON FORM 8-K
|------- |  | --------------------------------



|(a) |  | The Exhibits to this report are set forth on Exhibit Index to Second Quarter Form 10-Q attached hereto.
|--- |  | -------------------------------------------------------------------------------------------------------



|(b) |  | No reports on Form 8-K were filed during the second quarter of 2004.
|--- |  | --------------------------------------------------------------------



SIGNATURES



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



|                |  |  |  |                                                                                                  |  |  |  | 
|--------------- |  |  |  | ------------------------------------------------------------------------------------------------ |  |  |  | 
|                |  |  |  | WELLS REAL ESTATE FUND XII, L.P. (Registrant)                                                   
|                |  | 
|                |  |  |  | By: WELLS PARTNERS, L.P. (General Partner)                                                      
|                |  | 
|                |  |  |  | By: WELLS CAPITAL, INC. (Corporate General Partner)                                             
|                |  | 
|August 11, 2004 |  |  |  | /s/    LEO F. WELLS, IIILeo F. Wells, III President                                             
|August 11, 2004 |  |  |  | /s/    DOUGLAS P. WILLIAMSDouglas P. Williams Principal Financial Officer of Wells Capital, Inc.



Page 20



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##### Table of Contents

EXHIBIT INDEX

TO

SECOND QUARTER FORM 10-Q

OF

WELLS REAL ESTATE FUND XII, L.P.



|            |  |                                                                                                                               
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |  | Description                                                                                                                   
|            | 
|31.1        |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                        
|            | 
|31.2        |  | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                        
|            | 
|32.1        |  | Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002