##### Index to Financial Statements

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-K



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(Mark one)



| | x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
| | - | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2006 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 0-17876



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WELLS REAL ESTATE FUND II-OW

(Exact name of registrant as specified in its
charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Georgia                                                        |  | 58-1754703                          
|(State or 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                      

Securities registered pursuant to Section 12(b) of the Act:



|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of each class |  | Name of each exchange on which registered
|None                |  | None                                     

Securities registered pursuant to section 12(g) of the Act:



|                 |  |                 
|---------------- |  | ----------------
|CLASS A UNITS    |  | CLASS B UNITS   
|(Title of class) |  | (Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.  Yes ̈No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange
Act.  Yes ̈No  x

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, 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.  x

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

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

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



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##### Index to Financial Statements

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements contained in this Form 10-K of Wells Real Estate Fund II-OW (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, we consider, among others, statements concerning future operating results and cash flows, our ability to meet future
obligations, and the amount and timing of any 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 this
report is filed with the Securities and Exchange Commission. We make no representations or warranties (express or implied) about the accuracy of any such forward-looking statements contained in this Form 10-K, 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 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 dividends to
stockholders, and maintain the value of our real estate properties, may be significantly hindered. Contained in Item 1A. are some of the risks and uncertainties, although not all risks and uncertainties, which could cause actual results to
differ materially from those presented in our forward-looking statements.



Page 1



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##### Index to Financial Statements

WELLS REAL ESTATE FUND II-OW



PART I



|ITEM 1. | BUSINESS.
|------- | ---------

General

Wells Real Estate Fund II-OW (the Partnership) is a Georgia public limited partnership with Leo F. Wells, III and Wells Capital, Inc.
(Wells Capital), a Georgia corporation, serving as its general partners (collectively, the General Partners). Wells Capital is a wholly owned subsidiary of Wells Real Estate Funds, Inc. (WREF). Leo F. Wells, III
is the president and sole director of Wells Capital and the president, sole director, and sole owner of WREF. The Partnership was formed on October 13, 1987 for the purpose of acquiring, developing, constructing, owning, operating, improving,
leasing, and otherwise managing income-producing properties for investment purposes. The Partnership has two classes of limited partnership interests, Class A and Class B Units. 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; and (c) add or remove a general partner. A majority vote on any of the above-described matters will
bind the Partnership without the concurrence of the General Partners. Each limited partnership unit has equal voting rights regardless of class.

On
November 6, 1987, the Partnership commenced an offering of up to $10,000,000 of Class A or Class B limited partnership units ($250.00 per unit) pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The
offering was terminated on September 7, 1988, at which time the Partnership had sold approximately 6,062 Class A Units and 1,626 Class B Units representing capital contributions of $1,922,000 from investors who were admitted to the
Partnership as limited partners.

Operating Phases and Objectives

The Partnership typically operates in the following five life cycle phases and, during which, typically focuses on the following key operating objectives. The duration of 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.



| |  |  | 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 the Partnership owns and operates its real estate assets 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; and



| |  |  | Disposition-and-liquidation phase
| | - |  | ---------------------------------

The period during which the Partnership sells its real estate investments, distributes net sale proceeds to the partners, liquidates, and terminates the Partnership.



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##### Index to Financial Statements

The Partnership is in the disposition-and-liquidation phase of its life cycle. Our focus on the remaining assets involves
leasing and marketing efforts that we believe will result in the best disposition pricing for our limited partners.

Employees

The Partnership has no direct employees. The employees of Wells Capital and Wells Management Company, Inc. (Wells Management), an affiliate of the General
Partners, perform a full range of real estate services for the Partnership including leasing and property management, accounting, asset management, and investor relations. See Item 13, Certain Relationships and Related Transactions,
for a summary of the fees paid to the General Partners and their affiliates during the years ended December 31, 2006, 2005, and 2004.

Insurance

Wells Management carries comprehensive liability and extended coverage with respect to the properties we own through our investment in Fund II and Fund
II-OW. In the opinion of management, our properties are adequately insured.

Competition

We will experience competition for tenants from owners and managers of competing projects which may include the General Partners and their affiliates. As a result, in
connection with negotiating leases, we may offer rental concessions, reduced charges for tenant improvements, and other inducements, all of which may have an adverse impact on results of operations. We are also in competition with sellers of similar
properties to locate suitable purchasers for its properties.

Economic Dependency

We have engaged Wells Capital and Wells Management to provide certain essential services, including supervision of the management and leasing of our properties, asset acquisition and disposition services, as well as
other administrative responsibilities for us including accounting services, investor communications and relations. These agreements are terminable by either party upon 60 days written notice. As a result of these relationships, we are
dependent upon Wells Capital and Wells Management.

Wells Capital and Wells Management are all owned and controlled by WREF. The operations of Wells
Capital and Wells Management represent substantially all of the business of WREF. Accordingly, we focus on the financial condition of WREF when assessing the financial condition of Wells Capital and Wells Management. In the event that WREF was to
become unable to meet its obligations as they become due, we might be required to find alternative service providers.

Future net income generated by WREF
will be largely dependent upon the amount of fees earned by Wells Capital and Wells Management based on, among other things, the level of investor proceeds raised from the sale of common stock for certain WREF-sponsored programs and the volume of
future acquisitions and dispositions of real estate assets by WREF-sponsored programs. As of December 31, 2006, we believe that WREF generates adequate cash flow from operations and has adequate liquidity available in the form of cash on hand
and current receivables necessary to meet its current and future obligations as they become due.

Additionally, we are dependent upon the ability of our
current tenants to pay their contractual rent amounts as the rents become due. The inability of a tenant to pay future rental amounts would have a negative impact on our results of operations. If certain situations prevent our tenants from paying
contractual rents, this could result in a material adverse impact on our results of operations.



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##### Index to Financial Statements

Assertion of Legal Action Against Related-Parties

On March 12, 2007, a stockholder of Wells Real Estate Investment Trust, Inc. (Wells REIT), a Wells-sponsored program, filed a purported class action and derivative complaint against, among others,
Wells REIT, the officers and directors of Wells REIT, Leo. F. Wells, III and Wells Capital, our General Partners, and certain affiliates of WREF.

The
complaint attempts to assert class action claims on behalf of those persons who receive and are entitled to vote on a proxy statement for Wells REIT that was filed with the Securities and Exchange Commission (SEC) on February 26,
2007, as amended (the proxy statement). The complaint alleges, among other things, that (i) the consideration to be paid as part of a proposed merger agreement to acquire certain affiliates of WREF is excessive; and (ii) the
proxy statement contains false and misleading statements or omits to state material facts. Additionally, the complaint seeks to, among other things, obtain (i) certification of the class action; (ii) a judgment declaring the proxy
statement false and misleading; (iii) unspecified monetary damages; (iv) nullification of any stockholder approvals obtained during the proxy process; (v) nullification of the merger proposal and the merger agreement;
(vi) restitution for disgorgement of profits, benefits, and other compensation for wrongful conduct and fiduciary breaches; (vii) the nomination and election of new independent directors, and the retention of a new financial advisor to
assess the advisability of Wells REITs strategic alternatives; and (viii) the payment of reasonable attorneys fees and experts fees.

Wells REIT, our General Partners, and certain affiliates of WREF believe that the allegations contained in the complaint are without merit and intends to vigorously defend this action. Due to the uncertainties inherent in the litigation
process, it is not possible to predict the ultimate outcome of this matter at this time; however, as with any litigation, the risk of financial loss does exist. Any financial loss incurred by WREF, which adversely affects the financial health of
Wells Capital or its affiliates, could hinder their ability to successfully manage our operations and our portfolio of investments.

Web Site Address

Access to copies of each of our filings with the SEC is available, free of charge, at the http://www.wellsref.com Web site, through a link to the
http://www.sec.gov Web site.



|ITEM 1A. | RISK FACTORS.
|-------- | -------------

Real Estate Risks

Economic and regulatory changes that impact the real estate market generally may cause our operating results to suffer and decrease the value of our real estate
properties.

Our operating results will be subject to risks generally incident to the ownership of real estate, including:



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



| |  |  | changes in supply of or demand for similar or competing properties in an area;
| | - |  | ------------------------------------------------------------------------------



| |  |  | changes in interest rates and availability of permanent mortgage funds, which may render the sale of a property difficult or unattractive;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in tax, real estate, environmental and zoning laws; and
| | - |  | ---------------------------------------------------------------



| |  |  | periods of high interest rates and tight money supply.
| | - |  | ------------------------------------------------------

These and other reasons may prevent us from being profitable or from realizing growth or maintaining the value of our real estate properties.



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##### Index to Financial Statements

General economic conditions may affect the timing of sale of our properties and the sale price we receive.

We may be unable to sell a property if or when we decide to do so. The real estate market is affected by many factors, such as general economic
conditions, the availability of financing, interest rates, and other factors, including supply and demand for real estate investments, all of which are beyond our control. We cannot predict whether we will be able to sell any property for the price
or on terms which are acceptable to us. Further, we cannot predict the length of time which will be needed to find a willing purchaser and to close the sale of a property.

Adverse economic conditions in the geographic regions in which we own properties may negatively impact your overall returns.

Adverse economic conditions in the geographic regions in which we own our properties could affect the real estate values in this area or the business of our tenant if our tenant relies upon the local economy for their revenues. Therefore,
changes in local economic conditions could reduce our income and distributions to limited partners or the amounts we could otherwise receive upon the sale of a property in a negatively affected region.

Adverse economic conditions affecting the particular industry of our tenant of Boeing at the Atrium may negatively impact your overall returns.

Adverse economic conditions affecting a particular industry of our tenant could affect the financial ability of our tenant to make payments under their leases, which
could cause delays in our receipt of rental revenues or a vacancy in one or more of our properties for a period of time. Therefore, changes in economic conditions of the particular industry of our tenant could reduce our income and distributions to
limited partners and the value of Boeing at the Atrium at the time of sale of such property.

We are dependent on our tenants for substantially all of
our revenue, so our success is materially dependent on the financial stability of our tenant.

One of our properties is primarily occupied by a single
tenant and, therefore, the success of our investments are materially dependent on the financial stability of our tenant. Lease payment defaults by our tenant could cause us to reduce the amount of distributions to holders of Class A Units. A
default of our tenant on its lease payments to us would cause us to lose the revenue from the property. In the event of a default, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our
investment and re-letting our property. If a lease is terminated, we cannot assure you that we will be able to lease the property for the rent previously received or sell the property without incurring a loss.

We currently have vacancy issues with some of our properties which could reduce or eliminate cash distributions to limited partners.

Because of vacancy issues, we have expended, or anticipate that we will be required to expend in the future, substantial funds for tenant improvements and tenant
refurbishments to the vacated space and other lease-up costs. If these vacancies continue for a long period of time, we may suffer reduced revenues resulting in less cash to be distributed to investors holding Class A Units, if any. In
addition, the resale values of these properties are currently diminished because the market value depends principally upon the value of the leases in place at such properties.

Your investment in units are subject to greater risk because we lack a diversified property portfolio.

Because we
own interests in only a few properties, your investment in units are subject to a greater risk of loss. There is a greater risk that you will lose money in your investment because our portfolio of properties is not diverse by geographic location,
property type, or industry group of tenants.



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##### Index to Financial Statements

Our future financial success primarily depends on only one tenant.

The revenues generated by this tenant are substantially reliant upon the financial condition of this tenant and, accordingly, any event of bankruptcy, insolvency, or a
general downturn in the business of this tenant may result in the failure or delay of such tenants rental payments, which may have a substantial adverse effect on our financial performance.

We depend on our tenant for our revenue. Accordingly, lease terminations and/or tenant default could reduce our net income and limit our ability to make distributions
to our stockholders.

The success of our investments materially depends on the financial stability of our tenant. A default or termination by a
significant tenant on its lease payments to us would cause us to lose the revenue associated with such lease and require us to find an alternative source of revenue to meet mortgage payments and prevent a foreclosure if the property is subject to a
mortgage. In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-letting our property. If significant leases are terminated or
defaulted upon, we may be unable to lease the property for the rent previously received or sell the property without incurring a loss. These events could cause us to reduce the amount of distributions to limited partners.

If our tenant files bankruptcy, we may be precluded from collecting all sums due.

If one or more of our tenants, or the guarantor of a tenants lease, commences, or has commenced against it, any proceeding under any provision of the federal Bankruptcy Code, as amended, or any other legal or
equitable proceeding under any bankruptcy, insolvency, rehabilitation, receivership, or debtors relief statute or law (bankruptcy proceeding), we may be unable to collect sums due under relevant leases. Our tenant, or a guarantor of a
tenants lease obligations, could be subject to a bankruptcy proceeding. Such a bankruptcy proceeding may bar our efforts to collect pre-bankruptcy debts from these entities or their properties, unless we are able to obtain an enabling order
from the bankruptcy court. If a lease is rejected by a tenant in bankruptcy, we would only have a general unsecured claim against the tenant, and may not be entitled to any further payments under the lease. A tenants or lease guarantors
bankruptcy proceeding could hinder or delay efforts to collect past due balances under relevant leases, and could ultimately preclude collection of these sums. Such an event could cause a decrease or cessation of rental payments which would mean a
reduction in our cash flow and the amount available for distribution to limited partners holding Class A Units. In the event of a bankruptcy proceeding, we cannot assure you that the tenant or its trustee will assume our lease. If a given
lease, or guaranty of a lease, is not assumed, our cash flow and the amounts available for distribution to limited partners holding Class A Units may be adversely affected.

We may not have funding for future tenant improvements which may reduce your returns and make it difficult to attract one or more new tenants.

When a tenant at one of our properties does not renew its lease or otherwise vacates its space in one of our buildings, it is likely that in order to attract one or more new tenants, we will be required to expend
substantial funds for tenant improvements and tenant refurbishments to the vacated space and other lease-up costs. Substantially all of our net offering proceeds available for investment have been used for investment in Partnership properties, and
we do not anticipate that we will maintain permanent working capital reserves. We also have not identified a funding source to provide funds which may be required in the future for tenant improvements, tenant refurbishments and other lease-up costs
in order to attract new tenants. We cannot assure you that any such source of funding will be available to us for such purposes in the future. In the event that we are required to use net cash from operations to fund such tenant improvements, tenant
refurbishments and other lease-up costs, cash distributions to limited partners holding Class A Units will be reduced or eliminated for potentially extended periods of time.



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##### Index to Financial Statements

A property that incurs a vacancy could be difficult to sell or lease.

A property may incur a vacancy either by the continued default of a tenant under its lease or the expiration of such lease. Our properties may be leased to a single
tenant and/or may be specifically suited to the particular needs of a certain tenant based on the type of business the tenant operates. If a vacancy on any of our properties continues for a long period of time, we may suffer reduced revenues
resulting in less cash to be distributed to investors holding Class A Units. In addition, the resale value of the property could be diminished because the market value of a particular property will depend principally upon the value of the
leases of such property.

Uninsured losses relating to real property or excessively expensive premiums for insurance coverage could reduce our net
income.

Our General Partners will attempt to obtain adequate insurance on all of our properties to cover casualty losses. However, there are types of
losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution, or environmental matters that are uninsurable or not economically insurable, or may be insured subject to
limitations, such as large deductibles or co-payments. Insurance risks associated with potential terrorism acts could sharply increase the premiums we pay for coverage against property and casualty claims. We may not have adequate coverage for such
losses. If any of our properties incur a casualty loss that is not fully insured, the value of our assets will be reduced by such uninsured loss. In addition, other than reserves of net cash from operations we may establish, we have no source of
funding to repair or reconstruct any uninsured damaged property. Also, to the extent we must pay unexpectedly large amounts for insurance, we could suffer reduced earnings that would result in lower distributions to limited partners.

Uncertain market conditions and the broad discretion of our General Partners relating to the future disposition of properties could adversely affect the return on
your investment.

We generally will hold the various real properties in which we invest until such time as the General Partners determine that the sale
or other disposition thereof appears to be advantageous to achieve our investment objectives or until it appears that such objectives will not be met. Our General Partners may exercise their discretion as to whether and when to sell a property, and
we will have no obligation to sell properties at any particular time, except upon the termination of the Partnership as specified in the partnership agreement, or earlier if a majority of you vote to liquidate the Partnership pursuant to a formal
proxy to liquidate. We cannot predict with any certainty the various market conditions affecting real estate investments which will exist at any particular time in the future. Due to the uncertainty of market conditions which may affect the future
disposition of our properties, we cannot assure you that we will be able to sell our properties at a profit in the future. Accordingly, the timing of liquidation of the Partnership and the extent to which you will receive cash distributions and
realize potential appreciation on our real estate investments will be dependent upon fluctuating market conditions.

If any environmentally hazardous
material is determined to exist on a property owned by the Partnership, our operating results could be adversely affected.

Under various federal,
state, and local environmental laws, ordinances, and regulations, a current or previous owner or operator of real property may be liable for the cost of removal or remediation of hazardous or toxic substances on, under, or in such property. Such
laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. Environmental laws also may impose restrictions on the manner in which property may be used or
businesses may be operated, and these restrictions may require expenditures. Environmental laws provide for sanctions in the event of noncompliance and may be enforced by governmental agencies or, in certain circumstances, by private parties. In
connection with the acquisition and ownership of our properties, we may be potentially liable for such costs. The cost of defending against claims of liability, complying with environmental regulatory requirements, or remediating any contaminated
property could materially adversely affect the business, assets, or results of operations of the Partnership and, consequently, amounts available for distribution to limited partners holding Class A Units.



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##### Index to Financial Statements

The Partnership and/or other prior Wells public limited partnerships sponsored by our General Partners have sold real
estate properties for a sale price less than the original purchase price.

Certain of the real estate properties previously purchased by the Partnership
and other Wells public limited partnerships sponsored by the General Partners have not appreciated to the levels anticipated at the time of purchase. Recently some of these properties have been sold by such programs at purchase prices below the
prices paid for such properties. We cannot guarantee that any of our properties will appreciate in value.

General Investment Risks

You do not have any specific voting rights and your rights are limited under our partnership agreement.

A vote of a majority in interest of the limited partners is sufficient to take the following significant Partnership actions:



| |  |  | to amend our partnership agreement;
| | - |  | -----------------------------------



| |  |  | to change our business purpose or our investment objectives;
| | - |  | ------------------------------------------------------------



| |  |  | to remove our General Partners; or
| | - |  | ----------------------------------



| |  |  | to authorize a merger or a consolidation of the Partnership.
| | - |  | ------------------------------------------------------------

These are your only significant voting rights granted under our partnership agreement. Therefore, your voting rights are severely limited.

You
are bound by the majority vote on matters on which you are entitled to vote.

You may approve any of the above actions by majority vote of the limited
partners. Therefore, you are bound by such majority vote even if you do not vote with the majority on any of these actions.

Under our partnership
agreement, we are required to indemnify our General Partners under certain circumstances which may reduce returns to our limited partners.

Under our
partnership agreement and subject to certain limitations, the Partnership is required to indemnify our General Partners from and against losses, liabilities, and damages relating to or arising out of any action or inaction on behalf of the
Partnership done in good faith and in the best interest of the Partnership. If substantial and expensive litigation should ensue and the Partnership is obligated to indemnify one or both General Partners, we may be forced to use substantial funds to
do so, which may reduce the return on your investment.

Payment of fees to our General Partners and their affiliates will reduce cash available for
distribution to our limited partners.

Our General Partners and their affiliates perform services for us in connection with the management and leasing
of our properties in which we own interests. Our affiliates may receive property management and leasing fees of 6.0% of gross revenues in connection with the commercial properties we own. In addition, we will reimburse our General Partners and their
affiliates for the administrative services necessary to our prudent operation which includes actual costs of goods, services, and materials used for or by the Partnership. These fees and reimbursements will reduce the amount of cash available for
capital expenditures to our properties or distributions to our limited partners.

The availability and the timing of cash distributions are uncertain.

We cannot assure you that sufficient cash will be available to make distributions to you from either net cash from operations or proceeds from the sale
of properties. We bear all expenses incurred in connection with our operations, which are deducted from cash funds generated by operations prior to computing the amount of net cash from operations to be distributed to our general and limited
partners. In addition, our General Partners, in



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##### Index to Financial Statements

their discretion, may retain all or any portion of net cash generated from our operations and/or proceeds from the sale of our properties for tenant
improvements, tenant refurbishments, and other lease-up costs or for working capital reserves.

Gains and distributions upon sale of our properties are
uncertain.

Although gains from the sale of properties typically represent a substantial portion of any profits attributable to real estate investments,
we cannot assure you that we will realize any gains on the sale of our properties. In addition, the amount of taxable gain allocated to you with respect to the sale of a Partnership property could exceed the cash proceeds received from such sale.
While the net proceeds from the sale of a property will generally be distributed to investors, the General Partners, in their sole discretion, may not make such distribution if such proceeds are used to:



| |  |  | purchase land underlying any of our properties;
| | - |  | -----------------------------------------------



| |  |  | buy out the interest of any co-venturer or joint venture partner in a property which is jointly owned;
| | - |  | ------------------------------------------------------------------------------------------------------



| |  |  | establish working capital reserves; or
| | - |  | --------------------------------------



| |  |  | make repairs, maintenance, tenant improvements, capital improvements, or other expenditures to any of our existing properties.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------

We are uncertain of our sources for funding of future capital needs.

Substantially all of the gross proceeds of the offering were used to invest in properties and to pay various fees and expenses. In addition, we do not anticipate that we will maintain any permanent working capital reserves. Accordingly, in
the event that we develop a need for additional capital in the future, such as the funding of tenant improvements, tenant refurbishments, or other lease-up costs, we have not identified any sources for such funding, and we cannot assure you that any
sources of funding will be available to us for potential capital needs in the future.

We may need to reserve net cash from operations for future tenant
improvements which may reduce your returns.

We may be required to expend substantial funds for tenant improvements and tenant refurbishments to vacated
space and other lease-up costs. Substantially all of our net offering proceeds available for investment will be used for investment in Partnership properties, and we do not anticipate that we will maintain permanent working capital reserves. We also
have no identified funding source to provide funds which may be required in the future for tenant improvements, tenant refurbishments, and other lease-up costs in order to attract new tenants. We cannot assure you that any such source of funding
will be available to us for such purposes in the future. In the event that we are required to use net cash from operations to fund such tenant improvements, tenant refurbishments, and other lease-up costs, cash distributions to limited partners
holding Class A Units will be reduced or eliminated for potentially extended periods of time.

Marketability and Transferability Risks

There is no public trading market for your units.

There is no public market for your units, and we do not anticipate that any public trading market for your units will ever develop. If you attempt to sell your units, you would likely do so at substantially discounted prices on the
secondary market.

Your units have limited transferability and lack liquidity due to restrictions under state regulatory laws and our partnership
agreement.

You are limited in your ability to transfer your units. Our partnership agreement and certain state regulatory agencies have imposed
restrictions relating to the number of units you may transfer. In addition, the suitability standards applied to you upon the purchase of your units may also be applied to persons to whom you wish to



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##### Index to Financial Statements

transfer your units. Accordingly, you may find it difficult to sell your units for cash or if you are able to sell your units, you may have to sell your
units at a substantial discount. You may not be able to sell your units in the event of an emergency, and your units are not likely to be accepted as collateral for a loan.

Our estimated unit valuations should not be viewed as an accurate reflection of the value of the limited partners units.

The estimated unit valuations contained in this annual report on Form 10-K should not be viewed as an accurate reflection of the value of the limited partners units, what limited partners might be able to sell
their units for, or the fair market value of the Partnerships properties, nor do they necessarily represent the amount of net proceeds limited partners would receive if the Partnerships properties were sold and the proceeds distributed
in a liquidation of the Partnership. There is no established public trading market for the Partnerships limited partnership units, and it is not anticipated that a public trading market for the units will ever develop. We did not obtain any
third-party appraisals of our properties in connection with these estimated unit valuations. In addition, property values are subject to change and could decline in the future. The valuations performed by the General Partners are estimates only, and
are based on a number of assumptions which may not be accurate or complete and may or may not be applicable to any specific limited partnership units. It should also be noted that, as properties are sold and the net proceeds from property sales are
distributed to limited partners, the remaining value of the Partnerships portfolio of properties, and resulting value of Partnerships limited partnership units, will naturally decline.

Special Risks Regarding Status of Units

If you hold Class A
Units, we expect that you will be allocated more income than cash flow.

Since limited partners holding Class A Units are allocated substantially
all of the Partnerships net income, while substantially all deductions for depreciation and other tax losses are allocated to limited partners holding Class B Units, we expect that those of you who hold Class A Units will be allocated
taxable income in excess of your cash distributions. We cannot assure you that cash flow will be available for distribution in any year.

If you hold
Class B Units, you may not be able to use your passive losses.

Those of you holding Class B Units will be allocated a disproportionately larger share
of our deductions for depreciation and other tax losses. Such losses will be treated as passive losses, which may only be used to offset passive income and may not be used to offset active or portfolio income. Accordingly,
you may receive no current benefit from your share of tax losses unless you are currently being allocated passive income from other sources.

In addition,
the American Jobs Creation Act of 2004 (the Act) added Section 470 to the Internal Revenue Code, which provides for certain limitations on the utilization of losses allocable to leased property owned by a partnership having both
taxable and tax-exempt partners, such as the Partnership. In March 2005, the Internal Revenue Service (IRS) issued IRS Notice 2005-29 announcing that the IRS would not be applying Section 470 to disallow losses for tax year 2004 based
solely on the fact that a partnership had both taxable and tax-exempt partners. In December 2005, the IRS issued IRS Notice 2006-2 extending the period for transitional relief through the 2005 tax year and in December 2006, the IRS again extended
the period for transitional relief through all tax years beginning prior to January 1, 2007. The IRS has indicated that it is continuing to study the application of Section 470 to partnerships, such as the Partnership, but unless further
legislation is enacted which addresses this issue or some other form of relief from the provisions of Section 470 of the Act is granted, beginning in tax year 2007 and thereafter, passive losses allocable to limited partners holding Class B
Units may be used only to offset passive income generated from the same property or within the same fund.

The desired effect of holding Class A
Units or Class B Units may be reduced depending on how many investors hold each type of unit.

You will be entitled to different rights and priorities
as to distributions of cash flow from operations and net sale proceeds and as to the allocation of depreciation and other tax losses depending upon whether you are holding



Page 10



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##### Index to Financial Statements

Class A Units or Class B Units, which is fixed at the end of the offering period. However, the effect of any advantage associated with holding
Class A Units or Class B Units may be significantly reduced or eliminated, depending upon the ratio of Class A Units to Class B Units, which is fixed at the end of the offering period. We did not attempt to restrict the ratio of
Class A Units to Class B Units sold during the offering period.

Management Risks

You must rely on our General Partners for management of our business.

Our General Partners make all decisions with
respect to the management of the Partnership. Limited partners have no right or power to take part in the management of the Partnership, except through the exercise of limited voting rights. Therefore, you must rely almost entirely on our General
Partners for management of the Partnership and the operation of its business. Our General Partners may be removed only under certain conditions set forth in our partnership agreement. If our General Partners are removed, they will receive payment
equal to the fair market value of their interests in the Partnership as agreed upon by our General Partners and the Partnership or by arbitration if they are unable to agree.

Leo F. Wells, III has a primary role in determining what is in the best interests of the Partnership and its limited partners.

Leo F. Wells, III is one of our General Partners and is the president, treasurer, and sole director of Wells Capital, our other general partner. Therefore, one person has a primary role in determining what is in the
best interests of the Partnership and its limited partners. Although Mr. Wells relies on the input of the officers and other employees of Wells Capital, he ultimately has the authority to make decisions affecting our Partnership operations.
Therefore, Mr. Wells alone will determine the propriety of his own actions, which could result in a conflict of interest when he is faced with any significant decision relating to our Partnership affairs.

Our loss of or inability to obtain key personnel could delay or hinder implementation of our investment strategies, which could limit our ability to make
distributions.

Our success depends to a significant degree upon the contributions of Leo F. Wells, III, Douglas P. Williams, and Randall D. Fretz, each
of whom would be difficult to replace. We do not have employment agreements with Messrs. Wells, Williams, or Fretz, and we cannot guarantee that such persons will remain affiliated with us. If any of Wells Capitals key personnel were to cease
their affiliation with the Partnership, we may be unable to find suitable replacement personnel, and our operating results could suffer. We do not maintain key person life insurance on any person. We believe that our future success depends, in large
part, upon the ability of our General Partners to hire and retain highly skilled managerial and operational personnel. If we lose or are unable to obtain the services of highly skilled personnel or do not establish or maintain appropriate strategic
relationships, our ability to implement our investment strategies could be delayed or hindered, and the value of your investment may decline.

Our
operating performance could suffer if Wells Capital incurs significant losses, including those losses that may result from being the general partner of other entities.

We are dependent on Wells Capital to conduct our operations; thus, adverse changes in the financial condition of Wells Capital or our relationship with Wells Capital could hinder its ability to successfully manage our
operations and our portfolio of investments. As a general partner in many Wells-sponsored programs, Wells Capital may have contingent liabilities for the obligations of such programs. Enforcement of such obligations against Wells Capital could
result in a substantial reduction of its net worth. If such liabilities affected the level of services that Wells Capital could provide, our operations and financial performance could suffer.



Page 11



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##### Index to Financial Statements

Our General Partners have a limited net worth consisting of illiquid assets which may affect their ability to fulfill
their financial obligations to the Partnership.

The net worth of our General Partners consists primarily of interests in real estate, retirement plans,
partnerships, and closely-held businesses and, in the case of Wells Capital, receivables from affiliated corporations and partnerships. Accordingly, the net worth of our General Partners is illiquid and not readily marketable. This illiquidity may
be relevant to you in evaluating the ability of our General Partners to fulfill their financial obligations to the Partnership. In addition, our General Partners have significant commitments to the other Wells-sponsored programs.

Our operating performance could suffer if Wells Capital incurs significant losses, including those losses that may result from being the general partner of other
entities.

We are dependent on Wells Capital and its affiliates to select investments and conduct our operations. Thus, adverse changes to our
relationship with or the financial health of Wells Capital and its affiliates, including changes arising from litigation, could hinder their ability to successfully manage our operations and our portfolio of investments. As a general partner to many
WREF-sponsored programs, Wells Capital may have contingent liability for the obligations of such partnerships. Enforcement of such obligations against Wells Capital could result in a substantial reduction of its net worth. If such liabilities
affected the level of services that Wells Capital could provide, our operations and financial performance could suffer.

Conflicts of Interest Risks

Our General Partners will face conflicts of interest relating to time management which could result in lower returns on our investments.

Because our General Partners and their affiliates have interests in other real estate programs and also engage in other business activities, they could
have conflicts of interest in allocating their time between our business and these other activities, which could affect operations of the Partnership. You should note that our partnership agreement does not specify any minimum amount of time or
level of attention that our General Partners are required to devote to the Partnership.

Our General Partners will face conflicts of interest relating
to the sale and leasing of properties.

We may be selling properties at the same time as other Wells programs are buying and selling properties. We may
have acquired or be selling properties in geographic areas where other Wells programs own properties or are trying to sell properties, which could lower your return on your investment.

Investments in joint ventures with affiliates will result in additional risks involving our relationship with the co-venturer.

We have entered into joint ventures with affiliates. Such investments may involve risks not otherwise present with an investment in real estate, including, for example:



| |  |  | the possibility that our co-venturer, co-tenant, or partner in an investment might become bankrupt;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | that such co-venturer, co-tenant, or partner may at any time have economic or business interests or goals which are or which become inconsistent with our business
interests or goals; or
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | that such co-venturer, co-tenant, or partner may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

Actions by such a co-venturer, co-tenant, or partner might result in subjecting the property to liabilities in excess of those
contemplated and may have the effect of reducing your returns.



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##### Index to Financial Statements

Our General Partners will face various conflicts of interest relating to joint ventures with affiliates.

Since our General Partners and their affiliates control both the Partnership and other affiliates, transactions between the parties with respect to
joint ventures between such parties do not have the benefit of arms length negotiation of the type normally conducted between unrelated co-venturers. Under these joint venture arrangements, neither co-venturer has the power to control the
venture, and an impasse could be reached regarding matters pertaining to the joint venture, which might have a negative influence on the joint venture and decrease potential returns to you. In the event that a co-venturer has a right of first
refusal to buy out the other co-venturer, it may be unable to finance such buy-out at that time. It may also be difficult for us to sell our interest in any such joint venture or partnership or as a co-tenant in property. In addition, to the extent
that our co-venturer, partner, or co-tenant is an affiliate of our General Partners, certain conflicts of interest will exist.

Federal Income Tax Risks

The IRS may challenge our characterization of material tax aspects of your investment in the Partnership.

An investment in units involves certain material income tax risks, the character and extent of which are, to some extent, a function of whether you hold Class A
Units or Class B Units. We will not seek any rulings from the IRS regarding any of the tax issues related to your units.

Investors may realize taxable
income without cash distributions.

As a limited partner in the Partnership, you are required to report your allocable share of the Partnerships
taxable income on your personal income tax return regardless of whether or not you have received any cash distributions from the Partnership. For example, if you hold Class A Units, you will be allocated substantially all of our net income,
defined in the partnership agreement to mean generally net income for federal income tax purposes, including any income exempt from tax, but excluding all deductions for depreciation and amortization and gain or loss from the sale of Partnership
properties, even if such income is in excess of any distributions of cash from our operations. If you hold Class A Units, you will likely be allocated taxable income in excess of any distributions to you, and the amount of cash received by you
could be less than the income tax attributable to the net income allocated to you.

We could potentially be characterized as a publicly traded
partnership resulting in unfavorable tax results.

If the IRS were to classify the Partnership as a publicly traded partnership, we could be
taxable as a corporation, and distributions made to you could be treated as portfolio income to you rather than passive income. We cannot assure you that we will not, at some time in the future, be treated as a publicly traded partnership due to the
following factors:



| |  |  | the complex nature of the IRS rules governing our potential exemption from classification as a publicly traded partnership;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | the lack of interpretive guidance with respect to such rules; and
| | - |  | -----------------------------------------------------------------



| |  |  | the fact that any determination in this regard will necessarily be based upon events which have not yet occurred.
| | - |  | -----------------------------------------------------------------------------------------------------------------

The IRS may challenge our allocations of profit and loss.

While it
is more likely than not Partnership items of income, gain, loss, deduction, and credit will be allocated among our General Partners and our limited partners substantially in accordance with the allocation provisions of the partnership agreement, we
cannot assure you that the IRS will not successfully challenge the allocations in the partnership agreement and reallocate items of income, gain, loss, deduction, and credit in a manner which reduces the anticipated tax benefits to investors holding
Class B Units or increases the income allocated to investors holding Class A Units.



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##### Index to Financial Statements

We may be audited and additional tax, interest, and penalties may be imposed upon you.

Our federal income tax returns may be audited by the IRS. Any audit of the Partnership could result in an audit of your tax return causing adjustments of items unrelated
to your investment in the Partnership, in addition to adjustments to various Partnership items. In the event of any such adjustments, you might incur accountants or attorneys fees, court costs and other expenses contesting deficiencies
asserted by the IRS. You also may be liable for interest on any underpayment and certain penalties from the date your tax was originally due. The tax treatment of all Partnership items will generally be determined at the partnership level in a
single proceeding rather than in separate proceedings with each partner, and our General Partners are primarily responsible for contesting federal income tax adjustments proposed by the IRS. In this connection, our General Partners may extend the
statute of limitations as to all partners and, in certain circumstances, may bind the partners to a settlement with the IRS. Further, our General Partners may cause us to elect to be treated as an electing large partnership. If they do,
we could take advantage of simplified flow-through reporting of Partnership items. Adjustments to Partnership items would continue to be determined at the partnership level, however, and any such adjustments would be accounted for in the year they
take effect, rather than in the year to which such adjustments relate. Accordingly, our General Partners will have the discretion in such circumstances either to pass along any such adjustments to the partners or to bear such adjustments at the
partnership level, thereby potentially adversely impacting the holders of a particular class of units disproportionately to holders of the other class of units.

State and local taxes and a requirement to withhold state taxes may apply.

The state in which you reside may impose an income tax upon your
share of our taxable income. Further, states in which we own properties may impose income taxes upon your share of our taxable income allocable to any Partnership property located in that state or other taxes on limited partnerships owning
properties in their states. Many states have implemented or are implementing programs to require partnerships to withhold and pay state income taxes owed by nonresident partners relating to income-producing properties located in their states, and we
may be required to withhold state taxes from cash distributions otherwise payable to you. In the event we are required to withhold state taxes from your cash distributions, or pay other state taxes, the amount of the net cash from operations
otherwise payable to you would be reduced. In addition, such collection and filing requirements at the state level may result in increases in our administrative expenses which would have the effect of reducing cash available for distribution to you.
You are urged to consult with your own tax advisors with respect to the impact of applicable state and local taxes and state tax withholding requirements or other potential state taxes relating to an investment in our units.

Legislative or regulatory action could adversely affect investors.

In recent years, numerous legislative, judicial, and administrative changes have been made in the provisions of the federal income tax laws applicable to investments similar to an investment in our units. Additional changes to the tax laws
are likely to continue to occur in the future, and we cannot assure you that any such changes will not adversely affect the taxation of a limited partner. Any such changes could have an adverse effect on an investment in our units or on the market
value or the resale potential of our properties. You are urged to consult with your own tax advisor with respect to the impact of recent legislation on your investment in units and the status of legislative, regulatory or administrative developments
and proposals and their potential effect on an investment in our units.



Page 14



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##### Index to Financial Statements

Retirement Plan and Qualified Plan Risks

There are special considerations that apply to a pension or profit-sharing trust or an Individual Retirement Account (IRA) investing in units.

If you are investing the assets of a pension, profit-sharing, Section 401(k), Keogh, or other qualified retirement plan or the assets of an IRA in units, you should
satisfy yourself that:



| |  |  | your investment is consistent with your fiduciary obligations under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | your investment is made in accordance with the documents and instruments governing your plan or IRA, including your plans investment policy;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | your investment satisfies the prudence and diversification requirements of Sections 404(a)(1)(B) and 404(a)(1)(C) of ERISA;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | your investment will not impair the liquidity of the plan or IRA;
| | - |  | -----------------------------------------------------------------



| |  |  | your investment will not produce unrelated business taxable income for the plan or IRA;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | you will be able to value the assets of the plan annually in accordance with ERISA requirements; and
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | your investment will not constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Internal Revenue Code.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------

We may dissolve the Partnership if our assets are deemed to be plan assets or if we engage in prohibited transactions.

If our assets were deemed to be assets of qualified plans investing as limited partners, i.e., plan assets, our General Partners would be considered to
be fiduciaries of such plans and certain contemplated transactions between our General Partners or their affiliates, and the Partnership may then be deemed to be prohibited transactions subject to excise taxation under Section 4975
of the Internal Revenue Code. Additionally, if our assets were deemed to be plan assets, the standards of prudence and other provisions of ERISA applicable to plan fiduciaries would apply to the General Partners with respect to our investments. We
have not sought a ruling from the U.S. Department of Labor regarding the potential classification of our assets as plan assets.

In this regard, U.S.
Department of Labor Regulations defining plan assets for purposes of ERISA contain exemptions which, if satisfied, would preclude assets of a limited partnership such as ours from being treated as plan assets. We cannot assure you that our
partnership agreement has been structured so that the exemptions in such Regulations would apply to us, although our General Partners intend that an investment by a qualified plan in units will not be deemed an investment in the assets of the
Partnership. We can make no representations or warranties of any kind regarding the consequences of an investment in our units by qualified plans in this regard. Plan fiduciaries are urged to consult with and rely upon their own advisors with
respect to this and other ERISA issues which, if decided adversely to the Partnership, could result in qualified plan investors being deemed to have engaged in prohibited transactions, which would cause the imposition of excise taxes and
co-fiduciary liability under Section 405 of ERISA in the event actions taken by us are deemed to be nonprudent investments or prohibited transactions.

In the event our assets are deemed to constitute plan assets or certain transactions undertaken by us are deemed to constitute prohibited transactions under ERISA or the Internal Revenue Code, and no
exemption for such transactions is obtainable by us, the General Partners have the right, but not the obligation, upon notice to all limited partners, but without the consent of any limited partner, to:



| |  |  | compel a termination and dissolution of the Partnership; or
| | - |  | -----------------------------------------------------------



| |  |  | restructure our activities to the extent necessary to comply with any exemption in the U.S. Department of Labor Regulations or any prohibited transaction exemption
granted by the Department of Labor or any condition which the Department of Labor might impose as a condition to granting a prohibited transaction exemption.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Page 15



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##### Index to Financial Statements

Adverse tax consequences may result because of minimum distribution requirements.

If you intend to purchase units through your IRA, or if you are a custodian of an IRA or a trustee or other fiduciary of a retirement plan considering an investment in
units, you must consider the limited liquidity of an investment in our units as it relates to applicable minimum distribution requirements under the Internal Revenue Code. If units are held and our properties have not yet been sold at such time as
mandatory distributions are required to begin to an IRA beneficiary or qualified plan participant, Sections 408(a)(6) and 401(a)(9) of the Internal Revenue Code will likely require that a distribution-in-kind of the units be made to the IRA
beneficiary or qualified plan participant. Any such distribution-in-kind of units must be included in the taxable income of the IRA beneficiary or qualified plan participant for the year in which the units are received at the fair market value of
the units and taxes attributable thereto must be paid without any corresponding cash distributions from us with which to pay such income tax liability.

Unrelated business taxable income (UBTI) may be generated with respect to tax-exempt investors.

We do not intend or anticipate
that the tax-exempt investors in the Partnership will be allocated income deemed to be derived from an unrelated trade or business. Notwithstanding this, the General Partners do have limited authority to borrow funds deemed necessary:



| |  |  | to finance improvements necessary to protect capital previously invested in a property;
| | - |  | ---------------------------------------------------------------------------------------



| |  |  | to protect the value of our investment in a property; or
| | - |  | --------------------------------------------------------



| |  |  | to make one of our properties more attractive for sale or lease.
| | - |  | ----------------------------------------------------------------

Further, in the event we were deemed to be a dealer in real property, defined as one who holds real estate primarily for sale to customers in the ordinary course of business, the gain realized on the sale
of our properties which is allocable to tax-exempt investors would be characterized as UBTI.



|ITEM 1B. | UNRESOLVED STAFF COMMENTS.
|-------- | --------------------------

There were no unresolved SEC staff
comments as of December 31, 2006.



Page 16



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##### Index to Financial Statements

|ITEM 2. | PROPERTIES.
|------- | -----------

Overview

The Partnership owns interests in all of its real estate assets through its interest in Fund II and Fund II-OW, a joint venture between the Partnership and Wells Real
Estate Fund II. Fund II and Fund II-OW owns interests in real estate assets both directly and through joint ventures with other entities affiliated with the General Partners. During the periods presented, the Partnership owned interests in the
following joint ventures (the Joint Ventures) and properties:



|                                                                         |  |                                                                                                  |  |                 |  |                                                                                       |  |                             |   |  |      |      |  |      |      |  |      |      |  |      |  
|------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------ |  | --------------- |  | ------------------------------------------------------------------------------------- |  | --------------------------- | - |  | ---- | ---- |  | ---- | ---- |  | ---- | ---- |  | ---- | -
|                                                                         |  |                                                                                                  |  |                 |  |                                                                                       |  | Leased % as of December 31, |  
|Joint Venture                                                            |  | Joint Venture Partners                                                                           |  | Ownership %     |  | Properties                                                                            |  | 2006                        |   |  | 2005 |      |  | 2004 |      |  | 2003 |      |  | 2002 |  
|Fund II and Fund II-OW                                                   |  |   Wells Real Estate Fund II   Wells Real Estate
Fund II-OW                                     |  | 94.7%5.3%       |  | 1. Louis Rose Building A two-story office buildinglocated in Charlotte, NorthCarolina |  | 0                           | % |  | 0    | %    |  | 0    | %    |  | 0    | %    |  | 0    | %
|Fund I and Fund II Tucker                                                |  |   Wells Real Estate Fund I                                                                      |  | 51.9%           |  | 2. Heritage Place(1)                                                                  |  |                            |   |  | 49   | %(1) |  | 53   | %(1) |  | 51   | %(1) |  | 76   | %
|                                                                         |  |   Fund II and Fund II-OW                                                                        |  | 48.1%           |  | A retail and commercial officecomplex located in Tucker,Georgia                       |  |                             |   |  |      |      |  |      |      |  |      |      |  |      |  
|Fund II and Fund III Associates (Fund II-III Associates)               |  |   Fund II and Fund II-OW   Wells Real Estate Fund III, L.P.                                    |  | 63.1%36.9%      |  | 3. Boeing at the Atrium A four-story office buildinglocated in Houston, Texas         |  | 100                         | % |  | 100  | %    |  | 100  | %    |  | 100  | %    |  | 81   | %
|                                                                         |  |                                                                                                  |  |                 |  | 4. Brookwood Grill(2) A restaurant located in FultonCounty, Georgia                   |  |                            |   |  |     |      |  |     |      |  | 100  | %    |  | 100  | %
|Fund II, III, VI and VII Associates (Fund II-III-VI-VII Associates)(3) |  |   Fund II-III Associates   Wells Real Estate Fund VI, L.P.   Wells Real Estate Fund VII, L.P. |  | 23.4%26.2%50.4% |  | 5. Holcomb Bridge Property(2) An office/retail center located in Roswell, Georgia     |  |                            |   |  |     |      |  |     |      |  | 83   | %    |  | 60   | %



| | (1) | The retail portion of this property (approximately 30%) was sold in April 2003; therefore, the 2005,
2004, and 2003 leased percentages are applicable to the commercial office portion only. The remaining office component of this property was sold in May 2006.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | These properties were sold in July 2004.
| | --- | ----------------------------------------



| | (3) | Fund II-III-VI-VII Associates was liquidated in 2006.
| | --- | -----------------------------------------------------

Wells Real Estate Fund I, Wells Real Estate Fund II, Wells Real Estate Fund III, L.P., Wells Real Estate Fund VI, L.P., and Wells Real Estate Fund VII, L.P. are
affiliated with the Partnership through one or more common general partners. Each of the properties described above was acquired on an all-cash basis.

Lease Expirations

As of December 31, 2006, the lease expirations scheduled during the following ten years for all properties in which
the Partnership owned an interest through the Joint Ventures described above, assuming no exercise of renewal options or termination rights, are summarized below:



|                         |  |                           |  |                      |  |                                                |  |                                                                         |  |                                          |  |                                                                    
|------------------------ |  | ------------------------- |  | -------------------- |  | ---------------------------------------------- |  | ----------------------------------------------------------------------- |  | ---------------------------------------- |  | -------------------------------------------------------------------
|Year of Lease Expiration |  | Number of Leases Expiring |  | Square Feet Expiring |  | Annualized Gross Base Rent inYear ofExpiration |  | Partnership Share of Annualized Gross Base Rent in Year ofExpiration(1) |  | Percentage of Total Square Feet Expiring |  | Percentage of Total Annualized Gross Base Rent in Year ofExpiration
|2007(2)                  |  | 0                         |  | 53,151               |  | $837,128                                       |  | $28,379                                                                 |  | 45.2%                                    |  | 47.3%                                                              
|2008(3)                  |  | 2                         |  | 64,429               |  | $932,053                                       |  | $31,597                                                                 |  | 54.8%                                    |  | 52.7%                                                              
|                         |  |                           |  |                      |  |                                                |  |                                                                         |  |                                          |  |                                                                    
|                         |  | 2                         |  | 117,580              |  | $1,769,181                                     |  | $59,976                                                                 |  | 100.0%                                   |  | 100.0%                                                             
|                         |  |                           |  |                      |  |                                                |  |                                                                         |  |                                          |  |                                                                    



| | (1) | The Partnerships share of annualized gross base rent in year of expiration is calculated based
on the Partnerships ownership percentage in the joint venture that owns the leased property.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | Boeing exercised option to reduce space effective September 18, 2007 (53,151 square feet).
| | --- | ------------------------------------------------------------------------------------------



| | (3) | Includes expiration of Boeing lease (63,312 square feet).
| | --- | ---------------------------------------------------------



Page 17



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##### Index to Financial Statements

Property Descriptions

The properties in which the Partnership owned an interest through the Joint Ventures during the periods presented are further described below:

Louis Rose Building

The Louis Rose Building is a two-story office building containing approximately 71,000 net rentable square feet located in
Charlotte, North Carolina. The Louis Rose Building continues to remain vacant following the expiration of the sole tenants lease on April 30, 2001. The northeast submarket, in which this property is located, contains approximately
2.5 million square feet of office space and is currently experiencing an overall average vacancy rate of approximately 21.9%. Overall, the Charlotte market has about a 14% vacancy rate. We are continuing our efforts to lease this property
to both small and large tenants. Significant leasing commissions and capital improvements are anticipated to be required in connection with the re-leasing of this property.

Heritage Place

Heritage Place is a retail shopping center containing approximately 30,000 square feet and a commercial
office building complex containing approximately 67,000 square feet located in Tucker, Georgia. On April 7, 2003, the Fund I and Fund II Tucker sold the retail portion of Heritage Place, which comprised approximately 30% of the total premises.
The retail portion of Heritage Place was sold for a gross sale price of $3,400,000. As a result of this sale, the Partnership was allocated a gain of approximately $7,000 and net sale proceeds of approximately $82,000. The net proceeds from this
sale attributable to the Partnership are currently being held by Fund II and Fund II-OW. On May 10, 2006, Fund I and Fund II sold the office component of Heritage Place to an unrelated third party for a gross sale price of $4,215,000. As a
result of the sale, Fund I and Fund II Tucker received net sale proceeds of approximately $4,028,000, of which approximately $103,000 was allocated to the Partnership. As of March 31, 2006, Fund I and Fund II Tucker recognized an impairment
loss of approximately $795,000 in order to reduce the carrying value of Heritage Place to its estimated fair value, less costs to sell as a result of a change in managements intended holding period for this asset, and recognized an additional
loss on sale of approximately $10,000. Approximately $20,000 and $300 of the impairment loss and loss on sale was allocable to the Partnership, respectively. The net sale proceeds for this sale attributable to the Partnership are currently being
held by Fund II and Fund II-OW.

Boeing at the Atrium

Boeing
at the Atrium is an approximate 118,000-square-foot, four-story office building located on a 5.6-acre tract of land adjacent to the Johnson Space Center in metropolitan Houston, Texas. As of December 31, 2006, Boeing/Shuttle Division
(Boeing) leased approximately 99% of this property with annual base rent of $15.75 per square foot continuing through expiration of its lease in 2008, and one tenant leased the remaining approximate 1% of this property. A termination and
contraction option exists under the terms of the Boeing lease, which allows Boeing to cancel the lease or decrease the square footage under the lease at any time after September 1, 2005 with nine months prior written notice. In December
2006, Boeing exercised the option to reduce the square footage by approximately 53,000 square feet effective September 18, 2007, which consists of the first two floors. Boeing will pay a termination fee equal to the unamortized leasehold costs
incurred by the landlord.

Brookwood Grill

Brookwood Grill is
an approximate 7,000-square-foot restaurant located in Roswell, Georgia. In September 1991, a lease agreement was entered into with the Brookwood Grill of Roswell, Inc. and was set to expire in 2012. On July 1, 2004, Fund II-III Associates
and Fund II-III-VI-VII Associates sold Brookwood Grill and the Holcomb Bridge Property, described below, to an unrelated third party for an aggregate gross sales price of $9,500,000. As a result of the sale of Brookwood Grill, the Partnership was
allocated a gain of approximately $26,000 and net sale proceeds of approximately $77,000. The undistributable net proceeds from this sale attributable to the Partnership are currently being held by Fund II and Fund II-OW.



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##### Index to Financial Statements

Holcomb Bridge Property

The
Holcomb Bridge Property consisted of two buildings leased to multiple tenants containing a total of approximately 49,500 square feet located in Roswell, Georgia. On July 1, 2004, Fund II-III Associates and Fund II-III-VI-VII Associates, sold
Brookwood Grill and the Holcomb Bridge Property, to an unrelated third party for an aggregate gross sales price of $9,500,000. As a result of the sale of the Holcomb Bridge Property, the Partnership was allocated a gain of approximately $15,000 and
net proceeds of approximately $54,000. The undistributed net proceeds from this sale attributable to the Partnership are currently being held by Fund II and Fund II-OW.



|ITEM 3. | LEGAL PROCEEDINGS.
|------- | ------------------

From time to time, we are party to legal
proceedings which arise in the ordinary course of our business. We are not currently involved in any litigation for which the outcome would, in the judgment of the General Partners based on information currently available, have a materially adverse
impact on the results of operations or financial condition of the Partnership, nor is management aware of any such litigation threatened against us.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|------- | ----------------------------------------------------

No matters
were submitted to a vote of the limited partners during the fourth quarter of 2006.



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##### Index to Financial Statements

PART II



|ITEM 5. | MARKET FOR THE PARTNERSHIPS UNITS AND RELATED SECURITY HOLDER MATTERS.
|------- | -----------------------------------------------------------------------

Summary

As of February 28, 2007, the Partnership had 6,062 outstanding Class A Units held by a total of
174 limited partners and 1,626 outstanding Class B Units held by a total of 41 limited partners. The total number of limited partners has decreased due to the repurchase of certain units since the termination of the offering in 1988. The capital
contribution per unit is $250. There is no established public trading market for the Partnerships limited partnership units, and it is not anticipated that a public trading market for the units will develop. Under the partnership agreement,
the General Partners have the right to prohibit transfers of units under certain circumstances.

Unit Valuation

Because fiduciaries of retirement plans subject to the ERISA and the IRA custodians are required to determine and report the value of the assets held in their respective
plans or accounts on an annual basis, the General Partners are required under the partnership agreement to report estimated unit values each year in the Partnerships annual report on Form 10-K. The methodology to be utilized for determining
such estimated unit values under the partnership agreement requires the General Partners to estimate the amount a unit holder would receive assuming that the Partnerships properties were sold at their estimated fair market values as of the end
of the Partnerships fiscal year, and the proceeds therefrom (without any reduction for selling expenses), plus the amount of net sale proceeds held by the Partnership at year-end from previous property sales, if any, were distributed to the
limited partners in liquidation. The estimated unit valuations are intended to be an estimate of the distributions that would be made to limited partners who purchased their units directly from the Partnership in the Partnerships original
public offering of units.

Utilizing the foregoing methodology and based upon market conditions existing in early December 2006, the General Partners have
estimated the Partnerships unit valuations, based upon their estimates of property values as of December 31, 2006, to be approximately $90.33 per Class A Unit and $98.15 per Class B Unit. These estimates should not be viewed as an
accurate reflection of the value of the limited partners units, what limited partners might be able to sell their units for, or the fair market value of the Partnerships properties, nor do they necessarily represent the amount of net
proceeds limited partners would receive if the Partnerships properties were sold and the proceeds distributed in a liquidation of the Partnership. There is no established public trading market for the Partnership's limited partnership units,
and it is not anticipated that a public trading market for the units will ever develop. In addition, property values are subject to change and could decline in the future. While, as required by the partnership agreement, the General Partners have
obtained an opinion from The David L. Beal Company, an independent appraiser certified by the Member Appraisal Institute, to the effect that such estimates of value were deemed reasonable and were prepared in accordance with appropriate methods for
valuing real estate, no actual appraisals were obtained due to the inordinate expense that would be involved in obtaining appraisals for all of the Partnerships properties.

The valuations performed by the General Partners are estimates only, and are based on a number of assumptions which may not be accurate or complete and may or may not be applicable to any specific limited partnership
units. These estimated valuations assume, and are applicable only to, limited partners who purchased their units directly from the Partnership in the Partnerships original public offering of units. Further, as set forth above, no third-party
appraisals have or will be obtained. For these reasons, the estimated unit valuations set forth above should not be used by or relied upon by investors, other than fiduciaries of retirement plans and IRA custodians for limited ERISA and IRA
reporting purposes, as any indication of the fair market value of their units. In addition, it should be noted that ERISA plan fiduciaries and IRA custodians may use estimated unit valuations



Page 20



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##### Index to Financial Statements

obtained from other sources, such as prices paid for the Partnerships units in secondary market trades, and that such estimated unit valuations may
well be lower than those estimated by the General Partners using the methodology required by the partnership agreement.

It should also be noted that the
Partnership is in the process of selling certain of its properties and that as properties are sold and the net proceeds from property sales are distributed to limited partners, the remaining value of the Partnerships portfolio of properties,
and resulting value of Partnerships limited partnership units, will naturally decline. In considering the foregoing estimated unit valuations, it should be noted that the Partnership has previously distributed net sale proceeds in the amount
of $0.00 per Class A Unit and $197.09 per Class B Unit to its limited partners. These amounts are intended to represent the per-unit distributions received by limited partners who purchased their units directly from the Partnership in the
Partnerships original public offering of units.

Operating Distributions

Class A Unit holders are entitled to an annual 8% noncumulative distribution preference over Class B Unit holders as to cash distributions from net cash from operations, defined in the partnership agreement
as cash flow, less adequate cash reserves for other obligations of the Partnership for which there is no provision, but are initially allocated none of the depreciation, amortization, cost recovery, and interest expense. These items are allocated to
Class B Unit holders until their capital account balances have been reduced to zero.

The Partnership has reserved distributions to limited partners
since the fourth quarter of 2001 primarily as a result of (i) the vacancy of the Louis Rose Building effective April 30, 2001, (ii) a reduction in cash flows resulting from the sales of Cherokee Commons in 2001, the retail portion of
Heritage Place in 2003, Brookwood Grill and the Holcomb Bridge Property in 2004 and the office component of Heritage Place in 2006, and (iii) funding tenant improvements and leasing costs incurred in connection with the Boeing at the Atrium
lease renewals in 2002 and 2003.



|ITEM 6. | SELECTED FINANCIAL DATA.
|------- | ------------------------

A summary of the selected financial data
as of and for the fiscal years ended December 31, 2006, 2005, 2004, 2003, and 2002 for the Partnership is provided below. The comparability of net income for the periods presented below is impacted by the sale of properties described in
Item 2.



|                                                                             |  |      |           |   |      |   |          |      |  |   |           |   |  |      |         |   |  |   |           |  
|---------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | -------- | ---- |  | - | --------- | - |  | ---- | ------- | - |  | - | --------- | -
|                                                                             |  | 2006 |           |   | 2005 |   |          | 2004 |  |   | 2003      |   |  | 2002 |        
|Total assets                                                                 |  | $    | 635,186   |   |      | $ | 990,558  |      |  | $ | 1,005,053 |   |  | $    | 993,542 |   |  | $ | 1,023,250 |  
|Equity in income (loss) of Joint Venture                                     |  | $    | (30,372   | ) |      | $ | (14,495  | )    |  | $ | 11,533    |   |  | $    | (27,781 | ) |  | $ | (61,502   | )
|Net income (loss)                                                            |  | $    | (30,372   | ) |      | $ | (14,495  | )    |  | $ | 12,382    |   |  | $    | (28,541 | ) |  | $ | (61,423   | )
|Net income (loss) allocated to Limited Partners:                             |  |      |           |   |      |   |          |      |  |   |           |   |  |      |         |   |  |   |           |  
|Class A                                                                      |  | $    | (355,246  | ) |      | $ | 15,722   |      |  | $ | (17,961   | ) |  | $    | (28,541 | ) |  | $ | (61,423   | )
|Class B                                                                      |  | $    | 324,874   |   |      | $ | (30,217  | )    |  | $ | 30,343    |   |  | $    | 0       |   |  | $ | 0         |  
|Net income (loss) allocated to Limited Partner Unit:                         |  |      |           |   |      |   |          |      |  |   |           |   |  |      |         |   |  |   |           |  
|Class A                                                                      |  |      | $ (58.60  | ) |      |   | $   2.59 |      |  |   | $ (2.96   | ) |  |      | $(4.71  | ) |  |   | $(10.13   | )
|Class B                                                                      |  |      | $199.80   |   |      |   | $(18.58  | )    |  |   | $18.66    |   |  |      | $ 0.00  |   |  |   | $   0.00  |  
|Cash distribution per Limited Partner Unit:                                  |  |      |           |   |      |   |          |      |  |   |           |   |  |      |         |   |  |   |           |  
|Class A                                                                      |  |      | $    0.00 |   |      |   | $   0.00 |      |  |   | $  0.00   |   |  |      | $  0.00 |   |  |   | $   0.00  |  
|Class B                                                                      |  |      | $    0.00 |   |      |   | $   0.00 |      |  |   | $  0.00   |   |  |      | $  0.00 |   |  |   | $   0.00  |  
|Distribution of net sale proceeds per weighted-average Limited Partner Unit: |  |      |           |   |      |   |          |      |  |   |           |   |  |      |         |   |  |   |           |  
|Class A                                                                      |  |      | $    0.00 |   |      |   | $   0.00 |      |  |   | $  0.00   |   |  |      | $  0.00 |   |  |   | $   0.00  |  
|Class B                                                                      |  |      | $199.88   |   |      |   | $   0.00 |      |  |   | $  0.00   |   |  |      | $  0.00 |   |  |   | $   0.00  |  



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##### Index to Financial Statements

|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|------- | --------------------------------------------------------------------------------------

The following discussion and analysis should be read in conjunction with the Selected Financial Data presented in Item 6 and our accompanying financial statements and notes thereto. See also Cautionary Note
Regarding Forward-Looking Statements preceding Part I of this report and Risk Factors in Item 1A. of this report.

Overview

Portfolio Overview

We are currently in the
disposition-and-liquidation phase of our life cycle. Of the six assets in which we originally owned interests, we have sold four assets including the office component of Heritage Place, which closed in May 2006. In December 2006, Boeing exercised
the option to reduce the square footage by approximately 53,000 square feet, which consists of the first two floors effective September 18, 2007. We continue to aggressively pursue leasing opportunities for the Louis Rose Building and the
upcoming vacancy at Boeing at the Atrium that we believe will ultimately result in the best disposition pricing for our limited partners.

With a number of
properties sold, our General Partners are currently reserving operating distributions to limited partners in order to fund our pro-rata share of the capital improvements and re-leasing costs anticipated for the Louis Rose Building and Boeing at the
Atrium. Further, the General Partners anticipate continuing to reserve operating distributions primarily due to the fact that the Louis Rose Building remains vacant and Boeing exercised its option to reduce the square footage.

After paying liabilities and establishing reserves deemed necessary by our General Partners, the Partnership completed the first distribution of net sale proceeds from
the sales of Cherokee Commons, the Holcomb Bridge Property, Brookwood Grill, and the retail portion of Heritage Place of approximately $325,000 to limited partners in November 2006. Once the details surrounding the re-leasing efforts and future
dispositions become known, our General Partners will evaluate if further distributions of net sale proceeds are appropriate.

Property Summary

As we move further into the disposition-and liquidation phase, our attention will shift to locating suitable buyers and 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.

Information relating to the properties owned, or previously owned, by the Partnership or its Joint Ventures is provided below:



| |  |  | Cherokee Commons was sold on October 1, 2001.
| | - |  | ---------------------------------------------



| |  |  | Heritage Place originally included both an office component and a retail shopping center. The retail center, which represented approximately 30% of the premises,
was sold on April 7, 2003. The remaining office component was sold on May 10, 2006.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Brookwood Grill was sold on July 1, 2004.
| | - |  | -----------------------------------------



| |  |  | The Holcomb Bridge Property was sold on July 1, 2004.
| | - |  | -----------------------------------------------------



| |  |  | The Louis Rose Building is currently vacant. We are aggressively working on re-leasing this property.
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | Boeing at the Atrium property is currently 99% occupied by the Boeing/Shuttle Division of The Boeing Company. The existing Boeing lease extends through March 2008.
Boeing exercised the option to reduce the square footage by approximately 53,000 square feet effective September 18, 2007, which consists of the first two floors.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Index to Financial Statements

Industry Factors

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

General Economic Conditions and Real
Estate Market Commentary

The General Partners review a number of economic forecasts and market commentaries in order to evaluate
general economic conditions and formulate a view of the current environments effect on the real estate markets in which we operate.

The U.S. economy has grown at a rate of 3.4% in 2006, which is up slightly from 3.2% growth in 2005. The economy grew at a 3.5% annual pace in the fourth quarter, up from 2.2% in the previous quarter. This slowdown of growth in the third
quarter is primarily attributable to housing, with residential investment falling 19.0%, the worst decrease in over a decade. This weakness in the housing sector was offset by fourth quarter growth in personal consumption expenditures, which rose
4.4% in the quarter and contributed 3.1% to gross domestic product (GDP). GDP growth for 2007 is expected to be 2.5% with estimated inflation at 2.0%.

The U.S. office real estate market is continuing to display strong growth through the first quarter of 2007, with steady declines in vacancy, positive absorption rates, and moderate construction. These conditions are
creating an acceleration in rent growth across most markets. National vacancy rates continue to trend downward with fourth quarter vacancy at 12.5%, down 35 basis points from the third quarter and 105 basis points from one year ago. Many markets are
performing well due to job growth in the service sector and a restraint on new supply. Improved job growth is not seen across the board, however, with coastal and energy markets doing well and the Midwest slightly lagging. A four-quarter average
puts job growth at 2.5% since midyear 2005, which is reflected in steady positive absorption. Looking forward to the near-term, many economists anticipate that there may be a slowing in the economy due to a further housing correction, causing weaker
employment growth and a downturn in demand for consumer-related finance. Such a slowing would also slow the growth in rental rates.

The
real estate capital transactions market experienced a strong finish to the year with $45 billion of office properties changing hands in the fourth quarter. Office property sales in 2006 totaled $134 billion, an increase of 32% over prior year sales.
Real estate investment trust privatizations, the process of publicly traded real estate investment trusts becoming privately held through merger or acquisition, accounted for $18 billion of volume in 2006. Capitalization rates (cap
rates) for central business district properties are at an all-time low due to strong investor demand. Demand for office properties continues to be well distributed across the capital sector with equity funds, institutions, real estate
investment trusts, and foreign investors being the most competitive bidders for portfolios. A different capital sector has led acquisitions for each of the past four years, a further indication of the diversity of demand. Equity funds have replaced
institutions as the largest purchaser of office properties in 2006. The spread between average cap rates and 10-year U.S. Treasuries continues to tighten, as cap rates compress and the U.S. Treasury inches up from 2002 lows. In the medium-term, the
combination of higher interest rates and slower rent growth could spell the end of the cap rate compression with cap rates expected to slightly increase over the next three years.

Impact of Economic Conditions on our Portfolio

While some of the market conditions noted above may indicate an expected increase in rental rates, the extent to which our portfolio may benefit from this growth is dependent upon the contractual rental rates
currently provided in existing leases at the properties we own. As the majority of our in-place leases are at properties that were acquired at times during which the market demanded higher rental rates, as compared with today, new leasing activities
in certain markets could actually result in a decrease in future rental rates.

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

Real estate funds, such as the Partnership, that contain properties with current vacancies or near-term tenant
rollover may still face a challenging leasing environment. The properties within these funds will generally face lower rents and higher concession packages to the tenants in order to re-lease vacant space.



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##### Index to Financial Statements

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

Liquidity and Capital Resources

Overview

Our operating strategy entails funding expenditures related to the recurring operations of the Joint Ventures properties and the portfolio with operating cash flows, including current and prior period operating
distributions received from the Joint Ventures, and assessing the amount of remaining cash flows that will be required to fund known future re-leasing costs and other capital improvements. Any residual operating cash flows are generally considered
available for distribution to the Class A limited partners and, unless reserved, are generally paid quarterly. As a result, the ongoing monitoring of our 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 could be adversely affected.

Short-Term
Liquidity

We did not generate cash flow from operating activities during 2006, as Fund II and Fund II-OW has continued to hold operating distributions
received from the Joint Ventures and otherwise payable to the Partnership to provide funding for anticipated re-leasing and capital improvement costs for the Louis Rose Building and Boeing at the Atrium. Accordingly, no operating distributions were
paid to limited partners during the year ended December 31, 2006. Future operating distributions 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 for properties owned by the Joint Ventures. During 2006, we also received net sale proceeds of approximately $325,000 from Fund II and Fund II-OW and
distributed such net sale proceeds to the limited partners.

We believe that the cash on hand and distributions due from the Joint Ventures are sufficient
to cover our current working capital needs.

Long-Term Liquidity

We expect that our future sources of capital will be primarily derived from net proceeds generated from the selective and strategic sale of properties and operating cash flows generated from the Joint Ventures. Our
future long-term liquidity requirements will include, but not be limited to, funding tenant improvements, renovations, expansions, and other significant capital improvements necessary for properties owned through the Joint Ventures. Specifically, we
anticipate funding our proportionate share of the re-leasing costs and capital improvements for the Louis Rose Building and Boeing at the Atrium. Future cash flows from operating activities will be primarily affected by distributions received from
the Joint Ventures, which are dependent upon the net operating income generated by the Joint Ventures properties, less reserves for known capital expenditures.

We have encountered difficulties in re-leasing the Louis Rose Building primarily due to the softening of the Charlotte office market and related Northeast submarket during the period following the expiration of the
sole tenants lease on April 30, 2001. The Northeast submarket of Charlotte continues to present challenges to landlords, primarily due to the increasing availability of office space for lease, and low rental rates and concessions offered
to prospective tenants. As of December 31, 2006, vacancy is approximately 14.0% for Charlotte as a whole and approximately 21.9% for the Northeast submarket of Charlotte. Accordingly, we are uncertain as to when the Louis Rose Building will be
re-leased, the level of rental rates which may be achieved in connection with such re-leasing, or the amount of re-leasing costs we will be required to fund in connection therewith.



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##### Index to Financial Statements

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 on an all-cash basis that are pre-leased to creditworthy tenants through the Joint Ventures with affiliated
partnerships.

The Joint Ventures fund capital expenditures primarily related to building improvements for the purpose of maintaining the quality of their
properties, and tenant improvements for the purpose of readying their 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. Any capital or other expenditures not provided for by the operations of the Joint Ventures will be funded by the Partnership and the respective joint venture partners on a pro-rata basis.

Operating cash flows, if available, are generally distributed from the Joint Ventures to the Partnership 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 flows 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 would then be
utilized.



Page 25



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##### Index to Financial Statements

Net sale proceeds from the sale of properties are allocated to the Class A and Class B limited partners in
accordance with the terms of the partnership agreement, as amended effective January 1, 2000. As of December 31, 2006, Fund II and Fund II-OW received, used, and held net sale proceeds allocated to the Partnership from the sale of
properties as presented below:



|                                              |  |                   |  |                                     |  |                                              |         |                          |   |                                                                  |  |                                                                                                                          |  |   |         |  |   |        
|--------------------------------------------- |  | ----------------- |  | ----------------------------------- |  | -------------------------------------------- | ------- | ------------------------ | - | ---------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | - | ------- |  | - | -------
|Property
Sold                                 |  | Total NetProceeds |  | PartnershipsApproximateOwnership % |  | Net Sale ProceedsAllocated to thePartnership |         | Use of Net Sale Proceeds |   | Net Sale Proceeds Distributed toPartners as of December 31, 2006 |  | Undistributed Net Sale Proceeds Currently Being Reserved as of December 31, 2006                                        
|                                              |  |                   |  | Amount                              |  | Purpose                                      |         |                         
|                                              |  |                   |  |                                     |  |                                              |        
|Cherokee Commons(sold in 2001)                |  | $8,414,089        |  | 2.9%                                |  | $                                            | 239,776 |                          | $ | 77,421                                                           |  |   Re-leasing of Boeing at the Atrium (2003 and 2002)   Funding for Fund I and Fund II Tucker operating expenses (2005) |  | $ | 162,355 |  | $ | 0      
|                                              |  |                   |  |                                     |  |                                              |        
|Heritage Place  retail portion(sold in 2003) |  | $3,207,708        |  | 2.6%                                |  |                                              | 81,797  |                          |   | 1,332                                                            |  |   Funding for Fund I and Fund II Tucker operating expenses (2005)                                                       |  |   | 80,465  |  |   | 0      
|                                              |  |                   |  |                                     |  |                                              |        
|Brookwood Grill(sold in 2004)                 |  | $2,346,693        |  | 3.3%                                |  |                                              | 76,730  |                          |   | 429                                                              |  |   Funding for Fund I and Fund II Tucker operating expenses (2005)                                                       |  |   | 33,851  |  |   | 42,450 
|                                              |  |                   |  |                                     |  |                                              |        
|Holcomb Bridge Property(sold in 2004)         |  | $6,889,379        |  | 0.8%                                |  |                                              | 53,737  |                          |   | 297                                                              |  |   Funding for Fund I and Fund II Tucker operating expenses (2005)                                                       |  |   | 48,329  |  |   | 5,111  
|                                              |  |                   |  |                                     |  |                                              |        
|Heritage Place  office portion(sold in 2006) |  | $4,028,043        |  | 2.6%                                |  |                                              | 102,715 |                          |   | 0                                                                |  |                                                                                                                          |  |   | 0       |  |   | 102,715
|                                              |  |                   |  |                                     |  |                                              |         |                          |   |                                                                  |  |                                                                                                                          |  |   |         |  |   |        
|                                              |  |                   |  |                                     |  |                                              |        
|Total                                         |  |                   |  |                                     |  | $                                            | 554,755 |                          | $ | 79,479                                                           |  |                                                                                                                          |  | $ | 325,000 |  | $ | 150,276
|                                              |  |                   |  |                                     |  |                                              |         |                          |   |                                                                  |  |                                                                                                                          |  |   |         |  |   |        

The net proceeds listed above will continue to be held in reserve by Fund II and Fund II-OW as our General
Partners evaluate the capital needs of the existing properties in which we hold an interest.

Results of Operations

Comparison of the year ended December 31, 2006 vs. the year ended December 31, 2005

Equity in loss of Fund II and Fund II-OW was $30,372 and $14,495 for the years ended December 31, 2006 and 2005, respectively. The 2006 increase in loss, as compared to 2005, is primarily attributable to
(i) Fund I and Fund II Tucker recognizing an impairment loss of approximately $795,000 for the office portion of Heritage Place, (ii) Fund I and Fund II Tucker recognizing an additional loss on sale of the office portion of Heritage Place
(iii) Fund II-III Associates recognizing a lease termination expense as a result of a tenant at Boeing at the Atrium exercising its option to reduce square footage, partially offset by (iv) a decrease in administrative costs relative to
the reduction in the size of the portfolio, and (v) an increase in interest income recognized on the net sale proceeds held by Fund II and Fund II-OW as a result of an increase in the daily interest yield and an increase in the average net
proceeds held during the respective periods as a result of the May 2006 sale of the office portion of Heritage Place.



Page 26



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##### Index to Financial Statements

We expect future equity in loss of Fund II and Fund II-OW to increase as a result of (i) a corresponding decline in
income due to selling the office component of Heritage Place in May 2006, (ii) a reduction of interest income earned resulting from the decline in net sales proceeds held by Fund II and Fund II-OW following the distribution of the net sales
proceeds in November 2006, and (iii) a tenant at Boeing at the Atrium exercising its option to reduce the square footage which will occur in September 2007.

Comparison of the year ended December 31, 2005 vs. the year ended December 31, 2004

Equity in income (loss) of Fund II and Fund
II-OW was $(14,495) and $11,533 for the years ended December 31, 2005 and 2004, respectively. The 2005 decrease, as compared to 2004, is primarily attributable to (i) gains recognized from the sale of the Holcomb Bridge Property and
Brookwood Grill in 2004, (ii) a reduction in operating income due to the sale of the two aforementioned properties, (iii) an increase in administrative expenses recorded by Fund II and Fund II-OW related to increased reporting and
regulatory requirements, (iv) a decrease in rental income and tenant reimbursement income as a result of the decrease in occupancy at Heritage Place, partially offset by (v) a reduction in depreciation expense as a result of changing the
useful life for all buildings owned through the Joint Ventures from 25 years to 40 years effective July 1, 2004, and (vi) an increase in interest income recorded by Fund II and Fund II-OW as a result of the joint venture holding additional
net sale proceeds from the sales of the Brookwood Grill and the Holcomb Bridge Property.

Inflation

We are exposed to inflation risk as income from long-term leases is the primary source of our cash flows from operations. There are provisions in the majority of our
tenant leases that would protect us from the impact of inflation. These provisions include rent steps, 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. However, due to the long-term nature of our leases, the leases may not readjust their reimbursement rates frequently enough to cover inflation.

Application of Critical Accounting Policies

Our
accounting policies have been established to conform with U.S. generally accepted accounting principles (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 our 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

We will be required to make subjective assessments as to the useful lives of its depreciable assets. We will consider 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             |  | 40 years                              
|Building improvements |  | 5-25 years                            
|Land improvements     |  | 20 years                              
|Tenant improvements   |  | Shorter of lease term or economic life



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##### Index to Financial Statements

Effective July 1, 2004, the Joint Ventures extended the weighted-average composite useful life for all building
assets from 25 years to 40 years. We believe that this change more appropriately reflects the estimated useful lives of real estate assets and is consistent with prevailing industry practice. The change resulted in an increase to net income of
approximately $12,000 for the year ended December 31, 2004. In the event that the Joint Ventures utilize inappropriate useful lives or methods of depreciation, our net income would be misstated.

Valuation of Real Estate Assets

We continually monitor events and
changes in circumstances that could indicate that the carrying amounts of the real estate assets in which we have an ownership interest 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 assets and their 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, as defined by Statement of Financial Accounting Standard No. 144, and recognizes an impairment loss. Estimated fair values are calculated based on the following information, dependent upon availability, in order
of preference: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated salvage value. In the first quarter of 2006, Fund I and Fund II
Tucker recorded an impairment loss for the office component of Heritage Place of approximately $795,000, of which approximately $20,000 was allocated to the Partnership in order to reduce the carrying value of the property to its fair value, less
costs to sell, as a result of a change in managements intended holding period for this asset.

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.

Related-Party Transactions and Agreements

We have entered into agreements with Wells Capital, Wells Management, an affiliate of our General Partners, and their affiliates, whereby we pay
certain fees and expense reimbursements to Wells Capital, Wells Management, and their affiliates for asset management; the management and leasing of our properties; administrative services relating to accounting, property management, and other
partnership administration; and incur the related expenses. See Item 13, Certain Relationships and Related Transactions for a description of these fees and reimbursements and amounts incurred and Risk Factors  Conflicts
of Interest in Item 1A. of this report.

Potential Tax Impact for Limited Partners Holding Class B Units  American Jobs Creation Act of
2004

The American Jobs Creation Act of 2004 added Section 470 to the Internal Revenue Code, which provides for certain limitations on the
utilization of losses by investors that are attributable to leased property owned by a partnership having both taxable and tax-exempt partners such as the Partnership. If Section 470 were deemed to apply to the Partnership, passive losses
allocable to limited partners holding Class B Units could only be utilized to offset passive income generated from the same property or potentially from properties owned by the same partnership. In March 2005, the IRS announced that it would not
apply Section 470 to partnerships for the taxable year 2004 based solely on the fact that a partnership had both taxable and tax-exempt partners. In December 2005, the IRS extended the period for transitional relief through the 2005 tax year,
and in December 2006, the IRS again extended the period for transitional relief through all tax years beginning prior to January 1, 2007. In addition, pursuant to Section 403(ff) of the Gulf Opportunity Zone Act of 2005, the effective date



Page 28



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##### Index to Financial Statements

provisions regarding the applicability of Section 470 were amended to provide that, in the case of leased property treated as tax-exempt use property by
reason of its being owned by a partnership having both taxable and tax-exempt partners, Section 470 will apply only to property acquired after March 12, 2004. Since the Partnership acquired all of its properties prior to March 12,
2004, and is not expected to acquire interests in any additional properties in the future, we do not believe that the provisions of Section 470 should apply to limit the utilization of losses attributable to the properties owned by the
Partnership; however, due to the uncertainties and lack of guidance relating to this provision, it is unclear as to whether the acquisition of a limited partnership interest in the Partnership after the March 12, 2004 effective date may be
deemed to be an acquisition of property within the meaning of the effective date provisions of Section 470.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|-------- | -----------------------------------------------------------

Since
we do not borrow any money, make any foreign investments, or invest in any market risk-sensitive instruments, we are 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 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
|------- | --------------------------------------------

Our financial
statements and supplementary data are detailed under Item 15(a) and filed as part of the report on the pages indicated.



|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
|------- | -------------------------------------------------------------------------------------

On September 22, 2006, the Financial Oversight Committee of the General Partners dismissed Ernst & Young LLP as the Partnerships independent registered public accounting firm, effective
immediately. Also, on September 22, 2006, the Financial Oversight Committee engaged Frazier & Deeter, LLC as its independent registered public accounting firm.

Ernst & Young LLPs reports on the financial statements of the Partnership for the years ended December 31, 2005 and 2004 did not contain an adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope, or accounting principle.

During the years ended December 31, 2005 and 2004, and the subsequent
interim period through September 22, 2006, there were no disagreements with Ernst & Young LLP on any matters related to accounting principles or practices, financial statement disclosures, or auditing scope or procedures, which, if not
resolved to the satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make reference thereto in their reports on the financial statements of the Partnership for such years. There were no reportable events as set
forth in Item 304(a)(1)(v) of Regulation S-K.

The Partnership provided Ernst & Young LLP with a copy of the Form 8-K filed with regard to
the change in independent registered public accounting firm, which was filed with the SEC on September 27, 2006, and requested that Ernst & Young LLP furnish the Partnership with a letter addressed to the Securities and Exchange
Commission stating whether or not it agrees with the foregoing statements. A copy of Ernst & Young LLPs letter dated September 27, 2006, was filed as Exhibit 16.1 to the September 27, 2006 Form 8-K.

During the years ended December 31, 2005 and 2004, and through September 22, 2006, the Partnership did not consult with Frazier & Deeter, LLC with
respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Partnerships financial statements, or any other matters or reportable
events as set forth in Items 304(a)(2)(i) and (ii) of Regulation S-K.



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##### Index to Financial Statements

There were no disagreements with the Partnerships independent public accountants during the years ended
December 31, 2006 and 2005.



|ITEM 9A. | CONTROLS AND PROCEDURES.
|-------- | ------------------------

We carried out an evaluation, under the
supervision and with the participation of management of Wells Capital, our corporate general partner, including the Principal Executive Officer and Principal Financial Officer, of the effectiveness of the design and operation of our disclosure
controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and Principal Financial Officer concluded
that our disclosure controls and procedures were effective as of the end of the period covered by this report in providing a reasonable level of assurance that information we are required to disclose in reports that we file or submit under the
Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in applicable SEC rules and forms, including providing a reasonable level of assurance that information required to be disclosed by us
in such reports is accumulated and communicated to our management, including our Principal Executive Officer and our Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There were no significant changes in our internal control over financial reporting during the quarter ended December 31, 2006 that have materially affected, or are
likely to materially affect, our internal control over financial reporting.



|ITEM 9B. | OTHER INFORMATION.
|-------- | ------------------

For the quarter ended December 31, 2006,
all items required to be disclosed under Form 8-K were reported under Form 8-K.



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##### Index to Financial Statements

PART III



|ITEM 10. | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANTS GENERAL PARTNERS.
|-------- | ----------------------------------------------------------------------

Wells Capital

Wells Capital, our corporate general partner, was formed in April 1984. The executive offices of Wells Capital are located at
6200 The Corners Parkway, Norcross, Georgia 30092. Leo F. Wells, III is the sole Director and the President of Wells Capital. Wells Capital was organized under the Georgia Business Corporation Code, and is primarily in the business of
serving as general partner or as an affiliate of the general partner in affiliated public limited partnerships (Wells Real Estate Funds). Wells Capital or its affiliates serves as the advisor to the Wells Real Estate Investment Trust,
Inc., Wells Real Estate Investment Trust II, Inc., Wells Timberland REIT, Inc., and Institutional REIT, Inc. (collectively, Wells REITs), each of which are Maryland corporations. Wells Real Estate Investment Trust, Inc. and Wells
Real Estate Investment Trust II, Inc. qualify as real estate investment trusts, and Wells Timberland REIT, Inc. and Institutional REIT, Inc. intend to qualify as real estate investment trusts beginning with the year ending December 31,
2007. In these capacities, Wells Capital performs certain services for Wells Real Estate Funds and the Wells REITs, including presenting, structuring, and acquiring real estate investment opportunities; entering into leases and service contracts on
acquired properties; arranging for and completing the disposition of properties; and providing other services such as accounting and administrative functions. Wells Capital is a wholly owned subsidiary of WREF, of which Leo F. Wells, III is the sole
stockholder.

Leo F. Wells, III

Mr. Wells, 63,
who serves as one of our General Partners, is the president, treasurer, and sole director of Wells Capital, which is our corporate general partner. He is also the sole stockholder, president, and sole director of WREF, the parent corporation of
Wells Capital, Wells Management, Wells Investment Securities, Inc. (WIS), and Wells & Associates, Inc., a real estate brokerage and investment company formed in 1976 and incorporated in 1978, for which Mr. Wells serves as
principal broker. He is also the president, treasurer, and sole director of:



| |  |  | Wells Management, our property manager;
| | - |  | ---------------------------------------

| |  |  | Wells Asset Management, Inc.;
| | - |  | -----------------------------

| |  |  | Wells & Associates, Inc.; and
| | - |  | -----------------------------

| |  |  | Wells Development Corporation, a company he organized in 1997 to develop real properties.
| | - |  | -----------------------------------------------------------------------------------------

Mr. Wells is a director of each of the Wells REITs, which are Maryland corporations that either currently qualify as real estate investment trusts or intend to
qualify as real estate investment trusts beginning with the year ending December 31, 2007.

Mr. Wells was a real estate salesman and property
manager from 1970 to 1973 for Roy D. Warren & Company, an Atlanta-based real estate company, and he was associated from 1973 to 1976 with Sax Gaskin Real Estate Company. From 1980 to February 1985 he served as Vice President of
Hill-Johnson, Inc., a Georgia corporation engaged in the construction business. Mr. Wells holds a Bachelor of Business Administration degree in economics from the University of Georgia. Mr. Wells is a member of the Financial Planning
Association.

On August 26, 2003, Mr. Wells and WIS entered into a Letter of Acceptance, Waiver and Consent (AWC) with the National
Association of Securities Dealers, Inc. (NASD) relating to alleged rule violations. The AWC set forth the NASDs findings that WIS and Mr. Wells had violated conduct rules relating to the provision of noncash compensation of
more than $100 to associated persons of NASD member firms in connection with their attendance at the annual educational and due diligence conferences sponsored by WIS in 2001 and 2002. Without admitting or denying the allegations and findings
against them, WIS and Mr. Wells consented in the AWC to various findings by the NASD, which are summarized in the following paragraph:

In 2001 and 2002, WIS sponsored conferences attended by registered representatives who sold its real estate investment products. WIS also paid for certain expenses of guests of the registered representatives who



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##### Index to Financial Statements

attended the conferences. In 2001, WIS paid the costs of travel to the conference and meals for many of the guests, and paid the costs of playing golf for
some of the registered representatives and their guests. WIS later invoiced registered representatives for the cost of golf and for travel expenses of guests, but was not fully reimbursed for such. In 2002, WIS paid for meals for the guests. WIS
also conditioned most of the 2001 conference invitations on attainment by the registered representatives of a predetermined sales goal for WIS products. This conduct violated the prohibitions against payment and receipt of noncash compensation in
connection with the sales of these products contained in NASDs Conduct Rules 2710, 2810, and 3060. In addition, WIS and Mr. Wells failed to adhere to all of the terms of their written undertaking made in March 2001 not to engage in the
conduct described above, and thereby engaged in conduct that was inconsistent with high standards of commercial honor and just and equitable principles of trade in violation of NASD Conduct Rule 2110.

WIS consented to a censure and Mr. Wells consented to suspension from acting in a principal capacity with an NASD member firm for one year. WIS and Mr. Wells
also agreed to the imposition of a joint and several fine in the amount of $150,000. Mr. Wells one-year suspension from acting in a principal capacity ended on October 6, 2004. Mr. Wells continues to represent the issuer and
perform other nonprincipal activities on behalf of WIS.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires the officers and directors of the general partner of our general partner, and persons who own 10% or
more of any class of equity interests in the Partnership, to report their beneficial ownership of equity interests in the Partnership to the SEC. Their initial reports are required to be filed using the SECs Form 3, and they are required
to report subsequent purchases, sales, and other changes using the SECs Form 4, which must be filed within two business days of most transactions. Officers, directors, and partners owning more than 10% of any class of equity interests in
the Partnership are required by SEC regulations to furnish us with copies of all of reports they file pursuant to Section 16(a).

Financial
Oversight Committee

The Partnership does not have a board of directors or an audit committee. Accordingly, as our corporate general partner, Wells
Capital has established a Financial Oversight Committee consisting of Leo F. Wells, III, as the Principal Executive Officer; Douglas P. Williams, as the Principal Financial Officer; and Randall D. Fretz, as the Senior Vice President of our
corporate general partner. The Financial Oversight Committee serves the equivalent function of an audit committee for, among others, the following purposes: appointment, compensation, review, and oversight of the work of our independent registered
public accountants, and establishing and enforcing the code of ethics. However, since neither the Partnership nor its corporate general partner has an audit committee and the Financial Oversight Committee is not independent of the Partnership or the
General Partners, we do not have an audit committee financial expert.

Code of Ethics

The Partnership has adopted a code of ethics applicable to our corporate general partners Principal Executive Officer and Principal Financial Officer, as well as
the principal accounting officer, controller, or other employees of our corporate general partner performing similar functions on behalf of the Partnership, if any. The code of ethics is contained in the Business Standards/Code of Conduct/General
Policies established by WREF. You may obtain a copy of this code of ethics, without charge, upon request by calling our Client Services Department at 800-557-4830 or 770-243-8282.



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##### Index to Financial Statements

|ITEM 11. | COMPENSATION OF GENERAL PARTNERS AND AFFILIATES.
|-------- | ------------------------------------------------

The Partnership
has not made any payments to Leo F. Wells, III as compensation for serving as our general partner. Further, the Partnership does not have any employees, officers, or directors and, accordingly, no compensation has been awarded to, earned by, or paid
to any individuals. See Item 13, Certain Relationships and Related Transactions, for a description of the fees incurred by the Partnership payable to affiliates of the General Partners during the year ended December 31, 2006.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
|-------- | ---------------------------------------------------------------

(a) No limited partner owns beneficially more than 5% of any class of the outstanding units of the Partnership.

(b) Set forth below is the
security ownership of management as of February 28, 2007:

Leo F. Wells, III does not own any Class A or Class B Units in Wells Real Estate Fund
II-OW as of February 28, 2007.

The General Partners did not receive any distributions of operating cash flow or net sale proceeds in 2006.

(c) No arrangements exist which would, upon implementation, result in a change in control of the Partnership.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
|-------- | -----------------------------------------------

The compensation
and fees we pay to our General Partners and their affiliates in connection with our operations are as follows:

Interest in Partnership Cash Flow and
Net Sale Proceeds

The General Partners are entitled to receive a subordinated participation in distributions from cash available for distribution equal
to 10% of the total distribution for such year payable only after the limited partners each receive distributions from cash available for distribution equal to 8% of their adjusted capital accounts in each fiscal year. In addition, after the limited
partners receive their distributions equal to 8% of their adjusted capital contributions and the General Partners receive their distributions equal to 10% of the total distributions for such year, the General Partners will receive a participation of
10% of the additional distributions from cash available for distribution, 9% of which shall be paid to the General Partners as a partnership management fee. The General Partners are also entitled to receive a subordinated participation in net sale
proceeds and net financing proceeds equal to 15% of the residual proceeds available for distribution after the limited partners have received a return of their adjusted capital contributions plus a 12% cumulative return on their adjusted capital
contributions. The General Partners did not receive any distributions of net cash from operations or net sale proceeds for the year ended December 31, 2006.

Management and Leasing Fees

In accordance with the property management and leasing agreement, Wells Management, an affiliate of the General
Partners, is entitled to compensation for the management and leasing of the Partnerships properties owned through Fund II and Fund II-OW equal to (a) of the gross revenues collected monthly, 3% for management services and 3% leasing
services, plus a separate fee for the one-time 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, which is assessed periodically based on market studies, or (b) in the case of commercial properties that are leased on a long-term net basis (ten or more years), 1% of the gross revenues except for initial leasing fees equal
to 3% of the gross revenues over the first five years of the lease term. Management and leasing fees are paid by Fund II and Fund II-OW and, accordingly, included in equity in income (loss) of Fund II and Fund II-OW in the accompanying statement of
operations. Our share of management and leasing fees and lease acquisition costs incurred through the Joint Ventures that are payable to Wells Management and its affiliates is $4,387, $5,055, and $5,883 for the years ended December 31, 2006,
2005, and 2004, respectively.



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##### Index to Financial Statements

Real Estate Commissions

In connection with the sale of our properties, the General Partners or their affiliates may receive commissions not exceeding the lesser of (a) 50% of the commissions customarily charged by other brokers in arms-length
transactions involving comparable properties in the same geographic area or (b) 3% of the gross sales price of the property, and provided that payments of such commissions will be made only after limited partners have received prior
distributions totaling 100% of their capital contributions plus a 6% cumulative return on their adjusted capital contributions. No real estate commissions were paid to the General Partners or their affiliates for the years ended December 31,
2006, 2005, or 2004.

Procedures Regarding Related-Party Transactions

Our policies and procedures governing related-party transactions with our General Partners and their affiliates, including, but not limited to, all transactions required to be disclosed under Item 404(a) of
Regulation S-K, are restricted or severely limited under many circumstances pursuant to the provisions of Articles XI, XII, XIII, and XIV of our partnership agreement, which has been filed with the SEC. No transaction has been entered into with
either of our General Partners or their affiliates that does not comply with those policies and procedures. In addition, in any transaction involving a potential conflict of interest, including any transaction that would require disclosure under
Item 404(a) of Regulation S-K, our General Partners must view such a transaction after taking into consideration their fiduciary duties to the Partnership.

Administrative Reimbursements

Wells Capital, one of the General Partners, and Wells Management perform certain
administrative services for the Partnership, relating to accounting and other partnership administration, and incur the related expenses. Such expenses are allocated among various other entities affiliated with the General Partners based on time
spent on each fund by individual administrative personnel. In the opinion of the General Partners, this allocation is a reasonable estimation of such expenses. The administrative charges related to the Partnership are recorded by Fund II and Fund
II-OW and, therefore, included in equity in income (loss) of Fund II and Fund II-OW in the accompanying statements of operations. The Partnerships share of administrative costs reimbursed to Wells Capital and Wells Management recorded by Fund
II and Fund II-OW is $7,520, $9,539, and $8,838 for the years ended December 31, 2006, 2005, and 2004.



|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES.
|-------- | ---------------------------------------

Preapproval Policies
and Procedures

The Financial Oversight Committee preapproves all auditing and permissible nonauditing services provided by our independent registered
public accountants. The approval may be given as part of the Financial Oversight Committees approval of the scope of the engagement of our independent registered public accountants or on an individual basis. The preapproval of certain
audit-related services and certain nonauditing services not exceeding enumerated dollar limits may be delegated to one or more of the Financial Oversight Committees members, but the member to whom such authority is delegated shall report any
preapproval decisions to the full Financial Oversight Committee. Our independent registered public accountants may not be retained to perform the nonauditing services specified in Section 10A(g) of the Securities Exchange Act of 1934.

Fees Paid to the Independent Registered Public Accountants

On September 22, 2006, the Financial Oversight Committee of the General Partners dismissed Ernst & Young LLP as the Partnerships independent registered public accounting firm, which had served as the Partnerships
independent registered public accountants since July 3, 2002, and appointed Frazier & Deeter, LLC to serve in that capacity for the fiscal year ended December 31, 2006. All such fees are recognized in the period to which the
services relate. A portion of such fees are allocated to the joint ventures in which the Partnership invests. The



Page 34



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##### Index to Financial Statements

aggregate fees billed to the Partnership for professional accounting services by Frazier & Deeter, LLC and Ernst & Young LLP, and including
the audit of the Partnerships annual financial statements, for the fiscal years ended December 31, 2006 and 2005, are set forth in the table below.



|                   |  |                       |       |                   |   |        |  |   |       
|------------------ |  | --------------------- | ----- | ----------------- | - | ------ |  | - | ------
|                   |  | Frazier & Deeter, LLC |       | Ernst & Young LLP
|                   |  | 2006                  |       | 2006              |   | 2005  
|Audit Fees         |  | $                     | 6,234 |                   | $ | 5,781  |  | $ | 8,970 
|Audit-Related Fees |  |                       | 0     |                   |   | 0      |  |   | 0     
|Tax Fees           |  |                       | 0     |                   |   | 8,628  |  |   | 7,312 
|Other Fees         |  |                       | 0     |                   |   | 0      |  |   | 0     
|                   |  |                       |       |                   |   |        |  |   |       
|Total              |  | $                     | 6,234 |                   | $ | 14,409 |  | $ | 16,282
|                   |  |                       |       |                   |   |        |  |   |       

For purposes of the preceding table, the professional fees are classified as follows:



| |  |  | Audit Fees  These are fees for professional services performed for the audit of our annual financial statements and review of financial statements included in
our Form 10-Q filings, services that are normally provided by independent registered public accountants in connection with statutory and regulatory filings or engagements, and services that generally independent registered public accountants
reasonably can provide, such as statutory audits, attest services, consents, and assistance with and review of documents filed with the SEC.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Audit-Related Fees  These are fees for assurance and related services that traditionally are performed by independent registered public accountants, such as
due diligence related to acquisitions and dispositions, internal control reviews, attestation services that are not required by statute or regulation, and consultation concerning financial accounting and reporting standards.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Tax Fees  These are fees for all professional services performed by professional staff in our independent registered public accountants tax division,
except those services related to the audit of our financial statements. These include fees for tax compliance, tax planning, and tax advice. Tax compliance involves preparation of any federal, state or local tax returns. Tax planning and tax advice
encompass a diverse range of services, including assistance with tax audits and appeals, tax advice related to acquisitions and dispositions of assets, and requests for rulings or technical advice from taxing authorities.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Other Fees  These are fees for other permissible work performed that do not meet the above-described categories, including assistance with internal audit
plans and risk assessments.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

During the fiscal years ended December 31, 2006 and 2005, 100% of the services performed by
Frazier & Deeter, LLC and Ernst & Young LLP and described above under the captions Audit Fees, Audit-Related Fees, Tax Fees, and Other Fees were approved in advance by a member of the
Financial Oversight Committee.



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##### Index to Financial Statements

PART IV



|ITEM 15. | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
|-------- | -------------------------------------------



|(a) | 1. The financial statements are contained on pages F-2 through F-61 of this Annual Report on Form 10-K, and the list of the financial statements contained herein is set forth
on page F-1, which is hereby incorporated by reference.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(b) | The Exhibits filed in response to Item 601 of Regulation S-K are listed on the Exhibit Index attached hereto.
|--- | -------------------------------------------------------------------------------------------------------------



|(c) | See (a) 1 above.
|--- | ----------------



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##### Index to Financial Statements

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 II-OW (Registrant)                                                         
|               |  |                                                                                                   
|               |  | By:                                                                                                |  | WELLS CAPITAL, INC. (Corporate General Partner)
|               | 
|March 27, 2007 |  | /S/    LEO F. WELLS,
III                                                                          
|               |  | Leo F. Wells, III President,
Principal Executive Officer, and Sole Director of Wells Capital, Inc.
|               | 
|March 27, 2007 |  | /S/    DOUGLAS P.
WILLIAMS                                                                        
|               |  | Douglas P. Williams Principal
Financial Officer of Wells Capital, Inc.                            



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##### Index to Financial Statements

WELLS REAL ESTATE FUND II-OW

TABLE OF CONTENTS



|                                                                                                                                      |  |     
|------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|FINANCIAL STATEMENTS                                                                                                                  |  | Page
|                                                                                                                                      | 
|WELLS REAL ESTATE FUND II-OW                                                                                                          |  |     
|Report of Independent Registered Public Accounting Firm  Frazier & Deeter, LLC                                                       |  | F-2 
|Report of Independent Registered Public Accounting Firm  Ernst & Young LLP                                                           |  | F-3 
|Balance Sheets as of December 31, 2006 and 2005                                                                                       |  | F-4 
|Statements of Operations for the Years Ended December 31, 2006, 2005, and 2004                                                        |  | F-5 
|Statements of Partners Capital for the Years Ended December 31, 2006, 2005, and 2004                                                 |  | F-6 
|Statements of Cash Flows for the Years Ended December 31, 2006, 2005, and 2004                                                        |  | F-7 
|Notes to Financial Statements                                                                                                         |  | F-8 
|                                                                                                                                      | 
|FUND I AND FUND II TUCKER                                                                                                             |  |     
|Report of Independent Registered Public Accounting Firm  Ernst & Young LLP                                                           |  | F-18
|Statement of Net Assets in Liquidation as of December 31, 2006 (unaudited) and Balance Sheet as of December 31, 2005                  |  | F-19
|Statement of Changes in Net Assets in Liquidation for the Period of July 1, 2006 to December 31, 2006 (unaudited)                     |  | F-20
|Statements of Operations for the Six Months Ended June 30, 2006 (unaudited) and Years Ended December 31, 2005 and 2004                |  | F-21
|Statements of Partners Capital for the Six Months Ended June 30, 2006 (unaudited) and for the Years Ended December 31, 2005 and 2004 |  | F-22
|Statements of Cash Flows for the Six Months Ended June 30, 2006 (unaudited) and the Years Ended December 31, 2005 and 2004            |  | F-23
|Notes to Financial Statements                                                                                                         |  | F-24
|Schedule III  Real Estate and Accumulated Depreciation                                                                               |  | F-30
|                                                                                                                                      | 
|FUND II AND FUND II-OW                                                                                                                |  |     
|Report of Independent Registered Public Accounting Firm  Frazier & Deeter, LLC                                                       |  | F-31
|Report of Independent Registered Public Accounting Firm  Ernst & Young LLP                                                           |  | F-32
|Balance Sheets as of December 31, 2006 and 2005                                                                                       |  | F-33
|Statements of Operations for the Years Ended December 31, 2006, 2005, and 2004                                                        |  | F-34
|Statements of Partners Capital for the Years Ended December 31, 2006, 2005, and 2004                                                 |  | F-35
|Statements of Cash Flows for the Years Ended December 31, 2006, 2005, and 2004                                                        |  | F-36
|Notes to Financial Statements                                                                                                         |  | F-37
|Schedule III  Real Estate and Accumulated Depreciation                                                                               |  | F-45
|                                                                                                                                      | 
|FUND II AND FUND III ASSOCIATES                                                                                                       |  |     
|Report of Independent Registered Public Accounting Firm  Frazier & Deeter, LLC                                                       |  | F-47
|Report of Independent Registered Public Accounting Firm  Ernst & Young LLP                                                           |  | F-48
|Balance Sheets as of December 31, 2006 and 2005                                                                                       |  | F-49
|Statements of Operations for the Years Ended December 31, 2006, 2005, and 2004                                                        |  | F-50
|Statements of Partners Capital for the Years Ended December 31, 2006, 2005, and 2004                                                 |  | F-51
|Statements of Cash Flows for the Years Ended December 31, 2006, 2005, and 2004                                                        |  | F-52
|Notes to Financial Statements                                                                                                         |  | F-53
|Schedule III  Real Estate and Accumulated Depreciation                                                                               |  | F-60



Page F-1



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##### Index to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The General Partners of

Wells Real Estate Fund II-OW

We have
audited the accompanying balance sheet of Wells Real Estate Fund II-OW (the Partnership) as of December 31, 2006, and the related statements of operations, partners capital, and cash flows for the year ended December 31,
2006. 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 audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnerships internal control over financial reporting. Our audit
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnerships
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides 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 Wells Real Estate Fund II-OW as of December 31, 2006, and the results of its
operations and its cash flows for the year ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

/s/    FRAZIER & DEETER, LLC

Atlanta, Georgia

March 26, 2007



Page F-2



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##### Index to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The General Partners of

Wells Real Estate Fund II-OW

We have
audited the accompanying balance sheet of Wells Real Estate Fund II-OW (the Partnership) as of December 31, 2005, and the related statements of operations, partners capital, and cash flows for each of the two years in the
period ended December 31, 2005. 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Partnerships internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnerships
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and 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 Wells Real Estate Fund II-OW at December 31, 2005, and the results of its operations
and its cash flows for each of the two years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles.

/s/    ERNST & YOUNG LLP

Atlanta, Georgia

March 23, 2007



Page F-3



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##### Index to Financial Statements

WELLS REAL ESTATE FUND II-OW

BALANCE SHEETS

DECEMBER 31, 2006 AND 2005

ASSETS



|                                             |  |      |         |      |   |        
|-------------------------------------------- |  | ---- | ------- | ---- | - | -------
|                                             |  | 2006 |         | 2005
|Investment in Fund II and Fund II-OW         |  | $    | 442,125 |      | $ | 593,240
|Due from Fund II and Fund II-OW              |  |      | 187,877 |      |   | 392,134
|Cash and cash equivalents                    |  |      | 5,184   |      |   | 5,184  
|                                             |  |      |         |      |   |        
|Total assets                                 |  | $    | 635,186 |      | $ | 990,558
|                                             |  |      |         |      |   |        
|                                            
|LIABILITIES AND PARTNERS CAPITAL           
|                                             |  |     
|Commitments and contingencies                |  | $    |        |      | $ |       
|                                             |  |     
|Partners capital:                           |  |      |         |      |   |        
|Limited partners:                            |  |      |         |      |   |        
|Class A  6,062 units issued and outstanding |  |      | 635,186 |      |   | 990,432
|Class B  1,626 units issued and outstanding |  |      | 0       |      |   | 126    
|General partners                             |  |      | 0       |      |   | 0      
|                                             |  |      |         |      |   |        
|Total partners capital                      |  |      | 635,186 |      |   | 990,558
|                                             |  |      |         |      |   |        
|Total liabilities and partners capital      |  | $    | 635,186 |      | $ | 990,558
|                                             |  |      |         |      |   |        

See accompanying notes.



Page F-4



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##### Index to Financial Statements

WELLS REAL ESTATE FUND II-OW

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED

DECEMBER 31, 2006, 2005, AND 2004



|                                                  |  |      |          |   |      |   |         |      |  |   |         |  
|------------------------------------------------- |  | ---- | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                  |  | 2006 |          |   | 2005 |   |         | 2004 | 
|EQUITY IN INCOME (LOSS) OF FUND II AND FUND II-OW |  | $    | (30,372  | ) |      | $ | (14,495 | )    |  | $ | 11,533  |  
|                                                  |  |      |         
|EXPENSES:                                         |  |      |          |   |      |   |         |      |  |   |         |  
|General and administrative                        |  |      | 0        |   |      |   | 0       |      |  |   | (272    | )
|                                                  |  |      |         
|INTEREST AND OTHER INCOME                         |  |      | 0        |   |      |   | 0       |      |  |   | 1,121   |  
|                                                  |  |      |          |   |      |   |         |      |  |   |         |  
|NET INCOME (LOSS)                                 |  | $    | (30,372  | ) |      | $ | (14,495 | )    |  | $ | 12,382  |  
|                                                  |  |      |          |   |      |   |         |      |  |   |         |  
|                                                  |  |      |         
|NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS:  |  |      |          |   |      |   |         |      |  |   |         |  
|CLASS A                                           |  | $    | (355,246 | ) |      | $ | 15,722  |      |  | $ | (17,961 | )
|                                                  |  |      |          |   |      |   |         |      |  |   |         |  
|CLASS B                                           |  | $    | 324,874  |   |      | $ | (30,217 | )    |  | $ | 30,343  |  
|                                                  |  |      |          |   |      |   |         |      |  |   |         |  
|                                                  |  |      |         
|NET INCOME (LOSS) PER LIMITED PARTNER UNIT:       |  |      |          |   |      |   |         |      |  |   |         |  
|CLASS A                                           |  | $    | (58.60   | ) |      | $ | 2.59    |      |  | $ | (2.96   | )
|                                                  |  |      |          |   |      |   |         |      |  |   |         |  
|CLASS B                                           |  | $    | 199.80   |   |      | $ | (18.58  | )    |  | $ | 18.66   |  
|                                                  |  |      |          |   |      |   |         |      |  |   |         |  

See accompanying notes.



Page F-5



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##### Index to Financial Statements

WELLS REAL ESTATE FUND II-OW

STATEMENTS OF PARTNERS CAPITAL

FOR THE YEARS ENDED

DECEMBER 31, 2006, 2005, AND 2004



|                                                                                                 |  |                  |  |        |                  |   |                         |       |        |   |          |   |  |   |   |  |   |           |  
|------------------------------------------------------------------------------------------------ |  | ---------------- |  | ------ | ---------------- | - | ----------------------- | ----- | ------ | - | -------- | - |  | - | - |  | - | --------- | -
|                                                                                                 |  | Limited Partners |  |        | General Partners |   | Total Partners Capital |      
|                                                                                                 |  | Class A          |  |        | Class B          |   |                         |      
|                                                                                                 |  | Units            |  | Amount |                  |   | Units                   |       | Amount |   |          |  
|BALANCE, December 31, 2003                                                                       |  | 6,062            |  | $      | 992,671          |   |                         | 1,626 |        | $ | 0        |   |  | $ | 0 |  | $ | 992,671   |  
|                                                                                                 |  |                  |  |        |                  |  
|Net income (loss)                                                                                |  | 0                |  |        | (17,961          | ) |                         | 0     |        |   | 30,343   |   |  |   | 0 |  |   | 12,382    |  
|                                                                                                 |  |                  |  |        |                  |   |                         |       |        |   |          |   |  |   |   |  |   |           |  
|BALANCE, December 31, 2004                                                                       |  | 6,062            |  |        | 974,710          |   |                         | 1,626 |        |   | 30,343   |   |  |   | 0 |  |   | 1,005,053 |  
|                                                                                                 |  |                  |  |        |                  |  
|Net income (loss)                                                                                |  | 0                |  |        | 15,722           |   |                         | 0     |        |   | (30,217  | ) |  |   | 0 |  |   | (14,495   | )
|                                                                                                 |  |                  |  |        |                  |   |                         |       |        |   |          |   |  |   |   |  |   |           |  
|BALANCE, December 31, 2005                                                                       |  | 6,062            |  |        | 990,432          |   |                         | 1,626 |        |   | 126      |   |  |   | 0 |  |   | 990,558   |  
|                                                                                                 |  |                  |  |        |                  |  
|Net income (loss)                                                                                |  | 0                |  |        | (355,246         | ) |                         | 0     |        |   | 324,874  |   |  |   | 0 |  |   | (30,372   | )
|Distributions of net sale proceeds($0.00 and $199.88 per Class A and Class B Unit, respectively) |  | 0                |  |        | 0                |   |                         | 0     |        |   | (325,000 | ) |  |   | 0 |  |   | (325,000  | )
|                                                                                                 |  |                  |  |        |                  |   |                         |       |        |   |          |   |  |   |   |  |   |           |  
|                                                                                                 |  |                  |  |        |                  |  
|BALANCE, December 31, 2006                                                                       |  | 6,062            |  | $      | 635,186          |   |                         | 1,626 |        | $ | 0        |   |  | $ | 0 |  | $ | 635,186   |  
|                                                                                                 |  |                  |  |        |                  |   |                         |       |        |   |          |   |  |   |   |  |   |           |  

See accompanying notes.



Page F-6



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##### Index to Financial Statements

WELLS REAL ESTATE FUND II-OW

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED

DECEMBER 31, 2006, 2005, AND 2004



|                                                                                     |  |      |          |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------------------------ |  | ---- | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                     |  | 2006 |          |   | 2005 |   |         | 2004 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                |  |      |          |   |      |   |         |      |  |   |         |  
|Net income (loss)                                                                    |  | $    | (30,372  | ) |      | $ | (14,495 | )    |  | $ | 12,382  |  
|Adjustments to reconcile net income (loss) to net cash used in operating activities: |  |      |          |   |      |   |         |      |  |   |         |  
|Equity in (income) loss of Fund II and Fund II-OW                                    |  |      | 30,372   |   |      |   | 14,495  |      |  |   | (11,533 | )
|Operating changes in assets and liabilities:                                         |  |      |          |   |      |   |         |      |  |   |         |  
|Decrease in accounts payable and accrued expenses                                    |  |      | 0        |   |      |   | 0       |      |  |   | (871    | )
|                                                                                     |  |      |          |   |      |   |         |      |  |   |         |  
|Net cash used in operating activities                                                |  |      | 0        |   |      |   | 0       |      |  |   | (22     | )
|                                                                                     |  |      |         
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                |  |      |          |   |      |   |         |      |  |   |         |  
|Net sale proceeds received from joint ventures                                       |  |      | 325,000  |   |      |   | 0       |      |  |   | 0       |  
|Contributions to the joint venture                                                   |  |      | 0        |   |      |   | (158    | )    |  |   | (797    | )
|                                                                                     |  |      |          |   |      |   |         |      |  |   |         |  
|Net cash provided by (used in) investing activities                                  |  |      | 325,000  |   |      |   | (158    | )    |  |   | (797    | )
|                                                                                     |  |      |         
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                |  |      |          |   |      |   |         |      |  |   |         |  
|Net sale proceeds distributions paid to limited partners                             |  |      | (325,000 | ) |      |   | 0       |      |  |   | 0       |  
|                                                                                     |  |      |         
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                            |  |      | 0        |   |      |   | (158    | )    |  |   | (819    | )
|                                                                                     |  |      |         
|CASH AND CASH EQUIVALENTS, beginning of year                                         |  |      | 5,184    |   |      |   | 5,342   |      |  |   | 6,161   |  
|                                                                                     |  |      |          |   |      |   |         |      |  |   |         |  
|CASH AND CASH EQUIVALENTS, end of year                                               |  | $    | 5,184    |   |      | $ | 5,184   |      |  | $ | 5,342   |  
|                                                                                     |  |      |          |   |      |   |         |      |  |   |         |  
|                                                                                     |  |      |         
|SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:               |  |      |          |   |      |   |         |      |  |   |         |  
|Due from Fund II and Fund II-OW contributed to Fund II andFund II-OW                 |  | $    | 0        |   |      | $ | 19,886  |      |  | $ | 0       |  
|                                                                                     |  |      |          |   |      |   |         |      |  |   |         |  

See accompanying notes.



Page F-7



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##### Index to Financial Statements

WELLS REAL ESTATE FUND II-OW

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004



|1. | ORGANIZATION AND BUSINESS
|-- | -------------------------

Wells Real Estate Fund II-OW (the
Partnership) is a public limited partnership organized on October 13, 1987 under the laws of the state of Georgia with Leo F. Wells III and Wells Capital, Inc. (Wells Capital), a Georgia corporation, serving as
its general partners (collectively, the General Partners). Wells Capital is a wholly owned subsidiary of Wells Real Estate Funds, Inc. Leo F. Wells, III is the president and sole director of Wells Capital and the president, sole
director, and sole owner of Wells Real Estate Funds, Inc. The Partnership has two classes of limited partnership interests, Class A and Class B Units. 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; and (c) remove a general partner. A majority vote on any of the above-described matters will bind the Partnership,
without the concurrence of the General Partners. Each limited partnership unit has equal voting rights, regardless of class.

On November 6, 1987, the
Partnership commenced a public offering of its limited partnership units pursuant to a Registration Statement filed on Form S-11 under the Securities Act of 1933. The Partnership terminated its offering on September 7, 1988, upon receiving
gross offering proceeds of $1,922,000 for 7,688 Class A and Class B limited partner units at $250 per unit.

The Partnership owns interests in all of
its real estate assets through its interest in Fund II and Fund II-OW, a joint venture between the Partnership and Wells Real Estate Fund II. Fund II and Fund II-OW owns interests in real estate assets both directly and through joint ventures with
other entities affiliated with the General Partners. During the periods presented, the Partnership owned interests in the following joint ventures (the Joint Ventures) and properties:



|                                                                         |  |                                                                                                  |  |                                                                                        
|------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------ |  | ---------------------------------------------------------------------------------------
|Joint Venture                                                            |  | Joint Venture Partners                                                                           |  | Properties                                                                             
|Fund II and Fund II-OW                                                   |  |   Wells Real Estate Fund II   Wells Real Estate Fund II-OW                                     |  | 1. Louis Rose Building A two-story office building located in Charlotte, North Carolina
|Fund I and Fund II Tucker                                                |  |   Wells Real Estate Fund I   Fund II and Fund II-OW                                            |  | 2. Heritage Place(1) A commercial office complex located in
Tucker, Georgia            
|Fund II and Fund III Associates (Fund II-III Associates)               |  |   Fund II and Fund II-OW   Wells Real Estate Fund III, L.P.                                    |  | 3. Boeing at the Atrium A four-story office building located in Houston, Texas         
|                                                                         |  |                                                                                                  |  | 4. Brookwood Grill(2) A restaurant located in Fulton County,
Georgia                   
|Fund II, III, VI and VII Associates (Fund II-III-VI-VII Associates)(3) |  |   Fund II-III Associates   Wells Real Estate Fund VI, L.P.   Wells Real Estate Fund VII, L.P. |  | 5. Holcomb Bridge Property(2) An office/retail center located
in Roswell, Georgia      



| | (1) | The retail portion of this property (approximately 30%) was sold in April 2003, and the remaining
office component of this property was sold in May 2006.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | These properties were sold in July 2004.
| | --- | ----------------------------------------



| | (3) | Fund II-III-VI-VII Associates was liquidated in 2006.
| | --- | -----------------------------------------------------



Page F-8



---

##### Index to Financial Statements

Wells Real Estate Fund II, Wells Real Estate Fund III, L.P., Wells Real Estate Fund VI, L.P., and Wells Real Estate
Fund VII, L.P. are affiliated with the Partnership through one or more common general partners. Each of the properties described above was acquired on an all-cash basis.



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------

Basis of
Presentation

The Partnerships financial statements are prepared in accordance with U.S. generally accepted accounting principles
(GAAP).

Use of Estimates

The preparation
of the Partnerships financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, and expenses and related disclosures of contingent assets and
liabilities in the financial statements and accompanying notes. Actual results could differ from those estimates.

Investment in Fund II and Fund II-OW

The Partnership has evaluated the Joint Ventures and concluded that none are variable-interest entities under the provisions of Financial Accounting
Standards Board Interpretation (FIN) No. 46(R), Consolidation of Variable Interest Entities, which supersedes FIN No. 46 and is an interpretation of Accounting Research Bulletin (ARB) No. 51,
Consolidated Financial Statements. The Partnership does not have control over the operations of Fund II and Fund II-OW; however, it does exercise significant influence. Approval by 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, upon applying the provisions of Statement of Financial Accounting Standard (SFAS)
No. 94, Consolidation of All Majority-Owned Subsidiaries, ARB No. 51, and Statement of Position No. 78-9, Accounting for Investments In Real Estate Ventures, the Partnership accounts for its investments in Fund II and
Fund II-OW 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. Pursuant to the terms of the joint
venture agreements, all income (loss) and distributions are allocated to joint venture partners in accordance with their respective ownership interests. Distributions of net cash from operations, if available, are generally distributed to the joint
venture partners on a quarterly basis.

Cash and Cash Equivalents

The Partnership considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents include cash and short-term investments. Short-term
investments are stated at cost, which approximates fair value, and consist of investments in money market accounts.

Distribution of Net Cash from
Operations

Net cash from operations, if available, is generally distributed to limited partners quarterly. In accordance with the partnership
agreement, such distributions are paid first to each limited partner holding Class A Units until he has received an 8% per annum return on his adjusted capital contributions, as defined. Net cash from operations is then distributed to each
limited partner holding Class B Units until he has received an 8% per annum return on his adjusted capital contributions, as defined. Any excess net cash from operations would then be distributed to the General Partners until they have received
10% of the total distributions for the year. Thereafter, net cash from operations is distributed 90% to limited partners and 10% to the General Partners.



Page F-9



---

##### Index to Financial Statements

Distribution of Net Sale Proceeds

Under the terms of the partnership agreement, as amended effective January 1, 2000, after satisfying all debts and liabilities and establishing such reserves as the General Partners in their sole discretion deem
reasonable necessary, net sale proceeds from the sale of the Partnerships properties, unless reserved, are to be distributed to partners in the following order:



| |  |  | To limited partners holding Class B Units until they have received an amount equal to the net cash available for distribution previously received by limited
partners holding Class A Units on a per-unit basis;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | To all limited partners on a per-unit basis until limited partners have received 100% of their respective net capital contributions, as defined in the partnership
agreement, plus a cumulative 12% per annum return on their respective net capital contributions (less the sum of all prior distributions to such limited partner); and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Thereafter, 85% to the limited partners on a per-unit basis and 15% to the General Partners.
| | - |  | --------------------------------------------------------------------------------------------

Allocations of Net Income, Net Loss, and Gain on Sale

For the
purpose of determining allocations per the partnership agreement, net income is defined as net income recognized by the Partnership, excluding deductions for depreciation, amortization, cost recovery, interest expense, and the gain on the sale of
assets. Net income, as defined, of the Partnership will be allocated each year in the same proportions that net cash from operations is distributed to the 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, and amortization deductions for each
fiscal year will be allocated as follows: (a) 99% to the limited partners holding Class B 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 as follows: (a) first, to partners having negative capital accounts, if any, until all negative capital accounts have been restored to zero; (b) then, to the limited partners in proportion to
and to the extent of the excess of (i) each limited partners adjusted capital contribution, plus a cumulative 12% per annum return on his adjusted capital contribution, less the sum of all prior distributions of cash flow from
operations previously made to such limited partner, over (ii) such limited partners capital account balance as of the sale date, subject to the requirement to initially allocate gain on sale to limited partners holding Class B Units until
they have been allocated an amount equal to the net from operations previously received by limited partners holding Class A Units on a per-unit basis; (c) then, to the General Partners in proportion to and to the extent of the excess of
(i) each general partners adjusted capital contribution, over (ii) such general partners capital account balance as of the sale date; and (d) thereafter, 85% to the limited partners and 15% to the General Partners.

Income Taxes

The Partnership is not subject to
federal or state income taxes; therefore, none have been provided for in the accompanying financial statements. The partners are required to include their respective shares of profits and losses in their individual income tax returns.

Impairment of Real Estate Assets

The Partnership continually
monitors events and changes in circumstances that could indicate that the carrying amounts of the real estate assets owned through the Partnerships investment in the Joint Ventures may not be recoverable. When indicators of potential
impairment are present, management assesses whether the respective



Page F-10



---

##### Index to Financial Statements

carrying values will be recovered with the undiscounted future operating cash flows expected from the use of the asset and its eventual disposition for
assets held for use, or with the estimated fair values for assets held for sale. In the event that the expected undiscounted future cash flows for assets held for use or the estimated fair value, less costs to sell, for assets held for sale do not
exceed the respective asset carrying value, management adjusts such assets to the respective estimated fair values, as defined by SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, and recognizes an impairment
loss. Estimated fair values are calculated based on the following information, dependent upon availability, in order of preference: (i) recently quoted market prices, (ii) market prices for comparable properties, or (iii) the present
value of undiscounted cash flows, including estimated salvage value.

Reclassifications

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

Recent Accounting Pronouncements

In September 2006, the Financial
Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value, and expands disclosures required for fair value measurements under
GAAP, including amending SFAS No. 144. SFAS No. 157 emphasizes that fair value is a market-based measurement, as opposed to an entity-specific measurement. SFAS No. 157 will be effective for the Partnership beginning January 1, 2008.
The Partnership is currently assessing provisions and evaluating the financial impact of SFAS No. 157 on its financial statements, however, does not believe the adoption of this pronouncement will have a material impact on its financial
statements.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 108, Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year
misstatements for the purpose of a materiality assessment. SAB No. 108 is effective for fiscal years ending after November 15, 2006, and is effective for the Partnership for the year ended December 31, 2006. The adoption of this
pronouncement has not had a material impact on the Partnerships financial statements.

In July 2006, the FASB issued FIN No. 48, Accounting
for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, which clarifies the relevant criteria and approach for the recognition, derecognition, and measurement of uncertain tax positions. FIN No. 48 will be
effective for the Partnership beginning January 1, 2007. The Partnership is currently assessing provisions and evaluating the financial impact of FIN No. 48 on its financial statements, however, does not believe the adoption of this
pronouncement will have a material impact on its financial statements.

In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error
Corrections, which replaces Accounting Principles Board Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the method to account for
and report changes in accounting principles and corrections of errors. Previously, most voluntary changes in accounting principles required recognition as a cumulative effect adjustment to net income during the period in which the change was
adopted. Conversely, in circumstances where applicable accounting guidance does not include specific transition provisions, SFAS No. 154 requires retrospective application to prior periods financial statements unless it is impractical to
determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for fiscal years beginning after December 15, 2005; however, it does not change the transition provisions of any of the existing
accounting pronouncements. The adoption of this pronouncement has not had a material impact on the Partnerships financial statements.



Page F-11



---

##### Index to Financial Statements

|3. | INVESTMENT IN JOINT VENTURES
|-- | ----------------------------

Summary of
Investments

The Partnerships investment and approximate ownership percentage in Fund II and Fund II-OW as of December 31, 2006 and 2005 are
summarized below:



|                       |  |        |         |                       |    |        |   |                       |  |   
|---------------------- |  | ------ | ------- | --------------------- | -- | ------ | - | --------------------- |  | --
|                       |  | 2006   |         | 2005                 
|                       |  | Amount |         | ApproximatePercentage |    | Amount |   | ApproximatePercentage
|Fund II and Fund II-OW |  | $      | 442,125 |                       | 5% |        | $ | 593,240               |  | 5%
|                       |  |        |         |                       |    |        |   |                       |  |   

Fund II and Fund II-OWs investment and approximate ownership percentages in the Joint Ventures as of
December 31, 2006 and 2005, are summarized below:



|                          |  |        |           |                       |     |        |   |                       |  |    
|------------------------- |  | ------ | --------- | --------------------- | --- | ------ | - | --------------------- |  | ---
|                          |  | 2006   |           | 2005                 
|                          |  | Amount |           | ApproximatePercentage |     | Amount |   | ApproximatePercentage
|Fund I and Fund II Tucker |  | $      | 0         |                       | 48% |        | $ | 2,330,394             |  | 48%
|Fund II-III Associates(1) |  |        | 4,005,310 |                       | 63% |        |   | 4,462,407             |  | 63%
|                          |  |        |           |                       |     |        |   |                       |  |    
|                          |  | $      | 4,005,310 |                       |     |        | $ | 6,792,801             |  |    
|                          |  |        |           |                       |     |        |   |                       |  |    



| | (1) | Includes Fund II-III
Associates approximate 23% equity interest in Fund II-III-VI-VII Associates of $0 and $20,935 as of December 31, 2006 and December 31, 2005, respectively.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Summary of Activities

Roll-forwards of the Partnerships
investment in Fund II and Fund II-OW for the years ended December 31, 2006 and 2005, are presented below:



|                                                             |  |      |          |   |      |   |         |  
|------------------------------------------------------------ |  | ---- | -------- | - | ---- | - | ------- | -
|                                                             |  | 2006 |          |   | 2005 |  
|Investment in Fund II and Fund II-OW, beginning of year      |  | $    | 593,240  |   |      | $ | 599,836 |  
|Equity in loss of Fund II and Fund II-OW                     |  |      | (30,372  | ) |      |   | (14,495 | )
|Contribution to Fund II and Fund II-OW                       |  |      | 0        |   |      |   | 158     |  
|(Distributions from) contributions to Fund II and Fund II-OW |  |      | (120,743 | ) |      |   | 7,741   |  
|                                                             |  |      |          |   |      |   |         |  
|Investment in Fund II and Fund II-OW, end of year            |  | $    | 442,125  |   |      | $ | 593,240 |  
|                                                             |  |      |          |   |      |   |         |  

Roll-forwards of the Fund II and Fund II-OWs investment in joint ventures for the years ended
December 31, 2006 and 2005 are presented below:



|                                                |  |      |            |   |      |   |           |  
|----------------------------------------------- |  | ---- | ---------- | - | ---- | - | --------- | -
|                                                |  | 2006 |            |   | 2005 |  
|Investment in joint ventures, beginning of year |  | $    | 6,792,801  |   |      | $ | 6,767,613 |  
|Equity in income (loss) of Joint Ventures       |  |      | (279,674   | ) |      |   | 215,586   |  
|Contribution to Joint Ventures                  |  |      | 43,912     |   |      |   | 374,494   |  
|Distributions from Joint Ventures               |  |      | (2,551,729 | ) |      |   | (564,892  | )
|                                                |  |      |            |   |      |   |           |  
|Investment in joint ventures, end of year       |  | $    | 4,005,310  |   |      | $ | 6,792,801 |  
|                                                |  |      |            |   |      |   |           |  



Page F-12



---

##### Index to Financial Statements

Summary of Financial Information

Condensed financial information for Fund II and Fund II-OW as of December 31, 2006 and 2005 and for the years ended December 31, 2005, and 2004, is presented below:



|                       |  |                           |            |                               |   |                           |  |      |           |      |   |           |  |   |           |  |   |           
|---------------------- |  | ------------------------- | ---------- | ----------------------------- | - | ------------------------- |  | ---- | --------- | ---- | - | --------- |  | - | --------- |  | - | ----------
|                       |  | Total Assets December 31, |            | Total LiabilitiesDecember 31, |   | Total Equity December 31,
|                       |  | 2006                      |            | 2005                          |   | 2006                      |  | 2005 |           | 2006 |   | 2005     
|Fund II and Fund II-OW |  | $                         | 11,749,772 |                               | $ | 18,602,157                |  | $    | 3,426,236 |      | $ | 7,430,038 |  | $ | 8,323,536 |  | $ | 11,172,119
|                       |  |                           |            |                               |   |                           |  |      |           |      |   |           |  |   |           |  |   |           



|                       |  |                                  |         |                                  |   |         |  |      |        |  |      |          |   |      |   |          |   |  |   |        
|---------------------- |  | -------------------------------- | ------- | -------------------------------- | - | ------- |  | ---- | ------ |  | ---- | -------- | - | ---- | - | -------- | - |  | - | -------
|                       |  | Total Revenues                   |         | Net Income (Loss)(1)            
|                       |  | For the Years Ended December 31, |         | For the Years Ended December 31,
|                       |  | 2006                             |         | 2005                             |   | 2004    |  | 2006 |        |  | 2005 |          |   | 2004
|Fund II and Fund II-OW |  | $                                | 367,395 |                                  | $ | 242,334 |  | $    | 60,803 |  | $    | (571,996 | ) |      | $ | (272,968 | ) |  | $ | 217,186
|                       |  |                                  |         |                                  |   |         |  |      |        |  |      |          |   |      |   |          |   |  |   |        



| | (1) | Effective July 1, 2004,
Fund II and Fund II-OW extended the weighted-average composite useful life for all building assets from 25 years to 40 years, which resulted in an increase to Fund II and Fund II-OW net income for the year ended December 31, 2004 of
approximately $112,422. Management believes that this change more appropriately reflects the estimated useful lives of real estate assets and is consistent with prevailing industry practice.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Impairment of Real Estate Assets

Fund I and Fund II Tucker
reevaluated the recoverability of the carrying value of Heritage Place pursuant to the Partnerships policy for evaluating and accounting for the impairment of real estate assets described above. Fund I and Fund II Tucker determined that the
carrying value of the related real estate assets of Heritage Place was not recoverable as compared to the estimated fair value, primarily as a result of reducing the estimated holding period of such assets. Accordingly, Fund I and Fund II Tucker
reduced the carrying value of such real estate assets to the estimated fair value by recognizing an impairment loss of approximately $795,000 in the first quarter of 2006, of which approximately $20,000 is allocable to the Partnership. This
impairment loss is included in income (loss) from discontinued operations from Fund I and Fund II Tucker for the year ended December 31, 2006 in the table below.

Effective July 1, 2006, the first day of the quarter following the completion of the sale of all real estate assets, Fund I and Fund II Tucker adopted the liquidation basis of accounting, under which assets and liabilities are stated
at their estimated net realizable values and net settlement amounts, respectively, and statements of operations and statements of cash flows are no longer presented. Accordingly, condensed financial information for the Fund I and Fund II Tucker as
of December 31, 2006 and 2005 and for the six months ended June 30, 2006 and the years ended December 31, 2005 and 2004 is presented below:



|                          |  |                          |        |                               |   |                                            |  |                           |        |                  |   |        |  |   |   |  |   |          
|------------------------- |  | ------------------------ | ------ | ----------------------------- | - | ------------------------------------------ |  | ------------------------- | ------ | ---------------- | - | ------ |  | - | - |  | - | ---------
|                          |  | Total AssetsDecember 31, |        | Total LiabilitiesDecember 31, |   | Total Net Assets inLiquidationDecember 31, |  | Total Equity December 31,
|                          |  | (Unaudited) 2006         |        | 2005                          |   | (Unaudited) 2006                           |  | 2005                      |        | (Unaudited) 2006 |   | 2005  
|Fund I and Fund II Tucker |  | $                        | 27,852 |                               | $ | 4,934,963                                  |  | $                         | 27,852 |                  | $ | 89,061 |  | $ | 0 |  | $ | 4,845,902
|                          |  |                          |        |                               |   |                                            |  |                           |        |                  |   |        |  |   |   |  |   |          



Page F-13



---

##### Index to Financial Statements

|                          |  |                                             |       |                                 |   |                                             |                                  |      |                                 |             |      |                                             |   |      |                                 |        |      |                                             |   |         |                                 |  |      |          |   |      |   |         |      |  |   |         |   |  |   |          |   |  |   |         |   |  |   |         |  
|------------------------- |  | ------------------------------------------- | ----- | ------------------------------- | - | ------------------------------------------- | -------------------------------- | ---- | ------------------------------- | ----------- | ---- | ------------------------------------------- | - | ---- | ------------------------------- | ------ | ---- | ------------------------------------------- | - | ------- | ------------------------------- |  | ---- | -------- | - | ---- | - | ------- | ---- |  | - | ------- | - |  | - | -------- | - |  | - | ------- | - |  | - | ------- | -
|                          |  | Total Revenues                              |       | Loss FromContinuing Operations  |   |                                             | Loss FromDiscontinued Operations |      |                                 | Net Loss(1) |     
|                          |  | (Unaudited) For the Six
MonthsEndedJune 30, |       | For the Years EndedDecember 31, |   | (Unaudited) For the Six
MonthsEndedJune 30, |                                  |      | For the Years EndedDecember 31, |             |      | (Unaudited) For the Six
MonthsEndedJune 30, |   |      | For the Years EndedDecember 31, |        |      | (Unaudited) For the Six
MonthsEndedJune 30, |   |         | For the Years EndedDecember 31, | 
|                          |  | 2006                                        |       | 2005                            |   | 2004                                        |                                  | 2006 |                                 |             | 2005 |                                             |   | 2004 |                                 |        | 2006 |                                             |   | 2005    |                                 |  | 2004 |          |   | 2006 |   |         | 2005 |  |   | 2004    |  
|Fund I and Fund II Tucker |  | $                                           | 2,189 |                                 | $ | 3,227                                       |                                  | $    | 8                               |             | $    | (10,804                                     | ) |      | $                               | (4,937 | )    |                                             | $ | (20,502 | )                               |  | $    | (810,142 | ) |      | $ | (56,298 | )    |  | $ | (12,438 | ) |  | $ | (820,946 | ) |  | $ | (61,235 | ) |  | $ | (32,940 | )
|                          |  |                                             |       |                                 |   |                                             |                                  |      |                                 |             |      |                                             |   |      |                                 |        |      |                                             |   |         |                                 |  |      |          |   |      |   |         |      |  |   |         |   |  |   |          |   |  |   |         |   |  |   |         |  



| | (1) | Effective July 1, 2004, Fund I and Fund II Tucker extended the weighted-average composite useful
life for all building assets from 25 years to 40 years, which resulted in decrease to net loss for year ended December 31, 2004 of approximately $49,200. Management believes that this change more appropriately reflects the estimated useful
lives of real estate assets and is consistent with prevailing industry practice.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Condensed financial information for Fund II-III
Associates as of December 31, 2006 and 2005 and for the years ended December 31, 2006, 2005, and 2004 is presented below:



|                       |  |                           |           |                                |   |                           |  |      |         |      |   |         |  |   |           |  |   |          
|---------------------- |  | ------------------------- | --------- | ------------------------------ | - | ------------------------- |  | ---- | ------- | ---- | - | ------- |  | - | --------- |  | - | ---------
|                       |  | Total Assets December 31, |           | Total Liabilities December 31, |   | Total Equity December 31,
|                       |  | 2006                      |           | 2005                           |   | 2006                      |  | 2005 |         | 2006 |   | 2005   
|Fund II-III Associates |  | $                         | 6,846,531 |                                | $ | 7,486,280                 |  | $    | 563,744 |      | $ | 487,318 |  | $ | 6,282,787 |  | $ | 6,998,962
|                       |  |                           |           |                                |   |                           |  |      |         |      |   |         |  |   |           |  |   |          



|                       |  |                                 |           |                                  |   |                                          |  |                                 |           |      |   |         |  |      |         |      |   |         |      |   |       |  |      |        |      |  |   |         |  |   |         |  |   |         |  |   |          
|---------------------- |  | ------------------------------- | --------- | -------------------------------- | - | ---------------------------------------- |  | ------------------------------- | --------- | ---- | - | ------- |  | ---- | ------- | ---- | - | ------- | ---- | - | ----- |  | ---- | ------ | ---- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | ---------
|                       |  | Total Revenues                  |           | Income FromContinuing Operations |   | Income (Loss)From DiscontinuedOperations |  | Net Income(1)                  
|                       |  | For the Years EndedDecember 31, |           | For the Years EndedDecember 31,  |   | For the Years EndedDecember 31,          |  | For the Years EndedDecember 31,
|                       |  | 2006                            |           | 2005                             |   | 2004                                     |  | 2006                            |           | 2005 |   | 2004    |  | 2006 |         | 2005 |   |         | 2004 |   | 2006  |  | 2005 |        | 2004
|Fund II-III Associates |  | $                               | 1,850,141 |                                  | $ | 1,839,204                                |  | $                               | 1,779,150 |      | $ | 201,921 |  | $    | 390,933 |      | $ | 667,930 |      | $ | 4,349 |  | $    | (6,388 | )    |  | $ | 863,986 |  | $ | 206,270 |  | $ | 384,545 |  | $ | 1,531,916
|                       |  |                                 |           |                                  |   |                                          |  |                                 |           |      |   |         |  |      |         |      |   |         |      |   |       |  |      |        |      |  |   |         |  |   |         |  |   |         |  |   |          



| | (1) | Effective July 1, 2004,
Fund II-III Associates extended the weighted-average composite useful life for all building assets from 25 years to 40 years, which resulted in increase to net income for year ended December 31, 2004 of approximately $144,200. Management
believes that this change more appropriately reflects the estimated useful lives of real estate assets and is consistent with prevailing industry practice.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Fund II-III-VI-VII Associates wound up its affairs by, among other things, collecting the outstanding receivables, satisfying outstanding payables, and distributing all residual cash balances to the joint venture
partners. Fund II-III-VI-VII Associates was terminated in 2006 in accordance with the relevant dissolution and termination provisions of the Georgia Uniform Partnership Act.

Condensed financial information for the joint venture in which the Partnership holds an interest through its ownership in Fund II-III Associates for the years ended December 31, 2006, 2005, and 2004, is
presented below:



|                              |  |                                 |   |                                 |   |      |                                     |      |                                 |      |   |   |      |   |        |      |  |      |         |      |  |      |   |      |   |        |  |   |           |  |   |   |  |   |        |  |   |          
|----------------------------- |  | ------------------------------- | - | ------------------------------- | - | ---- | ----------------------------------- | ---- | ------------------------------- | ---- | - | - | ---- | - | ------ | ---- |  | ---- | ------- | ---- |  | ---- | - | ---- | - | ------ |  | - | --------- |  | - | - |  | - | ------ |  | - | ---------
|                              |  | Total Revenues                  |   | Loss From ContinuingOperations  |   |      | Income From Discontinued Operations |      | Net Income                     
|                              |  | For the Years EndedDecember 31, |   | For the Years EndedDecember 31, |   |      | For the Years EndedDecember 31,     |      | For the Years EndedDecember 31,
|                              |  | 2006                            |   | 2005                            |   | 2004 |                                     | 2006 |                                 | 2005 |   |   | 2004 |   |        | 2006 |  | 2005 |         | 2004 |  | 2006 |   | 2005 |   | 2004  
|Fund II-III-VI-VII Associates |  | $                               | 0 |                                 | $ | 0    |                                     | $    | 0                               |      | $ | 0 |      | $ | (4,799 | )    |  | $    | (23,811 | )    |  | $    | 0 |      | $ | 94,148 |  | $ | 2,090,607 |  | $ | 0 |  | $ | 89,349 |  | $ | 2,066,796
|                              |  |                                 |   |                                 |   |      |                                     |      |                                 |      |   |   |      |   |        |      |  |      |         |      |  |      |   |      |   |        |  |   |           |  |   |   |  |   |        |  |   |          

The Partnership allocates its share of earnings generated by the properties owned by the Joint Ventures to its
Class A and Class B limited partners pursuant to the partnership agreement provisions outlined in Note 2 for net income, net loss, and gain on sale, respectively. The components of income (loss) from discontinued operations recognized by
the Joint Ventures results are provided below:



|                          |  |                                                    |        |   |                                      |   |          |                                      |  |   |        |   |  |               |          |   |             |   |         |   |  |               |   |  |             |         |       |  |   |         |   |  |   |   |  |   |         |  
|------------------------- |  | -------------------------------------------------- | ------ | - | ------------------------------------ | - | -------- | ------------------------------------ |  | - | ------ | - |  | ------------- | -------- | - | ----------- | - | ------- | - |  | ------------- | - |  | ----------- | ------- | ----- |  | - | ------- | - |  | - | - |  | - | ------- | -
|                          |  | (Unaudited) For the Six Months Ended June 30, 2006 |        |   | For the Year Ended December 31, 2005 |   |          | For the Year Ended December 31, 2004 | 
|                          |  | OperatingLoss                                      |        |   | ImpairmentLoss                       |   |          | Loss on Sale                         |  |   | Total  |   |  | OperatingLoss |          |   | Gain onSale |   | Total   |   |  | OperatingLoss |   |  | Gain onSale |         | Total | 
|Fund I and Fund II Tucker |  | $                                                  | (6,097 | ) |                                      | $ | (794,812 | )                                    |  | $ | (9,233 | ) |  | $             | (810,142 | ) |             | $ | (56,298 | ) |  | $             | 0 |  | $           | (56,298 | )     |  | $ | (12,438 | ) |  | $ | 0 |  | $ | (12,438 | )
|                          |  |                                                    |        |   |                                      |   |          |                                      |  |   |        |   |  |               |          |   |             |   |         |   |  |               |   |  |             |         |       |  |   |         |   |  |   |   |  |   |         |  



Page F-14



---

##### Index to Financial Statements

|                              |  |                                      |       |                                      |   |       |                                      |               |       |  |             |         |   |       |   |         |                 |  |             |        |       |  |   |         |  |   |           |  |   |          
|----------------------------- |  | ------------------------------------ | ----- | ------------------------------------ | - | ----- | ------------------------------------ | ------------- | ----- |  | ----------- | ------- | - | ----- | - | ------- | --------------- |  | ----------- | ------ | ----- |  | - | ------- |  | - | --------- |  | - | ---------
|                              |  | For the Year Ended December 31, 2006 |       | For the Year Ended December 31, 2005 |   |       | For the Year Ended December 31, 2004
|                              |  | OperatingIncome                      |       | Gain onSale                          |   | Total |                                      | OperatingLoss |       |  | Gain onSale |         |   | Total |   |         | OperatingIncome |  | Gain onSale |        | Total
|Fund II-III Associates        |  | $                                    | 4,349 |                                      | $ | 0     |                                      | $             | 4,349 |  | $           | (6,388  | ) |       | $ | 0       |                 |  | $           | (6,388 | )     |  | $ | 92,841  |  | $ | 771,145   |  | $ | 863,986  
|Fund II-III-VI-VII Associates |  |                                      | 0     |                                      |   | 0     |                                      |               | 0     |  |             | (6,038  | ) |       |   | 100,186 | (1)             |  |             | 94,148 |       |  |   | 217,207 |  |   | 1,873,400 |  |   | 2,090,607
|                              |  |                                      |       |                                      |   |       |                                      |               |       |  |             |         |   |       |   |         |                 |  |             |        |       |  |   |         |  |   |           |  |   |          
|                              |  | $                                    | 4,349 |                                      | $ | 0     |                                      | $             | 4,349 |  | $           | (12,426 | ) |       | $ | 100,186 |                 |  | $           | 87,760 |       |  | $ | 310,048 |  | $ | 2,644,545 |  | $ | 2,954,593
|                              |  |                                      |       |                                      |   |       |                                      |               |       |  |             |         |   |       |   |         |                 |  |             |        |       |  |   |         |  |   |           |  |   |          



| | (1) | Represents additional gain recognized on the sale of the Holcomb Bridge Property, which was deferred
at closing and represented our maximum estimated exposure related to a rental guarantee for certain space at the Holcomb Bridge Property.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. | RELATED-PARTY TRANSACTIONS
|-- | --------------------------

Management and Leasing Fees

In accordance with the property management and leasing agreement, Wells Management Company, Inc. (Wells Management), an affiliate of
the General Partners, is entitled to compensation for the management and leasing of the Partnerships properties owned through Fund II and Fund II-OW equal to (a) of the gross revenues collected monthly, 3% for management services and 3%
for leasing services, plus a separate fee for the one-time 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, which is assessed periodically based on market studies, or (b) in the case of commercial properties leased on a long-term net basis (ten or more years), 1% of the gross revenues except for initial leasing fees equal
to 3% of the gross revenues over the first five years of the lease term. Management and leasing fees are paid by the Joint Ventures and, accordingly, included in equity in income (loss) of Fund II and Fund II-OW in the accompanying statements of
operations. The Partnerships share of management and leasing fees and lease acquisition costs incurred through the Joint Ventures that are payable to Wells Management and its affiliates is $4,387, $5,055, and $5,883 for the years ended
December 31, 2006, 2005, and 2004, respectively.

Administrative Reimbursements

Wells Capital, one of the General Partners, and Wells Management perform certain administrative services for the Partnership, relating to accounting and other partnership administration, and incur the related
expenses. Such expenses are allocated among various other entities affiliated with the General Partners based on time spent on each fund by individual administrative personnel. In the opinion of the General Partners, this allocation is a reasonable
estimation of such expenses. The administrative charges related to the Partnership are recorded by Fund II and Fund II-OW and, therefore, included in equity in income (loss) of Fund II and Fund II-OW in the accompanying statements of operations. The
Partnerships share of administrative costs reimbursed to Wells Capital and Wells Management recorded by Fund II and Fund II-OW is $7,520, $9,539, and $8,838 for the years ended December 31, 2006, 2005, and 2004, respectively.



|5. | PER-UNIT AMOUNTS
|-- | ----------------

Income (loss) per limited partnership unit
amounts are calculated based upon weighted-average units outstanding during the respective periods. Income (loss) per limited partnership unit, as presented in the accompanying financial statements, will vary from the per-unit amounts attributable
to the individual investors due to the differences between the GAAP and tax basis treatment of certain items of income and expense and the fact that, within the respective classes of Class A Units and Class B Units, individual units have
different characteristics including capital bases, cumulative operating and net property sales proceeds distributions, and cumulative earnings allocations as a result of, among other things, the timing of when the limited partners were admitted into
the Partnership.



Page F-15



---

##### Index to Financial Statements

|6. | INCOME TAX BASIS NET INCOME AND PARTNERS CAPITAL
|-- | -------------------------------------------------

A
reconciliation of the Partnerships financial statement net income (loss) to net income (loss) presented in accordance with the Federal Income Tax basis of accounting is as follows for the years ended December 31, 2006, 2005, and 2004:



|                                                                                                                           |  |      |         |   |      |   |         |      |  |   |        |    
|-------------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------ | ---
|                                                                                                                           |  | 2006 |         |   | 2005 |   |         | 2004 | 
|Financial statement net income (loss)                                                                                      |  | $    | (30,372 | ) |      | $ | (14,495 | )    |  | $ | 12,382 |    
|Increase (decrease) in net income resulting from:                                                                          |  |      |         |   |      |   |         |      |  |   |        |    
|Amortization expense for financial reporting purposes less than amounts for income tax purposes                            |  |      | (126    | ) |      |   | (126    | )    |  |   | (422   | )  
|Bad debt expenses (recoveries) for financial reporting purposes in excess of amounts of income tax purposes                |  |      | 147     |   |      |   | (348    | )    |  |   | 647    |    
|Depreciation expense for financial reporting purposes greater than amounts for income tax purposes                         |  |      | 907     |   |      |   | 1,145   |      |  |   | 12,366 | (1)
|Expenses deductible when paid for income tax purposes in excess of amounts accrued for financial reporting purposes        |  |      | 0       |   |      |   | (4,382  | )    |  |   | (4,382 | )  
|Rental income financial reporting purposes (greater than) less than amounts for income tax purposes                        |  |      | (1,646  | ) |      |   | 2,213   |      |  |   | 6,026  |    
|Gains/losses on sale of properties for financial reporting purposes in excess of/less than amounts for income tax purposes |  |      | (27,958 | ) |      |   | (845    | )    |  |   | (9,075 | )  
|Other (Includes meals and entertainment)                                                                                   |  |      | 3,522   |   |      |   | (1,035  | )    |  |   | (1,546 | )  
|                                                                                                                           |  |      |         |   |      |   |         |      |  |   |        |    
|Income tax basis net income (loss)                                                                                         |  | $    | (55,526 | ) |      | $ | (17,873 | )    |  | $ | 15,996 |    
|                                                                                                                           |  |      |         |   |      |   |         |      |  |   |        |    



| | (1) | Effective July 1, 2004,
the Joint Ventures extended the weighted-average composite useful lives for all building assets from 25 years to 40 years. This change has no impact on the statutory life used for Federal income tax purposes of 40 years, upon which tax depreciation
is based (see Note 2).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

A reconciliation of the partners capital balances, as presented in the accompanying financial
statements, to partners capital balances, as presented in accordance with the Federal Income Tax basis of accounting, is as follows for the years ended December 31, 2006, 2005, and 2004:



|                                                                                                                             |  |      |           |   |      |   |           |      |  |   |           |  
|---------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                                                                                                             |  | 2006 |           |   | 2005 |   |           | 2004 | 
|Financial statement partners capital                                                                                        |  | $    | 635,186   |   |      | $ | 990,558   |      |  | $ | 1,005,053 |  
|Increase (decrease) in partners capital resulting from:                                                                     |  |      |           |   |      |   |           |      |  |   |           |  
|Accumulated amortization expense for financial reporting purposes in excess of amounts for income tax purposes               |  |      | 118       |   |      |   | 244       |      |  |   | 370       |  
|Accumulated bad debt expense, net, for financial reporting purposes in excess of amounts for income tax purposes             |  |      | 5,016     |   |      |   | 4,869     |      |  |   | 5,217     |  
|Accumulated depreciation expense for financial reporting purposes in excess of amounts for income tax purposes               |  |      | 267,179   |   |      |   | 266,272   |      |  |   | 265,127   |  
|Joint venture change in ownership                                                                                            |  |      | (1,427    | ) |      |   | (1,427    | )    |  |   | (1,427    | )
|Accumulated expenses deductible when paid for income tax purposes less than amounts accrued for financial reporting purposes |  |      | 12,964    |   |      |   | 12,964    |      |  |   | 17,346    |  
|Accumulated rental income accrued for financial reporting less than (greater than) amounts for income tax purposes           |  |      | 6,425     |   |      |   | 8,071     |      |  |   | 5,858     |  
|Accumulated gains on sale of properties for financial reporting purposes greater than amounts for income tax purposes        |  |      | (92,205   | ) |      |   | (64,247   | )    |  |   | (63,402   | )
|Section 734 Adjustment  Class B Partners step up in basis                                                                  |  |      | 231,457   |   |      |   | 0         |      |  |   | 0         |  
|Other (includes meals and entertainment)                                                                                     |  |      | (2,036    | ) |      |   | (5,559    | )    |  |   | (4,524    | )
|                                                                                                                             |  |      |           |   |      |   |           |      |  |   |           |  
|Income tax basis partners capital                                                                                           |  | $    | 1,062,677 |   |      | $ | 1,211,745 |      |  | $ | 1,229,618 |  
|                                                                                                                             |  |      |           |   |      |   |           |      |  |   |           |  



Page F-16



---

##### Index to Financial Statements

|7. | QUARTERLY RESULTS (UNAUDITED)
|-- | -----------------------------

Presented below is a summary of the
unaudited quarterly financial information for the years ended December 31, 2006 and 2005:



|                                                            |  |                     |         |   |         |   |        |              |  |   |             |   |  |   |           |  
|----------------------------------------------------------- |  | ------------------- | ------- | - | ------- | - | ------ | ------------ |  | - | ----------- | - |  | - | --------- | -
|                                                            |  | 2006 Quarters Ended |        
|                                                            |  | March 31            |         |   | June 30 |   |        | September 30 |  |   | December 31 |  
|Equity in loss of Fund II and Fund II-OW                    |  | $                   | (23,100 | ) |         | $ | (1,492 | )            |  | $ | (1,203      | ) |  | $ | (4,577    | )
|Net loss                                                    |  | $                   | (23,100 | ) |         | $ | (1,492 | )            |  | $ | (1,203      | ) |  | $ | (4,577    | )
|Net income (loss) allocated to limited partners:            |  |                     |         |   |         |   |        |              |  |   |             |   |  |   |           |  
|Class A                                                     |  | $                   | (22,974 | ) |         | $ | (1,492 | )            |  | $ | (1,203      | ) |  | $ | (329,577  | )
|Class B                                                     |  | $                   | (126    | ) |         | $ | 0      |              |  | $ | 0           |   |  | $ | 325,000   |  
|Net income (loss) per limited partner unit outstanding:     |  |                     |         |   |         |   |        |              |  |   |             |   |  |   |           |  
|Class A(a)                                                  |  |                     | $(3.79  | ) |         |   | $(0.25 | )            |  |   | $(0.20      | ) |  |   | $ (54.37  | )
|Class B                                                     |  |                     | $(0.08  | ) |         |   | $ 0.00 |              |  |   | $ 0.00      |   |  |   | $199.88   |  
|Net sales proceeds distributions per limited partners unit: |  |                     |         |   |         |   |        |              |  |   |             |   |  |   |           |  
|Class A                                                     |  |                     | $ 0.00  |   |         |   | $ 0.00 |              |  |   | $ 0.00      |   |  |   | $    0.00 |  
|Class B                                                     |  |                     | $ 0.00  |   |         |   | $ 0.00 |              |  |   | $ 0.00      |   |  |   | $199.88   |  
|                                                            | 
|                                                            |  | 2005 Quarters Ended |        
|                                                            |  | March 31            |         |   | June 30 |   |        | September 30 |  |   | December 31 |  
|Equity in loss of Fund II and Fund II-OW                    |  | $                   | (2,040  | ) |         | $ | (2,608 | )            |  | $ | (8,072      | ) |  | $ | (1,775    | )
|                                                            |  |                     |         |   |         |   |        |              |  |   |             |   |  |   |           |  
|Net loss                                                    |  | $                   | (2,040  | ) |         | $ | (2,608 | )            |  | $ | (8,072      | ) |  | $ | (1,775    | )
|                                                            |  |                     |         |   |         |   |        |              |  |   |             |   |  |   |           |  
|Net income (loss) allocated to limited partners:            |  |                     |         |   |         |   |        |              |  |   |             |   |  |   |           |  
|Class A                                                     |  | $                   | 5,493   |   |         | $ | 4,230  |              |  | $ | 0           |   |  | $ | 5,999     |  
|Class B                                                     |  | $                   | (7,533  | ) |         | $ | (6,838 | )            |  | $ | (8,072      | ) |  | $ | (7,774    | )
|Net income (loss) per limited partner unit outstanding:     |  |                     |         |   |         |   |        |              |  |   |             |   |  |   |           |  
|Class A(a)                                                  |  |                     | $ 0.91  |   |         |   | $ 0.70 |              |  |   | $ 0.00      |   |  |   | $ 0.99    |  
|Class B                                                     |  |                     | $(4.63  | ) |         |   | $(4.21 | )            |  |   | $(4.96      | ) |  |   | $(4.78    | )



| | (a) | The sum of the four quarterly amounts does not equal the respective annual amount presented in the
accompanying financial statements due to rounding.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------



Page F-17



---

##### Index to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The General Partners of

Fund I and Fund II Tucker:

We have audited the accompanying balance sheet of
Fund I and Fund II Tucker (the Joint Venture) as of December 31, 2005, and the related statements of operations, partners capital, and cash flows for each of the two years in the period ended December 31, 2005. Our audits
also included the financial statement schedule as of December 31, 2005 and for each of the two years in the period then ended listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Joint
Ventures management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our
audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. We were not engaged to perform an audit of the Joint Ventures internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Joint Ventures internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and 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 Fund I and Fund II Tucker at December 31, 2005, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2005, in conformity
with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the
information set forth therein.

/S/    ERNST &
YOUNG LLP

Atlanta, Georgia

March 20, 2007



Page F-18



---

##### Index to Financial Statements

FUND I AND FUND II TUCKER

STATEMENT OF NET ASSETS IN LIQUIDATION

AS OF DECEMBER 31, 2006 (unaudited)

AND

BALANCE SHEET

AS OF DECEMBER 31, 2005

ASSETS



|                                                                                                                          |  |                  |        |      |   |          
|------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------ | ---- | - | ---------
|                                                                                                                          |  | 2006 (unaudited) |        | 2005
|Real estate assets, at cost:                                                                                              |  |                  |        |      |   |          
|Land                                                                                                                      |  | $                | 0      |      | $ | 2,292,078
|Building and improvements, less accumulated depreciation of $0 and $3,893,808 at December 31, 2006 and 2005, respectively |  |                  | 0      |      |   | 2,440,873
|                                                                                                                          |  |                  |        |      |   |          
|Total real estate assets                                                                                                  |  |                  | 0      |      |   | 4,732,951
|                                                                                                                          |  |                 
|Cash and cash equivalents                                                                                                 |  |                  | 20,498 |      |   | 43,935   
|Tenant receivables, net                                                                                                   |  |                  | 0      |      |   | 68,286   
|Deferred leasing costs, net                                                                                               |  |                  | 0      |      |   | 51,913   
|Due from joint venture partners                                                                                           |  |                  | 4,260  |      |   | 0        
|Other assets                                                                                                              |  |                  | 3,094  |      |   | 37,878   
|                                                                                                                          |  |                  |        |      |   |          
|Total assets                                                                                                              |  | $                | 27,852 |      | $ | 4,934,963
|                                                                                                                          |  |                  |        |      |   |          
|                                                                                                                         
|LIABILITIES AND PARTNERS CAPITAL                                                                                        
|Liabilities:                                                                                                              |  |                  |        |      |   |          
|Accounts payable, accrued expenses, and refundable security deposits                                                      |  | $                | 26,288 |      | $ | 86,752   
|Due to affiliate                                                                                                          |  |                  | 1,564  |      |   | 2,309    
|                                                                                                                          |  |                  |        |      |   |          
|Total liabilities                                                                                                         |  |                  | 27,852 |      |   | 89,061   
|                                                                                                                          |  |                  |        |      |   |          
|Total net assets in liquidation                                                                                           |  | $                | 0      |      |   | 0        
|                                                                                                                          |  |                  |        |      |   |          
|Partners capital:                                                                                                        |  |                  |        |      |   |          
|Wells Real Estate Fund I                                                                                                  |  |                  |        |      |   | 2,515,508
|Fund II and Fund II-OW                                                                                                    |  |                  |        |      |   | 2,330,394
|                                                                                                                          |  |                  |        |      |   |          
|Total partners capital                                                                                                   |  |                  |        |      |   | 4,845,902
|                                                                                                                          |  |                  |        |      |   |          
|Total liabilities and partners capital                                                                                   |  |                  |        |      | $ | 4,934,963
|                                                                                                                          |  |                  |        |      |   |          

See accompanying notes.



Page F-19



---

##### Index to Financial Statements

FUND I AND FUND II TUCKER

STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION

FOR THE PERIOD OF JULY 1, 2006 TO

DECEMBER 31, 2006 (unaudited)



|                                                      |  |                  |         |  
|----------------------------------------------------- |  | ---------------- | ------- | -
|                                                      |  | 2006 (unaudited) |        
|Balance, July 1, 2006                                 |  | $                | 3,776   |  
|Changes in net assets in liquidation attributable to: |  |                  |         |  
|Net loss                                              |  |                  | (33,976 | )
|Contributions from joint venture partners             |  |                  | 30,200  |  
|                                                      |  |                  |         |  
|Balance, December 31, 2006                            |  | $                | 0       |  
|                                                      |  |                  |         |  

See accompanying notes.



Page F-20



---

##### Index to Financial Statements

FUND I AND FUND II TUCKER

STATEMENTS OF OPERATIONS



|                                    |  |                                            |          |   |                         |      |         |   |  |   |         |  
|----------------------------------- |  | ------------------------------------------ | -------- | - | ----------------------- | ---- | ------- | - |  | - | ------- | -
|                                    |  | Six Months Ended June 30, 2006 (unaudited) |          |   | Year Ended December 31, |     
|                                    |  |                                            | 2005     |   |                         | 2004 |        
|REVENUES:                           |  |                                            |          |   |                         |      |         |   |  |   |         |  
|Interest and other income           |  | $                                          | 2,189    |   |                         | $    | 3,227   |   |  | $ | 8       |  
|                                    |  |                                            |         
|EXPENSES:                           |  |                                            |          |   |                         |      |         |   |  |   |         |  
|General and administrative          |  |                                            | 12,993   |   |                         |      | 8,164   |   |  |   | 20,510  |  
|                                    |  |                                            |          |   |                         |      |         |   |  |   |         |  
|NET LOSS FROM CONTINUING OPERATIONS |  |                                            | (10,804  | ) |                         |      | (4,937  | ) |  |   | (20,502 | )
|                                    |  |                                            |         
|DISCONTINUED OPERATIONS:            |  |                                            |          |   |                         |      |         |   |  |   |         |  
|Operating loss                      |  |                                            | (6,097   | ) |                         |      | (56,298 | ) |  |   | (12,438 | )
|Impairment loss                     |  |                                            | (794,812 | ) |                         |      | 0       |   |  |   | 0       |  
|Loss on disposition                 |  |                                            | (9,233   | ) |                         |      | 0       |   |  |   | 0       |  
|                                    |  |                                            |          |   |                         |      |         |   |  |   |         |  
|Loss from discontinued operations   |  |                                            | (810,142 | ) |                         |      | (56,298 | ) |  |   | (12,438 | )
|                                    |  |                                            |          |   |                         |      |         |   |  |   |         |  
|NET LOSS                            |  | $                                          | (820,946 | ) |                         | $    | (61,235 | ) |  | $ | (32,940 | )
|                                    |  |                                            |          |   |                         |      |         |   |  |   |         |  

See accompanying notes.



Page F-21



---

##### Index to Financial Statements

FUND I AND FUND II TUCKER

STATEMENTS OF PARTNERS CAPITAL

FOR THE SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)

AND FOR THE YEARS ENDED DECEMBER 31, 2005 AND 2004



|                                   |  |                         |            |   |                        |   |            |                         |  |   |            |  
|---------------------------------- |  | ----------------------- | ---------- | - | ---------------------- | - | ---------- | ----------------------- |  | - | ---------- | -
|                                   |  | Wells RealEstate Fund I |            |   | Fund II and Fund II-OW |   |            | Total Partners Capital | 
|                                   |  |                         |           
|BALANCE, DECEMBER 31, 2003         |  | $                       | 2,263,584  |   |                        | $ | 2,120,186  |                         |  | $ | 4,383,770  |  
|                                   |  |                         |           
|Net loss                           |  |                         | (17,099    | ) |                        |   | (15,841    | )                       |  |   | (32,940    | )
|Partnership distributions          |  |                         | (36,180    | ) |                        |   | (56,694    | )                       |  |   | (92,874    | )
|                                   |  |                         |            |   |                        |   |            |                         |  |   |            |  
|BALANCE, DECEMBER 31, 2004         |  |                         | 2,210,305  |   |                        |   | 2,047,651  |                         |  |   | 4,257,956  |  
|                                   |  |                         |           
|Net loss                           |  |                         | (31,787    | ) |                        |   | (29,448    | )                       |  |   | (61,235    | )
|Partnership distributions          |  |                         | (67,252    | ) |                        |   | (62,303    | )                       |  |   | (129,555   | )
|Partnership contributions          |  |                         | 404,242    |   |                        |   | 374,494    |                         |  |   | 778,736    |  
|                                   |  |                         |            |   |                        |   |            |                         |  |   |            |  
|BALANCE, DECEMBER 31, 2005         |  |                         | 2,515,508  |   |                        |   | 2,330,394  |                         |  |   | 4,845,902  |  
|                                   |  |                         |           
|Net loss                           |  |                         | (426,153   | ) |                        |   | (394,793   | )                       |  |   | (820,946   | )
|Partnership distributions          |  |                         | (2,100,373 | ) |                        |   | (1,945,807 | )                       |  |   | (4,046,180 | )
|Partnership contributions          |  |                         | 12,978     |   |                        |   | 12,022     |                         |  |   | 25,000     |  
|                                   |  |                         |            |   |                        |   |            |                         |  |   |            |  
|                                   |  |                         |           
|BALANCE, JUNE 30, 2006 (UNAUDITED) |  | $                       | 1,960      |   |                        | $ | 1,816      |                         |  | $ | 3,776      |  
|                                   |  |                         |            |   |                        |   |            |                         |  |   |            |  

See accompanying notes.



Page F-22



---

##### Index to Financial Statements

FUND I AND FUND II TUCKER

STATEMENTS OF CASH FLOWS



|                                                                                          |  |                                            |            |   |                         |      |          |   |  |   |          |  
|----------------------------------------------------------------------------------------- |  | ------------------------------------------ | ---------- | - | ----------------------- | ---- | -------- | - |  | - | -------- | -
|                                                                                          |  | Six Months Ended June 30, 2006 (unaudited) |            |   | Year Ended December 31, |     
|                                                                                          |  |                                            | 2005       |   |                         | 2004 |         
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                     |  |                                            |            |   |                         |      |          |   |  |   |          |  
|Net loss                                                                                  |  | $                                          | (820,946   | ) |                         | $    | (61,235  | ) |  | $ | (32,940  | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                                            |            |   |                         |      |          |   |  |   |          |  
|Impairment loss                                                                           |  |                                            | 794,812    |   |                         |      | 0        |   |  |   | 0        |  
|Loss on sale                                                                              |  |                                            | 9,233      |   |                         |      | 0        |   |  |   | 0        |  
|Depreciation                                                                              |  |                                            | 34,850     |   |                         |      | 204,670  |   |  |   | 244,673  |  
|Amortization of deferred leasing costs                                                    |  |                                            | 8,119      |   |                         |      | 19,694   |   |  |   | 19,083   |  
|Lease termination expense                                                                 |  |                                            | 2,609      |   |                         |      | 0        |   |  |   | 0        |  
|Operating changes in assets and liabilities:                                              |  |                                            |            |   |                         |      |          |   |  |   |          |  
|Decrease in tenant receivables, net                                                       |  |                                            | 13,831     |   |                         |      | 3,386    |   |  |   | 4,176    |  
|Increase in other assets                                                                  |  |                                            | (38        | ) |                         |      | (22      | ) |  |   | (6,186   | )
|(Decrease) increase in accounts payable and accrued expenses                              |  |                                            | (18,352    | ) |                         |      | 16,178   |   |  |   | 10,937   |  
|Increase (decrease) in due to affiliate                                                   |  |                                            | 708        |   |                         |      | (780,584 | ) |  |   | 21,271   |  
|Decrease deferred income                                                                  |  |                                            | 0          |   |                         |      | (6,667   | ) |  |   | (15,951  | )
|                                                                                          |  |                                            |            |   |                         |      |          |   |  |   |          |  
|Net cash provided by (used in) operating activities                                       |  |                                            | 24,826     |   |                         |      | (604,579 | ) |  |   | 245,063  |  
|                                                                                          |  |                                            |           
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                     |  |                                            |            |   |                         |      |          |   |  |   |          |  
|Net proceeds from the sale of real estate                                                 |  |                                            | 4,028,983  |   |                         |      | 0        |   |  |   | 0        |  
|Investment in real estate                                                                 |  |                                            | (30,590    | ) |                         |      | (47,726  | ) |  |   | (135,220 | )
|Payment of deferred leasing costs                                                         |  |                                            | (9,262     | ) |                         |      | (7,079   | ) |  |   | (54,794  | )
|                                                                                          |  |                                            |            |   |                         |      |          |   |  |   |          |  
|Net cash provided by (used in) investing activities                                       |  |                                            | 3,989,131  |   |                         |      | (54,805  | ) |  |   | (190,014 | )
|                                                                                          |  |                                            |           
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                     |  |                                            |            |   |                         |      |          |   |  |   |          |  
|Operating distributions to joint venture partners in excess of accumulated earnings       |  |                                            | (17,197    | ) |                         |      | (158,123 | ) |  |   | (96,160  | )
|Net sale proceeds distributions to joint venture partners                                 |  |                                            | (4,028,983 | ) |                         |      | 0        |   |  |   | 0        |  
|Contributions from joint venture partners                                                 |  |                                            | 25,000     |   |                         |      | 778,736  |   |  |   | 0        |  
|                                                                                          |  |                                            |            |   |                         |      |          |   |  |   |          |  
|Net cash (used in) provided by financing activities                                       |  |                                            | (4,021,180 | ) |                         |      | 620,613  |   |  |   | (96,160  | )
|                                                                                          |  |                                            |           
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                                 |  |                                            | (7,223     | ) |                         |      | (38,771  | ) |  |   | (41,111  | )
|                                                                                          |  |                                            |           
|CASH AND CASH EQUIVALENTS, beginning of period                                            |  |                                            | 43,935     |   |                         |      | 82,706   |   |  |   | 123,817  |  
|                                                                                          |  |                                            |            |   |                         |      |          |   |  |   |          |  
|CASH AND CASH EQUIVALENTS, end of period                                                  |  | $                                          | 36,712     |   |                         | $    | 43,935   |   |  | $ | 82,706   |  
|                                                                                          |  |                                            |            |   |                         |      |          |   |  |   |          |  
|                                                                                          |  |                                            |           
|SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:                    |  |                                            |            |   |                         |      |          |   |  |   |          |  
|Partnership distributions payable                                                         |  | $                                          | 0          |   |                         | $    | 0        |   |  | $ | 28,568   |  
|                                                                                          |  |                                            |            |   |                         |      |          |   |  |   |          |  
|Write-off of fully amortized deferred leasing costs                                       |  | $                                          | 0          |   |                         | $    | 25,182   |   |  | $ | 0        |  
|                                                                                          |  |                                            |            |   |                         |      |          |   |  |   |          |  

See accompanying notes.



Page F-23



---

##### Index to Financial Statements

FUND I AND FUND II TUCKER

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006 (UNAUDITED), 2005, AND 2004



|1. | ORGANIZATION AND BASIS OF PRESENTATION
|-- | --------------------------------------

Organization

During 1986, Wells Real Estate Fund I (Fund I) and Fund II and Fund II-OW entered into a Georgia general partnership to create Fund I
and Fund II Tucker (the Joint Venture). Fund II and Fund II-OW is a joint venture between Wells Real Estate Fund II (Fund II) and Wells Real Estate Fund II-OW (Fund II-OW). The general partners of Fund I, Fund II,
and Fund II-OW are Leo F. Wells, III and Wells Capital, Inc. (Wells Capital).

The Joint Venture was formed to acquire and operate commercial
real properties, including properties to be developed, currently under development or construction, newly constructed or having operating histories. The Joint Venture owned a 100% interest in Heritage Place, which originally consisted of a retail
shopping and commercial office complex located in Tucker, Georgia.

On April 7, 2003, the Joint Venture sold the retail portion of Heritage Place,
which comprises approximately 30% of the total premises to an unrelated third party for a gross selling price of $3,400,000. As a result of this sale, the Joint Venture received net proceeds of approximately $3,208,000 and recognized a gain of
$293,000.

On May 10, 2006, the Joint Venture sold the office component of Heritage Place to an unrelated third party for a gross sale price of
$4,215,000. As a result of the sale, the Joint Venture received net sale proceeds of approximately $4,029,000. As of March 31, 2006, the Joint Venture recognized an impairment loss of approximately $795,000 to reduce the carrying value of
Heritage Place to its estimated fair value, less costs to sell, and recognized an additional loss on sale of approximately $9,000.

As of December 31,
2006, the Joint Venture has disposed of all of its real estate assets and does not intend to invest in additional properties. The Joint Venture intends to wind up its affairs by, among other things, collecting the outstanding receivables, satisfying
outstanding payables, and distributing any residual cash balances to the joint venture partners.

Basis of Presentation

As of December 31, 2006, the Joint Venture has disposed of all of its real estate assets and does not intend to invest in additional properties. The Joint Venture
intends to wind up its affairs by, among other things, collecting the outstanding receivables, satisfying outstanding payables, and distributing all residual cash balances to the joint venture partners.

The Joint Ventures financial statements are prepared in accordance with U.S. generally accepted accounting principles (GAAP). Effective July 1,
2006, the first day of the quarter following the completion of the sale of all real estate assets, the Joint Venture adopted the liquidation basis of accounting, under which assets and liabilities are stated at their estimated net realizable values
and net settlement amounts, respectively, and statements of operations and statements of cash flows are no longer presented.



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------

Use of Estimates

The preparation of the Joint Ventures financial statements in conformity with GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosures of contingent assets and liabilities in the financial statements and accompanying notes. Actual results could differ from those estimates.



Page F-24



---

##### Index to Financial Statements

Revenue Recognition

The Joint Ventures leases typically include renewal options, escalation provisions and provisions requiring tenants to reimburse the Joint Venture for a pro-rata share of operating costs incurred. All of the Joint Ventures
leases are classified as operating leases, and the related rental income, including scheduled rental rate increases (other than scheduled increases based on the Consumer Price Index) is recognized on a straight-line basis over the terms of the
respective leases. Rents and tenant reimbursements collected in advance are recorded as deferred income in the accompanying balance sheet.

Lease
termination income is recognized when the tenant loses the right to lease the space and the Joint Venture has satisfied all obligations under the related lease or lease termination agreement.

The Joint Venture records the sale of real estate assets pursuant to the provisions of Statement of Financial Accounting Standards (SFAS) No. 66,
Accounting for Sales of Real Estate. Accordingly, gains are recognized upon completing the sale and, among other things, determining the sale price and transferring all of the risks and rewards of ownership without significant continuing
involvement with the seller. Recognition of all or a portion of the gain would be deferred until both of these conditions are met. Losses are recognized in full as of the sale date.

Real Estate Assets

Real estate assets are stated at cost, less accumulated depreciation. Amounts capitalized to real
estate assets consist of the cost of acquisition or construction, and any tenant improvements or major improvements and betterments which extend the useful life of the related asset. We consider the period of future benefit of the asset to determine
the appropriate useful lives. These assessments have a direct impact on net income. Upon receiving notification of a tenants intention to terminate a lease, undepreciated tenant improvements are written off to lease termination expense. All
repairs and maintenance are expensed as incurred.

The estimated useful lives of the Joint Ventures real estate assets by class are provided below:



|                      |  |                                       
|--------------------- |  | --------------------------------------
|Buildings             |  | 40 years                              
|Building improvements |  | 5-25 years                            
|Land improvements     |  | 20 years                              
|Tenant Improvements   |  | Shorter of lease term or economic life

Management continually monitors events and changes in circumstances that could indicate that the carrying amounts
of the real estate assets owned by the Joint Venture may not be recoverable. When indicators of potential impairment are present, management assesses whether the respective carrying values will be recovered with the undiscounted future operating
cash flows expected from the use of the asset and its eventual disposition for assets held for use, or with the estimated fair values, less costs to sell, for assets held for sale. In the event that the expected undiscounted future cash flows for
assets held for use or the estimated fair value, less costs to sell, for assets held for sale do not exceed the respective asset carrying value, management adjusts such assets to the respective estimated fair values, as defined by SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, and recognizes an impairment loss. Estimated fair values are calculated based on the following information, dependent upon availability, in order of preference: (i) recently
quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated salvage value. In the first quarter of 2006, the Joint Venture recognized an impairment loss of
approximately $795,000 in order to reduce the carrying value of the office component of Heritage Place to its fair value, less costs to sell, as a result of a change in managements intended holding period for this asset.

In the third quarter of 2004, the Joint Venture completed a review of its real estate depreciation by performing an analysis of the components of each property type in
an effort to determine weighted-average composite useful



Page F-25



---

##### Index to Financial Statements

lives of its real estate assets. As a result of this review, the Joint Venture changed its estimate of the weighted-average composite useful lives for all
building assets. Effective July 1, 2004, for all building assets, the Joint Venture extended the weighted-average composite useful life from 25 years to 40 years. The change resulted in an increase to net income of approximately $49,246 for the
year ended December 31, 2004. We believe the change more appropriately reflects the estimated useful lives of the building assets and is consistent with prevailing industry practice.

Cash and Cash Equivalents

The Joint Venture considers all highly
liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents include cash and short-term investments. Short-term investments are stated at cost, which approximates fair value, and consist of
investments in money market accounts.

Tenant Receivables, net

Tenant receivables are comprised of tenant receivables and straight-line rent receivables. Tenant receivables were recorded at the original amount earned, less an allowance for any doubtful accounts, which approximates fair value.
Allowances of $2,290 and $20,220 are included in tenant receivables as of December 31, 2006 and 2005, respectively.

Deferred Leasing Costs, net

Deferred leasing costs reflect costs incurred to procure operating leases, which are capitalized and amortized on a straight-line basis over the terms
of the related leases. Upon receiving notification of a tenants intention to terminate a lease, unamortized deferred leasing costs are written off to lease termination expense. Deferred leasing costs include accumulated amortization of $0 and
$43,274 as of December 31, 2006 and 2005, respectively.

Due from joint venture partners

Due from joint venture partners reflect obligations from Fund I and Fund II and Fund II-OW resulting from the Joint Ventures deficit balance.

Other Assets

Other assets as of
December 31, 2006 and 2005 are comprised of the following items:



|                             |  |                  |       |      |   |       
|---------------------------- |  | ---------------- | ----- | ---- | - | ------
|                             |  | 2006 (unaudited) |       | 2005
|Refundable security deposits |  | $                | 0     |      | $ | 31,671
|Prepaid property insurance   |  |                  | 2,854 |      |   | 1,606 
|Miscellaneous                |  |                  | 240   |      |   | 4,601 
|                             |  |                  |       |      |   |       
|Total                        |  | $                | 3,094 |      | $ | 37,878
|                             |  |                  |       |      |   |       

Refundable security deposits represent cash deposits received from tenants. Pursuant to the respective leases, the
Joint Venture may apply such balances towards unpaid receivable balances or property damages, where applicable, or is obligated to refund such balances to the tenants upon the expiration of the related lease term. Prepaid property insurance is
recognized in the period in which the coverage is provided. Balances without a future economic benefit are written off as they are identified.

Allocation of Income and Distributions

Pursuant to the terms of the joint venture agreement, income and distributions are allocated to the
joint venture partners based upon their respective ownership interests as determined by relative cumulative capital



Page F-26



---

##### Index to Financial Statements

contributions, as defined. For the periods presented, Fund I and Fund II and Fund II-OW held ownership interests in the Joint Venture of approximately 52%
and 48%, respectively. Net cash from operations is generally distributed to the joint venture partners on a quarterly basis.

Income Taxes

The Joint Venture is not subject to federal or state income taxes; therefore, none have been provided for in the accompanying financial statements. The
partners of Fund I and Fund II and Fund II-OW are required to include their respective share of profits and losses from the Joint Venture in their individual income tax returns.

Reclassifications

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

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value, and
expands disclosures required for fair value measurements under GAAP, including amending SFAS No. 144. SFAS No. 157 emphasizes that fair value is a market-based measurement, as opposed to an entity-specific measurement. SFAS No. 157 will be
effective for the Joint Venture beginning January 1, 2008. The Joint Venture is currently assessing provisions and evaluating the financial impact of SFAS No. 157 on its financial statements, however, does not believe the adoption of this
pronouncement will have a material impact on its financial statements.

In September 2006, the Securities and Exchange Commission issued Staff Accounting
Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, which provides interpretive guidance on the consideration of the effects of
prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB No. 108 is effective for fiscal years ending after November 15, 2006, and is effective for the Joint Venture for the year
ended December 31, 2006. The adoption of this pronouncement has not had a material impact on the Joint Ventures financial statements.

In July
2006, the FASB issued Financial Accounting Standards Board Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, which clarifies the relevant criteria and
approach for the recognition, derecognition, and measurement of uncertain tax positions. FIN No. 48 will be effective for the Joint Venture beginning January 1, 2007. The Joint Venture is currently assessing provisions and evaluating the
financial impact of FIN No. 48 on its financial statements, however, does not believe the adoption of this pronouncement will have a material impact on its financial statements.

In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, which replaces Accounting Principles Board Opinion No. 20, Accounting Changes, and SFAS No. 3,
Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the method to account for and report changes in accounting principles and corrections of errors. Previously, most voluntary changes in accounting
principles required recognition as a cumulative effect adjustment to net income during the period in which the change was adopted. Conversely, in circumstances where applicable accounting guidance does not include specific transition provisions,
SFAS No. 154 requires retrospective application to prior periods financial statements unless it is impractical to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for
fiscal years beginning after December 15, 2005; however, it does not change the transition provisions of any of the existing accounting pronouncements. The adoption of this pronouncement has not had a material impact on the Joint Ventures
financial statements.



Page F-27



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##### Index to Financial Statements

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

Management and Leasing Fees

Fund I, Fund II, and Fund II-OW entered into property management and leasing agreements with Wells Management Company, Inc. (Wells
Management), an affiliate of their general partners. In accordance with the property management and leasing agreement, Wells Management receives compensation for the management and leasing of the Joint Ventures properties, the Joint
Venture will generally pay Wells Management fees equal to (a) of the gross revenues collected monthly, 3% for management services and 3% for leasing services, plus a separate fee for the one-time 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, which is assessed periodically based on market studies, or (b) in the
case of commercial properties which are leased on a long-term net basis (ten or more years), 1% of the gross revenues, except for initial leasing fees equal to 3% of the gross revenues over the first five years of the lease term.

From March 1987 through December 2004, Wells Management elected to defer the receipt of management and leasing fees and initial lease-up costs due from the Joint
Venture. As of December 31, 2004, the Joint Venture owed aggregate management and leasing fees to Wells Management of $778,736, which was paid in 2005. The Joint Venture began paying management and leasing fees to Wells Management from current
operating cash flow in the first quarter of 2005. During the six months ended June 30, 2006 and for the years ended December 31, 2005 and 2004, the Joint Venture incurred management and leasing fees that are payable to Wells Management and
its affiliates of $16,521, $43,586, and $45,494, respectively, all of which are included in loss from discontinued operations in the accompanying statements of operations.

Administration Reimbursements

Wells Management and its affiliates perform certain administrative services for the
Joint Venture, relating to accounting, property management, and other partnership administration, and incur the related expenses. Such expenses are allocated among these entities based on time spent on each entity by individual personnel. During
2006, 2005, and 2004, the Joint Venture reimbursed $26,485, $39,777, and $41,834, respectively, to Wells Management and its affiliates for these services, portions of which are included in loss from discontinued operations.

Due to Affiliate

As of December 31, 2006 and December 31,
2005, due to affiliate balances reflect amounts due to Wells Management for the following items:



|                              |  |                  |       |      |   |      
|----------------------------- |  | ---------------- | ----- | ---- | - | -----
|                              |  | 2006 (unaudited) |       | 2005
|Property management fees      |  | $                | 0     |      | $ | 620  
|Administrative reimbursements |  |                  | 1,564 |      |   | 1,689
|                              |  |                  |       |      |   |      
|                              |  | $                | 1,564 |      | $ | 2,309
|                              |  |                  |       |      |   |      



Page F-28



---

##### Index to Financial Statements

|4. | DISCONTINUED OPERATIONS
|-- | -----------------------

In accordance with SFAS No. 144, the
Joint Venture has classified the results of operations related to the office component of Heritage Place, which was sold on May 10, 2006, as discontinued operations in the accompanying statements of operations. The details comprising loss from
discontinued operations are presented below:



|                                  |  |                                            |          |   |                         |      |         |   |  |   |         |  
|--------------------------------- |  | ------------------------------------------ | -------- | - | ----------------------- | ---- | ------- | - |  | - | ------- | -
|                                  |  | Six Months Ended June 30, 2006 (unaudited) |          |   | Year Ended December 31, |     
|                                  |  |                                            | 2005     |   |                         | 2004 |        
|Rental income                     |  | $                                          | 224,094  |   |                         | $    | 683,121 |   |  | $ | 705,784 |  
|Tenant reimbursements             |  |                                            | 5,395    |   |                         |      | 19,186  |   |  |   | 1,133   |  
|Bad debt recoveries               |  |                                            | 0        |   |                         |      | 0       |   |  |   | 4,923   |  
|Interest and other income         |  |                                            | 0        |   |                         |      | 16      |   |  |   | 4,331   |  
|                                  |  |                                            |          |   |                         |      |         |   |  |   |         |  
|Total property revenues           |  |                                            | 229,489  |   |                         |      | 702,323 |   |  |   | 716,171 |  
|                                  |  |                                            |         
|Property operating costs          |  |                                            | 132,869  |   |                         |      | 409,388 |   |  |   | 355,693 |  
|Management and leasing fees       |  |                                            | 15,569   |   |                         |      | 41,172  |   |  |   | 43,383  |  
|Depreciation                      |  |                                            | 34,850   |   |                         |      | 204,670 |   |  |   | 244,673 |  
|Amortization                      |  |                                            | 8,119    |   |                         |      | 19,694  |   |  |   | 19,083  |  
|Lease termination expense         |  |                                            | 2,609    |   |                         |      | 0       |   |  |   | 0       |  
|General and administrative        |  |                                            | 41,570   |   |                         |      | 83,697  |   |  |   | 65,777  |  
|                                  |  |                                            |          |   |                         |      |         |   |  |   |         |  
|Total expenses                    |  |                                            | 235,586  |   |                         |      | 758,621 |   |  |   | 728,609 |  
|                                  |  |                                            |          |   |                         |      |         |   |  |   |         |  
|                                  |  |                                            |         
|Operating loss                    |  |                                            | (6,097   | ) |                         |      | (56,298 | ) |  |   | (12,438 | )
|Impairment loss                   |  |                                            | (794,812 | ) |                         |      | 0       |   |  |   | 0       |  
|Loss on disposition               |  |                                            | (9,233   | ) |                         |      | 0       |   |  |   | 0       |  
|                                  |  |                                            |          |   |                         |      |         |   |  |   |         |  
|Loss from discontinued operations |  | $                                          | (810,142 | ) |                         | $    | (56,298 | ) |  | $ | (12,438 | )
|                                  |  |                                            |          |   |                         |      |         |   |  |   |         |  



Page F-29



---

##### Index to Financial Statements

SCHEDULE III  REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2006 (UNAUDITED)



|                                         |  |      |            |   |                          |   |            |  
|---------------------------------------- |  | ---- | ---------- | - | ------------------------ | - | ---------- | -
|                                         |  | Cost |            |   | Accumulated Depreciation |  
|BALANCE AT DECEMBER 31, 2004             |  | $    | 8,579,033  |   |                          | $ | 3,689,138  |  
|                                         |  |     
|Additions                                |  |      | 47,726     |   |                          |   | 204,670    |  
|                                         |  |      |            |   |                          |   |            |  
|BALANCE AT DECEMBER 31, 2005             |  |      | 8,626,759  |   |                          |   | 3,893,808  |  
|                                         |  |     
|Additions                                |  |      | 30,590     |   |                          |   | 34,850     |  
|Dispositions                             |  |      | (7,862,537 | ) |                          |   | (3,928,658 | )
|Impairments(1)                           |  |      | (794,812   | ) |                          |   | 0          |  
|                                         |  |      |            |   |                          |   |            |  
|BALANCE AT DECEMBER 31, 2006 (UNAUDITED) |  | $    | 0          |   |                          | $ | 0          |  
|                                         |  |      |            |   |                          |   |            |  



| | (1) | As of March 31, 2006, Fund I and Fund II Tucker wrote down the basis of the office component of
Heritage Place to approximate a recently contracted sale price as a result of reducing the intended holding period.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Page F-30



---

##### Index to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The General Partners of

Fund II and Fund II-OW:

We have audited
the accompanying balance sheet of Fund II and Fund II-OW (the Joint Venture) as of December 31, 2006, and the related statements of operations, partners capital, and cash flows for the year ended December 31, 2006. Our
audit also included the financial statement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Joint Ventures management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Joint
Ventures internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Joint Ventures internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides 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 Fund II and
Fund II-OW as of December 31, 2006, and the results of its operations and its cash flows for the year ended December 31, 2006, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/    FRAZIER & DEETER, LLC

Atlanta, Georgia

March 26, 2007



Page F-31



---

##### Index to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The General Partners of

Fund II and Fund II-OW:

We have audited
the accompanying balance sheet of Fund II and Fund II-OW (the Joint Venture) as of December 31, 2005, and the related statements of operations, partners capital, and cash flows for each of the two years in the period ended
December 31, 2005. Our audits also included the financial statement schedule as of December 31, 2005 and for each of the two years in the period then ended listed in the index at Item 15(a). These financial statements and schedule are
the responsibility of the Joint Ventures management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Joint Ventures internal control over financial reporting. Our audits included consideration of internal control over
financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Joint Ventures internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by
management, and 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 Fund II and Fund II-OW at December 31, 2005, and the results of its operations and its cash flows for each of the two years
in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a
whole, presents fairly in all material respects the information set forth therein.

/s/    ERNST & YOUNG LLP

Atlanta, Georgia

March 9, 2007



Page F-32



---

##### Index to Financial Statements

FUND II AND FUND II-OW

BALANCE SHEETS

DECEMBER 31, 2006 AND 2005

ASSETS



|                                                                                                                                  |  |      |            |      |   |           
|--------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ----------
|                                                                                                                                  |  | 2006 |            | 2005
|Real estate assets, at cost:                                                                                                      |  |      |            |      |   |           
|Land                                                                                                                              |  | $    | 1,367,856  |      | $ | 1,367,856 
|Building and improvements, less accumulated depreciation of $4,956,266 and $4,821,521 at December 31, 2006 and 2005,
respectively |  |      | 2,951,066  |      |   | 2,968,245 
|                                                                                                                                  |  |      |            |      |   |           
|Total real estate assets                                                                                                          |  |      | 4,318,922  |      |   | 4,336,101 
|                                                                                                                                  |  |     
|Investment in joint ventures                                                                                                      |  |      | 4,005,310  |      |   | 6,792,801 
|Cash and cash equivalents                                                                                                         |  |      | 3,246,617  |      |   | 7,408,442 
|Due from joint ventures                                                                                                           |  |      | 162,550    |      |   | 62,880    
|Other assets                                                                                                                      |  |      | 16,373     |      |   | 1,933     
|                                                                                                                                  |  |      |            |      |   |           
|Total assets                                                                                                                      |  | $    | 11,749,772 |      | $ | 18,602,157
|                                                                                                                                  |  |      |            |      |   |           
|                                                                                                                                 
|LIABILITIES AND PARTNERS CAPITAL                                                                                                
|Liabilities:                                                                                                                      |  |      |            |      |   |           
|Accounts payable and accrued expenses                                                                                             |  | $    | 78,261     |      | $ | 30,204    
|Due to joint ventures                                                                                                             |  |      | 2,049      |      |   | 0         
|Due to affiliates                                                                                                                 |  |      | 12,478     |      |   | 17,973    
|Partnership distributions payable                                                                                                 |  |      | 3,333,448  |      |   | 7,381,861 
|                                                                                                                                  |  |      |            |      |   |           
|Total liabilities                                                                                                                 |  |      | 3,426,236  |      |   | 7,430,038 
|                                                                                                                                  |  |     
|Partners capital:                                                                                                                |  |      |            |      |   |           
|Wells Real Estate Fund II                                                                                                         |  |      | 7,881,412  |      |   | 10,578,879
|Wells Real Estate Fund II-OW                                                                                                      |  |      | 442,124    |      |   | 593,240   
|                                                                                                                                  |  |      |            |      |   |           
|Total partners capital                                                                                                           |  |      | 8,323,536  |      |   | 11,172,119
|                                                                                                                                  |  |      |            |      |   |           
|Total liabilities and partners capital                                                                                           |  | $    | 11,749,772 |      | $ | 18,602,157
|                                                                                                                                  |  |      |            |      |   |           

See accompanying notes.



Page F-33



---

##### Index to Financial Statements

FUND II AND FUND II-OW

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED

DECEMBER 31,
2006, 2005, AND 2004



|                                          |  |      |          |   |      |   |          |      |  |   |        
|----------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | ---- |  | - | -------
|                                          |  | 2006 |          |   | 2005 |   |          | 2004
|REVENUES:                                 |  |      |          |   |      |   |          |      |  |   |        
|Interest income and other income          |  | $    | 367,395  |   |      | $ | 242,334  |      |  | $ | 60,803 
|                                          |  |      |         
|EXPENSES:                                 |  |      |          |   |      |   |          |      |  |   |        
|Property operating costs                  |  |      | 183,856  |   |      |   | 187,196  |      |  |   | 165,544
|Management and leasing fees               |  |      | 11,000   |   |      |   | 9,900    |      |  |   | 10,380 
|Depreciation                              |  |      | 134,745  |   |      |   | 135,489  |      |  |   | 247,910
|General and administrative                |  |      | 330,116  |   |      |   | 398,303  |      |  |   | 361,633
|                                          |  |      |          |   |      |   |          |      |  |   |        
|Total expenses                            |  |      | 659,717  |   |      |   | 730,888  |      |  |   | 785,467
|                                          |  |      |         
|EQUITY IN INCOME (LOSS) OF JOINT VENTURES |  |      | (279,674 | ) |      |   | 215,586  |      |  |   | 941,850
|                                          |  |      |          |   |      |   |          |      |  |   |        
|NET INCOME (LOSS)                         |  | $    | (571,996 | ) |      | $ | (272,968 | )    |  | $ | 217,186
|                                          |  |      |          |   |      |   |          |      |  |   |        

See accompanying notes.



Page F-34



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##### Index to Financial Statements

FUND II AND FUND II-OW

STATEMENTS OF PARTNERS CAPITAL

FOR THE YEARS ENDED

DECEMBER 31,
2006, 2005, AND 2004



|                           |  |                          |            |   |                             |   |          |                         |  |   |            |  
|-------------------------- |  | ------------------------ | ---------- | - | --------------------------- | - | -------- | ----------------------- |  | - | ---------- | -
|                           |  | Wells RealEstate Fund II |            |   | Wells RealEstate Fund II-OW |   |          | Total Partners Capital | 
|BALANCE, DECEMBER 31, 2003 |  | $                        | 12,996,755 |   |                             | $ | 728,828  |                         |  | $ | 13,725,583 |  
|                           |  |                          |           
|Net income                 |  |                          | 205,653    |   |                             |   | 11,533   |                         |  |   | 217,186    |  
|Partnership contributions  |  |                          | 14,204     |   |                             |   | 796      |                         |  |   | 15,000     |  
|Partnership distributions  |  |                          | (2,520,093 | ) |                             |   | (141,321 | )                       |  |   | (2,661,414 | )
|                           |  |                          |            |   |                             |   |          |                         |  |   |            |  
|BALANCE, DECEMBER 31, 2004 |  |                          | 10,696,519 |   |                             |   | 599,836  |                         |  |   | 11,296,355 |  
|                           |  |                          |           
|Net loss                   |  |                          | (258,474   | ) |                             |   | (14,494  | )                       |  |   | (272,968   | )
|Partnership contributions  |  |                          | 354,608    |   |                             |   | 19,886   |                         |  |   | 374,494    |  
|Partnership distributions  |  |                          | (213,774   | ) |                             |   | (11,988  | )                       |  |   | (225,762   | )
|                           |  |                          |            |   |                             |   |          |                         |  |   |            |  
|BALANCE, DECEMBER 31, 2005 |  |                          | 10,578,879 |   |                             |   | 593,240  |                         |  |   | 11,172,119 |  
|                           |  |                          |           
|Net loss                   |  |                          | (541,623   | ) |                             |   | (30,373  | )                       |  |   | (571,996   | )
|Partnership distributions  |  |                          | (2,155,844 | ) |                             |   | (120,743 | )                       |  |   | (2,276,587 | )
|                           |  |                          |            |   |                             |   |          |                         |  |   |            |  
|BALANCE, DECEMBER 31, 2006 |  | $                        | 7,881,412  |   |                             | $ | 442,124  |                         |  | $ | 8,323,536  |  
|                           |  |                          |            |   |                             |   |          |                         |  |   |            |  

See accompanying notes.



Page F-35



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##### Index to Financial Statements

FUND II AND FUND II-OW

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED

DECEMBER 31,
2006, 2005, AND 2004



|                                                                                         |  |      |            |   |      |   |           |      |  |   |           |  
|---------------------------------------------------------------------------------------- |  | ---- | ---------- | - | ---- | - | --------- | ---- |  | - | --------- | -
|                                                                                         |  | 2006 |            |   | 2005 |   |           | 2004 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |  |      |            |   |      |   |           |      |  |   |           |  
|Net income (loss)                                                                        |  | $    | (571,996   | ) |      | $ | (272,968  | )    |  | $ | 217,186   |  
|Operating distributions received from joint ventures                                     |  |      | 514,973    |   |      |   | 605,267   |      |  |   | 715,448   |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |      |            |   |      |   |           |      |  |   |           |  
|Equity in (income) loss of joint ventures                                                |  |      | 279,674    |   |      |   | (215,586  | )    |  |   | (941,850  | )
|Depreciation                                                                             |  |      | 134,745    |   |      |   | 135,489   |      |  |   | 247,910   |  
|Changes in assets and liabilities:                                                       |  |      |            |   |      |   |           |      |  |   |           |  
|(Increase) decrease in other assets                                                      |  |      | (14,440    | ) |      |   | 69        |      |  |   | (2,002    | )
|Increase (decrease) in accounts payable and accrued expenses                             |  |      | 48,057     |   |      |   | (16,143   | )    |  |   | 47,876    |  
|(Decrease) increase in due to affiliates                                                 |  |      | (5,495     | ) |      |   | 10,252    |      |  |   | (1,230    | )
|                                                                                         |  |      |            |   |      |   |           |      |  |   |           |  
|Net cash provided by operating activities                                                |  |      | 385,518    |   |      |   | 246,380   |      |  |   | 283,338   |  
|                                                                                         |  |      |           
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |  |      |            |   |      |   |           |      |  |   |           |  
|Net sale proceeds received from joint ventures                                           |  |      | 1,937,086  |   |      |   | 0         |      |  |   | 2,477,659 |  
|Investment in real estate assets                                                         |  |      | (117,566   | ) |      |   | 0         |      |  |   | 0         |  
|Investment in joint ventures                                                             |  |      | (41,863    | ) |      |   | (374,494  | )    |  |   | (95,482   | )
|                                                                                         |  |      |            |   |      |   |           |      |  |   |           |  
|Net cash provided by (used in) investing activities                                      |  |      | 1,777,657  |   |      |   | (374,494  | )    |  |   | 2,382,177 |  
|                                                                                         |  |      |           
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |  |      |            |   |      |   |           |      |  |   |           |  
|Net sale proceeds distributions paid to joint venture partners                           |  |      | (6,325,000 | ) |      |   | 0         |      |  |   | 0         |  
|Contributions from joint venture partners                                                |  |      | 0          |   |      |   | 0         |      |  |   | 15,000    |  
|                                                                                         |  |      |            |   |      |   |           |      |  |   |           |  
|Net cash (used in) provided by financing activities                                      |  |      | (6,325,000 | ) |      |   | 0         |      |  |   | 15,000    |  
|                                                                                         |  |      |           
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                     |  |      | (4,161,825 | ) |      |   | (128,114  | )    |  |   | 2,680,515 |  
|                                                                                         |  |      |           
|CASH AND CASH EQUIVALENTS, beginning of year                                             |  |      | 7,408,442  |   |      |   | 7,536,556 |      |  |   | 4,856,041 |  
|                                                                                         |  |      |            |   |      |   |           |      |  |   |           |  
|CASH AND CASH EQUIVALENTS, end of year                                                   |  | $    | 3,246,617  |   |      | $ | 7,408,442 |      |  | $ | 7,536,556 |  
|                                                                                         |  |      |            |   |      |   |           |      |  |   |           |  
|                                                                                         |  |      |           
|SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:                   |  |      |            |   |      |   |           |      |  |   |           |  
|Due from joint ventures                                                                  |  | $    | 162,550    |   |      | $ | 62,880    |      |  | $ | 103,255   |  
|                                                                                         |  |      |            |   |      |   |           |      |  |   |           |  
|Due to joint ventures                                                                    |  | $    | 2,049      |   |      | $ | 0         |      |  | $ | 0         |  
|                                                                                         |  |      |            |   |      |   |           |      |  |   |           |  
|Partnership distributions payable                                                        |  | $    | 2,276,587  |   |      | $ | 225,762   |      |  | $ | 2,661,414 |  
|                                                                                         |  |      |            |   |      |   |           |      |  |   |           |  
|Contribution of amounts payable to joint venture partners                                |  | $    | 0          |   |      | $ | 374,494   |      |  | $ | 0         |  
|                                                                                         |  |      |            |   |      |   |           |      |  |   |           |  

See accompanying notes.



Page F-36



---

##### Index to Financial Statements

FUND II AND FUND II-OW

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004



|1. | ORGANIZATION AND BUSINESS
|-- | -------------------------

In March 1998, Wells Real Estate Fund II
and Wells Real Estate Fund II-OW entered into a joint venture organized as a Georgia general partnership to create Fund II and Fund II-OW. The general partners of Wells Real Estate Fund II and Wells Real Estate Fund II-OW are Leo F. Wells,
III and Wells Capital, Inc. (Wells Capital).

Fund II and Fund II-OW was formed to acquire, operate, and sell commercial real properties,
including properties to be developed, currently under development or construction, newly constructed or having operating histories. During the periods presented, Fund II and Fund II-OW owned 100% of the Louis Rose Building, a two-story office
building located in Charlotte, North Carolina.

Additionally, during the periods presented, Fund II and Fund II-OW owned interests in the following
properties and joint ventures (the Joint Ventures):



|                                                                      |  |                                                                                                  |  |                                                                                                                                               
|--------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------------------
|Joint Venture                                                         |  | Joint Venture Partners                                                                           |  | Properties                                                                                                                                    
|Fund I and Fund II Tucker                                             |  |   Wells Real Estate Fund I   Fund II and Fund II-OW                                            |  | 1. Heritage Place(1) A commercial office complex located in
Tucker, Georgia                                                                   
|Fund II and Fund III Associates (Fund II-III Associates)            |  |   Fund II and Fund II-OW   Wells Real Estate Fund III, L.P.                                    |  | 2. Boeing at the Atrium A four-story office building located in Houston, Texas  3. Brookwood Grill(2) A restaurant located in Roswell, Georgia
|Fund II, III, VI and VII Associates (Fund II-III-VI-VII Associates) |  |   Fund II-III Associates   Wells Real Estate Fund VI, L.P.   Wells Real Estate Fund VII, L.P. |  | 4. Holcomb Bridge Property(2) An office/retail center located
in Roswell, Georgia                                                             



| | (1) | Retail portion of this
property (approximately 30%) was sold in April 2003. The remaining office portion of this property was sold in May 2006.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------



| | (2) | These properties were sold in July 2004.
| | --- | ----------------------------------------

On April 7, 2003, Fund I and Fund II Tucker sold the retail portion of Heritage Place, which comprises approximately 30% of the total premises, to an unrelated
third party for a gross selling price of $3,400,000. As a result of this sale, Fund II and Fund II-OW was allocated a gain of approximately $141,000 and received net sales proceeds of approximately $1,543,000.

On July 1, 2004, Fund II-III Associates and Fund II-III-VI-VII Associates sold Brookwood Grill and the Holcomb Bridge Property, respectively, to an unrelated third
party for an aggregate gross sale price of $9,500,000. As a result of the sale of Brookwood Grill, Fund II and Fund II-OW was allocated a gain of approximately $481,000 and received net proceeds of approximately $1,445,000. As a result of the
sale of the Holcomb Bridge Property, Fund II and Fund II-OW recognized a gain of approximately $288,000 and received net sale proceeds of approximately $1,007,000.

On May 10, 2006, Fund I and Fund II Tucker sold the office component of Heritage Place to an unrelated third party for a gross sale price of $4,215,000. As a result of the sale, Fund II and Fund II-OW received net sale proceeds of
approximately $1,937,000. As of March 31, 2006, Fund I and Fund II Tucker recognized an



Page F-37



---

##### Index to Financial Statements

impairment loss of approximately $795,000 in order to reduce the carrying value of Heritage Place to its estimated fair value, less costs to sell, and
recognized an additional loss on sale of approximately $10,000. Approximately $382,000 and $5,000 of the impairment loss and loss on sale were allocable to Fund II and Fund II-OW, respectively.



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------

Basis of
Presentation

Fund II and Fund II-OWs financial statements are prepared in accordance with U.S. generally accepted accounting principles
(GAAP).

Use of Estimates

The preparation
of Fund II and Fund II-OW financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, and expenses and related disclosures of contingent
assets and liabilities in the financial statements and accompanying notes. Actual results could differ from those estimates.

Revenue Recognition

Fund II and Fund II-OW leases typically include renewal options, escalation provisions and provisions requiring tenants to reimburse Fund II
and Fund II-OW for a pro-rata share of operating costs incurred. All of Fund II and Fund II-OW leases are classified as operating leases, and the related rental income, including scheduled rental rate increases (other than scheduled increases
based on the Consumer Price Index) is recognized on a straight-line basis over the terms of the respective leases. Rents and tenant reimbursements collected in advance are recorded as deferred income in the accompanying balance sheets.

Lease termination income is recognized when the tenant loses the right to lease the space and Fund II and Fund II-OW has satisfied all obligations under the
related lease or lease termination agreement.

Fund II and Fund II-OW records the sale of real estate assets pursuant to the provisions of Statement
of Financial Accounting Standards (SFAS) No. 66, Accounting for Sales of Real Estate. Accordingly, gains are recognized upon completing the sale and, among other things, determining the sale price and transferring all of the
risks and rewards of ownership without significant continuing involvement with the seller. Recognition of all or a portion of the gain would be deferred until both of these conditions are met. Losses are recognized in full as of the sale date.

Real Estate Assets

Real estate assets are stated at
cost, less accumulated depreciation. Amounts capitalized to real estate assets consist of the cost of acquisition or construction, and any tenant improvements or major improvements and betterments which extend the useful life of the related asset.
We consider the period of future benefit of the asset to determine the appropriate useful lives. These assessments have a direct impact on net income. Upon receiving notification of a tenants intention to terminate a lease, undepreciated
tenant improvements are written off to lease termination expense. All repairs and maintenance are expensed as incurred.

The estimated useful lives of Fund
II and Fund II-OWs real estate assets by class are provided below:



|                      |  |                                       
|--------------------- |  | --------------------------------------
|Buildings             |  | 40 years                              
|Building improvements |  | 5-25 years                            
|Land improvements     |  | 20 years                              
|Tenant Improvements   |  | Shorter of lease term or economic life



Page F-38



---

##### Index to Financial Statements

Management continually monitors events and changes in circumstances that could indicate that the carrying amounts of the
real estate assets owned by Fund II and Fund II-OW may not be recoverable. When indicators of potential impairment are present, management assesses whether the respective carrying values will be recovered with the undiscounted future operating cash
flows expected from the use of the asset and its eventual disposition for assets held for use, or with the estimated fair values, less costs to sell, for assets held for sale. In the event that the expected undiscounted future cash flows for assets
held for use or the estimated fair value, less costs to sell, for assets held for sale do not exceed the respective asset carrying value, management adjusts such assets to the respective estimated fair values, as defined by SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, and recognizes an impairment loss. Estimated fair values are calculated based on the following information, dependent upon availability, in order of preference: (i) recently
quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated salvage value. As of March 31, 2006, Fund I and Fund II Tucker recorded an impairment loss
for the office component of Heritage Place of approximately $795,000, of which approximately $382,000 was allocated to Fund II and Fund II-OW.

In the
third quarter of 2004, Fund II and Fund II-OW completed a review of its real estate depreciation by performing an analysis of the components of each property type in an effort to determine weighted-average composite useful lives of its real
estate assets. As a result of this review, Fund II and Fund II-OW changed its estimate of the weighted-average composite useful lives for all building assets. Effective July 1, 2004, for all building assets, Fund II and Fund II-OW
extended the weighted-average composite useful life from 25 years to 40 years. The change resulted in an increase to net income of approximately $228,000 for the year ended December 31, 2004. We believe the change more appropriately reflects
the estimated useful lives of the building assets and is consistent with prevailing industry practice.

Investment in Joint Ventures

Fund II and Fund II-OW has evaluated the Joint Ventures and concluded that there are no variable interest entities under the provisions of Financial Accounting
Standards Board Interpretation (FIN) No. 46(R), Consolidation of Variable Interest Entities, which supersedes FIN No. 46 and is an interpretation of Accounting Research Bulletin (ARB) No. 51,
Consolidated Financial Statements. Fund II and Fund II-OW does not have control over the operations of the Joint Ventures; however, it does exercise significant influence. Approval by Fund II and Fund II-OW 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, upon applying the provisions of Statement of Financial Accounting Standard
(SFAS) No. 94, Consolidation of All Majority-Owned Subsidiaries, ARB No. 51, and Statement of Position No. 78-9, Accounting for Investments In Real Estate Ventures, Fund II and Fund II-OW accounted for
its investment in the Joint Ventures 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 Fund II and Fund
II-OW. Pursuant to the terms of the joint venture agreements, all income (loss) and distributions are allocated to joint venture partners in accordance with their respective ownership interests. Fund II and Fund II-OW is obligated to fund its pro
rata share of the Joint Ventures deficit balances and these amounts are included in due to joint ventures in the accompanying balance sheets. Distributions of net cash from operations, if available, are generally distributed to the joint
venture partners on a quarterly basis.

Cash and Cash Equivalents

Fund II and Fund II-OW considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents include cash and short-term investments.
Short-term investments are stated at cost, which approximates fair value, and consist of investments in money market accounts.



Page F-39



---

##### Index to Financial Statements

Other Assets

Prepaid
expenses and other assets as of December 31, 2006 and 2005 is comprised of the following balances:



|                           |  |      |        |      |   |      
|-------------------------- |  | ---- | ------ | ---- | - | -----
|                           |  | 2006 |        | 2005
|Interest receivable        |  | $    | 14,732 |      | $ | 0    
|Prepaid property insurance |  |      | 1,641  |      |   | 1,933
|                           |  |      |        |      |   |      
|Total                      |  | $    | 16,373 |      | $ | 1,933
|                           |  |      |        |      |   |      

Interest receivable represents interest earned during the period presented, which will be received in the
following month. Prepaid property insurance is recognized in the period in which the coverage is provided. Balances without a future economic benefit are written off as they are identified.

Allocation of Income and Distributions

Pursuant to the terms of
Fund II and Fund II-OWs joint venture agreement, income and distributions are allocated to the joint venture partners based upon their respective ownership interests as determined by relative cumulative capital contributions, as defined.
For the periods presented, Wells Real Estate Fund II and Wells Real Estate Fund II-OW held ownership interests in Fund II and Fund II-OW of approximately 95% and 5%, respectively. Net cash from operations is generally distributed to the joint
venture partners on a quarterly basis.

Income Taxes

Fund II and Fund II-OW is not subject to federal or state income taxes; therefore, none have been provided for in the accompanying financial statements. The general and limited partners of Wells Real Estate Fund II and Wells Real
Estate Fund II-OW are required to include their respective shares of profits and losses from Fund II and Fund II-OW in their individual income tax returns.

Reclassifications

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

Recent Accounting Pronouncements

In September 2006, the Financial
Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes a framework for measuring fair value, and expands disclosures required for fair value measurements under
GAAP, including amending SFAS No. 144. SFAS No. 157 emphasizes that fair value is a market-based measurement, as opposed to an entity-specific measurement. SFAS No. 157 will be effective for the Joint Ventures beginning January 1,
2008. The Joint Ventures are currently assessing provisions and evaluating the financial impact of SFAS No. 157 on their financial statements, however, does not believe the adoption of this pronouncement will have a material impact on their
financial statements.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 108,
Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, which provides interpretive guidance on the consideration of the effects of prior year misstatements in quantifying
current year misstatements for the purpose of a materiality assessment. SAB No. 108 is effective for fiscal years ending after November 15, 2006, and is effective for the Joint Ventures for the year ended December 31, 2006. The
adoption of this pronouncement has not had a material impact on the Joint Ventures financial statements.

In July 2006, the FASB issued FIN
No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, which clarifies the relevant criteria and approach for the recognition, derecognition, and measurement of uncertain tax positions. FIN
No. 48 will be effective for the Joint Ventures beginning



Page F-40



---

##### Index to Financial Statements

January 1, 2007. The Joint Ventures are currently assessing provisions and evaluating the financial impact of FIN No. 48 on their financial
statements, however, does not believe the adoption of this pronouncement will have a material impact on their financial statements.

In June 2005, the FASB
issued SFAS No. 154, Accounting Changes and Error Corrections, which replaces Accounting Principles Board Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial
Statements. SFAS No. 154 changes the method to account for and report changes in accounting principles and corrections of errors. Previously, most voluntary changes in accounting principles required recognition as a cumulative effect
adjustment to net income during the period in which the change was adopted. Conversely, in circumstances where applicable accounting guidance does not include specific transition provisions, SFAS No. 154 requires retrospective application to
prior periods financial statements unless it is impractical to determine either the period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for fiscal years beginning after December 15, 2005;
however, it does not change the transition provisions of any of the existing accounting pronouncements. The adoption of this pronouncement has not had a material impact on the Joint Ventures financial statements.



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

Due from Joint Ventures

Due from joint ventures as of December 31, 2006 and 2005 represents Fund II and Fund II-OWs share of cash to be distributed from the
Joint Ventures for the fourth quarters of 2006 and 2005, respectively.

Management and Leasing Fees

Wells Real Estate Fund II and Wells Real Estate Fund II-OW has property management and leasing agreements with Wells Management Company, Inc. (Wells
Management), an affiliate of their general partners. In accordance with the property management and leasing agreements, Wells Management receives compensation for the management and leasing of Fund II and Fund II-OWs properties
equal to (a) of the gross revenues collected monthly, 3% for management services and 3% for leasing services, plus a separate fee for the one-time 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, which is assessed periodically based on market studies, or (b) in the case of commercial properties which are leased on a
long-term net basis (ten or more years), 1% of the gross revenues, except for initial leasing fees equal to 3% of the gross revenues over the first five years of the lease term. Through its interests in the Joint Ventures, Fund II and Fund II-OW
incurred management and leasing fees that are payable to Wells Management and its affiliates through its equity in income of joint ventures of $82,621, $94,115, and $110,487 during the years ended December 31, 2006, 2005, and 2004,
respectively.

Administration Reimbursements

Wells
Capital, one of the general partners of Wells Real Estate Fund II and Wells Real Estate Fund II-OW, and Wells Management perform certain administrative services for Fund II and Fund II-OW, relating to accounting, property management, and other joint
venture administration, and incur the related expenses. Such expenses are allocated among these entities based on estimates of the time spent on each entity by individual personnel. In the opinion of management, this is a reasonable estimation of
such expenses. Fund II and Fund II-OW incurred administrative costs payable to Wells Capital and Wells Management of $152,144, $192,514, and $175,335 during the years ended December 31, 2006, 2005, and 2004, respectively, which are included in
general and administrative expenses in the accompanying statements of operations.

Due to Affiliates

As of December 31, 2006 and December 31, 2005, due to affiliates was comprised of administrative reimbursements due to Wells Management and/or Wells Capital.



Page F-41



---

##### Index to Financial Statements

|4. | INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
|-- | -------------------------------------------

Fund II and Fund
II-OWs investment and approximate ownership percentage in the Joint Ventures as of December 31, 2006 and 2005 are presented below:



|                          |  |        |           |         |     |        |   |           |  |    
|------------------------- |  | ------ | --------- | ------- | --- | ------ | - | --------- |  | ---
|                          |  | 2006   |           | 2005   
|                          |  | Amount |           | Percent |     | Amount |   | Percent  
|Fund I and Fund II Tucker |  | $      | 0         |         | 48% |        | $ | 2,330,394 |  | 48%
|Fund II-III Associates(1) |  |        | 4,005,310 |         | 63% |        |   | 4,462,407 |  | 63%
|                          |  |        |           |         |     |        |   |           |  |    
|                          |  | $      | 4,005,310 |         |     |        | $ | 6,792,801 |  |    
|                          |  |        |           |         |     |        |   |           |  |    



| | (1) | Includes Fund II-III
Associates approximate 23.43% equity interest in Fund II-III-VI-VII Associates of $0 and $20,935 as of December 31, 2006 and December 31, 2005, respectively.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Roll-forwards of Fund II and Fund II-OWs investment in the Joint Ventures for the years ended December 31, 2006 and 2005 are presented below:



|                                                |  |      |            |   |      |   |           |  
|----------------------------------------------- |  | ---- | ---------- | - | ---- | - | --------- | -
|                                                |  | 2006 |            |   | 2005 |  
|Investment in Joint Ventures, beginning of year |  | $    | 6,792,801  |   |      | $ | 6,767,613 |  
|Equity in income (loss) of Joint Ventures       |  |      | (279,674   | ) |      |   | 215,586   |  
|Contribution to Joint Ventures                  |  |      | 43,912     |   |      |   | 374,494   |  
|Distributions from Joint Ventures               |  |      | (2,551,729 | ) |      |   | (564,892  | )
|                                                |  |      |            |   |      |   |           |  
|Investment in Joint Ventures, end of year       |  | $    | 4,005,310  |   |      | $ | 6,792,801 |  
|                                                |  |      |            |   |      |   |           |  

Effective July 1, 2006, the first day of the quarter following the completion of the sale of all real estate
assets, Fund I and Fund II Tucker adopted the liquidation basis of accounting, under which assets and liabilities are stated at their estimated net realizable values and net settlement amounts, respectively, and statements of operations and
statements of cash flows are no longer presented. Accordingly, condensed financial information for the Fund I and Fund II Tucker as of December 31, 2006 and 2005 and for the six months ended June 30, 2006 and the years ended
December 31, 2005 and 2004 is presented below:



|                          |  |                           |        |                                |   |                                             |  |                           |        |      |   |        |  |   |   |  |   |          
|------------------------- |  | ------------------------- | ------ | ------------------------------ | - | ------------------------------------------- |  | ------------------------- | ------ | ---- | - | ------ |  | - | - |  | - | ---------
|                          |  | Total Assets December 31, |        | Total Liabilities December 31, |   | Total Net Assets in LiquidationDecember 31, |  | Total Equity December 31,
|                          |  | 2006                      |        | 2005                           |   | 2006                                        |  | 2005                      |        | 2006 |   | 2005  
|Fund I and Fund II Tucker |  | $                         | 27,852 |                                | $ | 4,934,963                                   |  | $                         | 27,852 |      | $ | 89,061 |  | $ | 0 |  | $ | 4,845,902
|                          |  |                           |        |                                |   |                                             |  |                           |        |      |   |        |  |   |   |  |   |          



Page F-42



---

##### Index to Financial Statements

|                          |  |                                 |       |                                 |   |                                 |                                  |      |                                 |             |         |                                 |  |      |                                 |   |      |                                 |         |      |                                 |   |          |   |  |      |         |   |      |   |         |      |  |   |          |   |  |   |         |   |  |   |         |  
|------------------------- |  | ------------------------------- | ----- | ------------------------------- | - | ------------------------------- | -------------------------------- | ---- | ------------------------------- | ----------- | ------- | ------------------------------- |  | ---- | ------------------------------- | - | ---- | ------------------------------- | ------- | ---- | ------------------------------- | - | -------- | - |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | -------- | - |  | - | ------- | - |  | - | ------- | -
|                          |  | Total Revenues                  |       | Loss FromContinuing Operations  |   |                                 | Loss FromDiscontinued Operations |      |                                 | Net Loss(1) |        
|                          |  | For The Six MonthsEndedJune 30, |       | For The Years EndedDecember 31, |   | For The Six MonthsEndedJune 30, |                                  |      | For The Years EndedDecember 31, |             |         | For The Six MonthsEndedJune 30, |  |      | For The Years EndedDecember 31, |   |      | For The Six MonthsEndedJune 30, |         |      | For The Years EndedDecember 31, |  
|                          |  | 2006                            |       | 2005                            |   | 2004                            |                                  | 2006 |                                 |             | 2005    |                                 |  | 2004 |                                 |   | 2006 |                                 |         | 2005 |                                 |   | 2004     |   |  | 2006 |         |   | 2005 |   |         | 2004 | 
|Fund I and Fund II Tucker |  | $                               | 2,189 |                                 | $ | 3,227                           |                                  | $8   |                                 | $           | (10,804 | )                               |  | $    | (4,937                          | ) |      | $                               | (20,502 | )    |                                 | $ | (810,142 | ) |  | $    | (56,298 | ) |      | $ | (12,438 | )    |  | $ | (820,946 | ) |  | $ | (61,235 | ) |  | $ | (32,940 | )
|                          |  |                                 |       |                                 |   |                                 |                                  |      |                                 |             |         |                                 |  |      |                                 |   |      |                                 |         |      |                                 |   |          |   |  |      |         |   |      |   |         |      |  |   |          |   |  |   |         |   |  |   |         |  



| | (1) | Effective July 1, 2004, Fund I and Fund II Tucker extended the weighted-average composite useful
life for all building assets from 25 years to 40 years, which resulted in decrease to net loss for year ended December 31, 2004 of approximately $49,200. Management believes that this change more appropriately reflects the estimated useful
lives of real estate assets and is consistent with prevailing industry practice.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Condensed financial information for Fund II-III
Associates as of December 31, 2006 and 2005 and for the years ended December 31, 2006, 2005 and 2004 is presented below:



|                       |  |                           |           |                                |   |                           |  |      |         |      |   |         |  |   |           |  |   |          
|---------------------- |  | ------------------------- | --------- | ------------------------------ | - | ------------------------- |  | ---- | ------- | ---- | - | ------- |  | - | --------- |  | - | ---------
|                       |  | Total Assets December 31, |           | Total Liabilities December 31, |   | Total Equity December 31,
|                       |  | 2006                      |           | 2005                           |   | 2006                      |  | 2005 |         | 2006 |   | 2005   
|Fund II-III Associates |  | $                         | 6,846,531 |                                | $ | 7,486,280                 |  | $    | 563,744 |      | $ | 487,318 |  | $ | 6,282,787 |  | $ | 6,998,962
|                       |  |                           |           |                                |   |                           |  |      |         |      |   |         |  |   |           |  |   |          



|                       |  |                                  |           |                                  |   |                                           |  |                                 |           |      |   |         |  |      |         |      |   |         |      |   |       |  |      |        |      |  |   |         |  |   |         |  |   |         |  |   |          
|---------------------- |  | -------------------------------- | --------- | -------------------------------- | - | ----------------------------------------- |  | ------------------------------- | --------- | ---- | - | ------- |  | ---- | ------- | ---- | - | ------- | ---- | - | ----- |  | ---- | ------ | ---- |  | - | ------- |  | - | ------- |  | - | ------- |  | - | ---------
|                       |  | Total Revenues                   |           | Income FromContinuing Operations |   | Income (Loss) FromDiscontinued Operations |  | Net Income(1)                  
|                       |  | For The Years Ended December 31, |           | For The Years EndedDecember 31,  |   | For The Years EndedDecember 31,           |  | For The Years EndedDecember 31,
|                       |  | 2006                             |           | 2005                             |   | 2004                                      |  | 2006                            |           | 2005 |   | 2004    |  | 2006 |         | 2005 |   |         | 2004 |   | 2006  |  | 2005 |        | 2004
|Fund II-III Associates |  | $                                | 1,850,141 |                                  | $ | 1,839,204                                 |  | $                               | 1,779,150 |      | $ | 201,921 |  | $    | 390,933 |      | $ | 667,930 |      | $ | 4,349 |  | $    | (6,388 | )    |  | $ | 863,986 |  | $ | 206,270 |  | $ | 384,545 |  | $ | 1,531,916
|                       |  |                                  |           |                                  |   |                                           |  |                                 |           |      |   |         |  |      |         |      |   |         |      |   |       |  |      |        |      |  |   |         |  |   |         |  |   |         |  |   |          



| | (1) | Effective July 1, 2004, Fund II-III Associates extended the weighted-average composite useful
life for all building assets from 25 years to 40 years, which resulted in increase to net income for year ended December 31, 2004 of approximately $144,200. Management believes that this change more appropriately reflects the estimated useful
lives of real estate assets and is consistent with prevailing industry practice.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Fund II and Fund II-OW allocates its share of
earnings generated by the properties owned by Fund I and Fund II Tucker and Fund II-III Associates to its joint venture partners pursuant to the joint venture agreement provisions outlined in Note 2 for allocation of income and distributions,
respectively. The components of income (loss) from discontinued operations recognized by Fund I and Fund II Tucker and Fund II-III Associates are provided below:



|                          |  |                                        |        |   |                                      |   |          |                                      |  |   |        |   |  |               |          |   |             |   |         |   |  |               |  |   |             |   |       |   |         |   |  |    |  |   |         |  
|------------------------- |  | -------------------------------------- | ------ | - | ------------------------------------ | - | -------- | ------------------------------------ |  | - | ------ | - |  | ------------- | -------- | - | ----------- | - | ------- | - |  | ------------- |  | - | ----------- | - | ----- | - | ------- | - |  | -- |  | - | ------- | -
|                          |  | For The Six Months Ended June 30, 2006 |        |   | For The Year Ended December 31, 2005 |   |          | For The Year Ended December 31, 2004 | 
|                          |  | OperatingLoss                          |        |   | ImpairmentLoss                       |   |          | Loss onSale                          |  |   | Total  |   |  | OperatingLoss |          |   | Gain onSale |   | Total   |   |  | OperatingLoss |  |   | Gain onSale |   | Total |  
|Fund I and Fund II Tucker |  | $                                      | (6,097 | ) |                                      | $ | (794,812 | )                                    |  | $ | (9,233 | ) |  | $             | (810,142 | ) |             | $ | (56,298 | ) |  | $0            |  | $ | (56,298     | ) |       | $ | (12,438 | ) |  | $0 |  | $ | (12,438 | )
|                          |  |                                        |        |   |                                      |   |          |                                      |  |   |        |   |  |               |          |   |             |   |         |   |  |               |  |   |             |   |       |   |         |   |  |    |  |   |         |  



|                       |  |                                      |       |                                      |    |       |                                      |               |  |   |             |   |       |    |  |                 |        |             |  |       |        |  |   |         |  |   |        
|---------------------- |  | ------------------------------------ | ----- | ------------------------------------ | -- | ----- | ------------------------------------ | ------------- |  | - | ----------- | - | ----- | -- |  | --------------- | ------ | ----------- |  | ----- | ------ |  | - | ------- |  | - | -------
|                       |  | For The Year Ended December 31, 2006 |       | For The Year Ended December 31, 2005 |    |       | For The Year Ended December 31, 2004
|                       |  | OperatingIncome                      |       | Gain onSale                          |    | Total |                                      | OperatingLoss |  |   | Gain onSale |   | Total |    |  | OperatingIncome |        | Gain onSale |  | Total
|Fund II-III Associates |  | $                                    | 4,349 |                                      | $0 |       | $                                    | 4,349         |  | $ | (6,388      | ) |       | $0 |  | $               | (6,388 | )           |  | $     | 92,841 |  | $ | 771,145 |  | $ | 863,986
|                       |  |                                      |       |                                      |    |       |                                      |               |  |   |             |   |       |    |  |                 |        |             |  |       |        |  |   |         |  |   |        



Page F-43



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##### Index to Financial Statements

Fund II-III-VI-VII Associates

Fund II-III-VI-VII Associates wound up its affairs by, among other things, collecting the outstanding receivables, satisfying outstanding payables, and distributing all residual cash balances to the joint venture
partners. We terminated the Joint Venture in 2006 in accordance with the relevant dissolution and termination provisions of the Georgia Uniform Partnership Act.

Condensed financial information for Fund II-III-VI-VII Associates for the years ended December 31, 2006, 2005, and 2004 is presented below:



|                                |  |                                  |  |                                     |  |                                 |  |          |  |           |  |        |  |         |  |            |  |        |  |         |  |           
|------------------------------- |  | -------------------------------- |  | ----------------------------------- |  | ------------------------------- |  | -------- |  | --------- |  | ------ |  | ------- |  | ---------- |  | ------ |  | ------- |  | ----------
|Total Revenues                  |  | Loss From Continuing Operations  |  | Income From Discontinued Operations |  | Net Income                     
|For The Years EndedDecember 31, |  | For The Years Ended December 31, |  | For The Years EndedDecember 31,     |  | For The Years
EndedDecember 31,
|2006                            |  | 2005                             |  | 2004                                |  | 2006                            |  | 2005     |  | 2004      |  | 2006   |  | 2005    |  | 2004       |  | 2006   |  | 2005    |  | 2004      
|$    0                          |  | $    0                           |  | $    0                              |  | $    0                          |  | $(4,799) |  | $(23,811) |  | $    0 |  | $94,148 |  | $2,090,607 |  | $    0 |  | $89,349 |  | $2,066,796
|                                |  |                                  |  |                                     |  |                                 |  |          |  |           |  |        |  |         |  |            |  |        |  |         |  |           

Fund II and Fund II-OW allocates its share of earnings generated by the properties owned by Fund II-III-VI-VII
Associates to its joint venture partners pursuant to the joint venture agreement provisions outlined in Note 2 for allocation of income and distributions, respectively. The components of income (loss) from discontinued operations recognized by Fund
II-III-VI-VII Associates are provided below:



|                                      |  |                                       |  |                                       |  |               |  |              |  |         |  |                 |  |              |  |           
|------------------------------------- |  | ------------------------------------- |  | ------------------------------------- |  | ------------- |  | ------------ |  | ------- |  | --------------- |  | ------------ |  | ----------
|For The Years Ended December 31, 2006 |  | For The Years Ended December 31, 2005 |  | For The Years Ended December 31, 2004
|OperatingIncome                       |  | Gain onSale                           |  | Total                                 |  | OperatingLoss |  | Gain on Sale |  | Total   |  | OperatingIncome |  | Gain on Sale |  | Total     
|$    0                                |  | $    0                                |  | $    0                                |  | $(6,038)      |  | $100,186(1)  |  | $94,148 |  | $217,207        |  | $1,873,400   |  | $2,090,607
|                                      |  |                                       |  |                                       |  |               |  |              |  |         |  |                 |  |              |  |           



| | (1) | Represents additional gain recognized on the sale of the Holcomb Bridge Property, which was deferred
at closing related to a rental guarantee for certain space at the Holcomb Bridge Property.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Page F-44



---

##### Index to Financial Statements

SCHEDULE III  REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2006



|                       |  |              |  |              |  |                                                |  |                                               |      |            |                            |            |                         |    |       |            |                             |            |                      |      |               |        
|---------------------- |  | ------------ |  | ------------ |  | ---------------------------------------------- |  | --------------------------------------------- | ---- | ---------- | -------------------------- | ---------- | ----------------------- | -- | ----- | ---------- | --------------------------- | ---------- | -------------------- | ---- | ------------- | -------
|                       |  |              |  | Initial Cost |  | Costs Capitalized Subsequent To
Acquisition(c) |  | Gross Carrying Amount as of December 31, 2006 |      |            |                            |            |                         |   
|Description            |  | Encumbrances |  | Land         |  | Buildings and Improvements                     |  |                                               | Land |            | Buildings and Improvements |            | Constructionin Progress |    | Total |            | Accumulated Depreciation(b) |            | Date of Construction |      | Date Acquired
|LOUIS ROSE BUILDING(a) |  | None         |  | $1,282,500   |  | $7,285,315                                     |  | $707,373                                      |      | $1,367,856 |                            | $7,907,332 |                         | $0 |       | $9,275,188 |                             | $4,956,266 |                      | 1987 |               | 5/09/88



| | (a) | The Louis Rose Building is a two-story office building located in Charlotte, North Carolina.
| | --- | --------------------------------------------------------------------------------------------



| | (b) | Buildings, land improvements,
building improvements, and tenant improvements are depreciated using the straight-line method over 40 years, 20 years, 5 to 25 years, and the shorter of the economic life or corresponding lease terms, respectively.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | Includes acquisition and advisory fees and acquisition expense reimbursements applied at
acquisition.
| | --- | -----------------------------------------------------------------------------------------------------



Page F-45



---

##### Index to Financial Statements

SCHEDULE III  REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2006



|                             |  |      |           |                          |   |          
|---------------------------- |  | ---- | --------- | ------------------------ | - | ---------
|                             |  | Cost |           | Accumulated Depreciation
|BALANCE AT DECEMBER 31, 2003 |  | $    | 9,157,622 |                          | $ | 4,438,122
|                             |  |     
|Additions                    |  |      | 0         |                          |   | 247,910  
|                             |  |      |           |                          |   |          
|BALANCE AT DECEMBER 31, 2004 |  |      | 9,157,622 |                          |   | 4,686,032
|                             |  |     
|Additions                    |  |      | 0         |                          |   | 135,489  
|                             |  |      |           |                          |   |          
|BALANCE AT DECEMBER 31, 2005 |  |      | 9,157,622 |                          |   | 4,821,521
|                             |  |     
|Additions                    |  |      | 117,566   |                          |   | 134,745  
|                             |  |      |           |                          |   |          
|BALANCE AT DECEMBER 31, 2006 |  | $    | 9,275,188 |                          | $ | 4,956,266
|                             |  |      |           |                          |   |          



Page F-46



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##### Index to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The General Partners of

Fund II and Fund III Associates:

We
have audited the accompanying balance sheet of Fund II and Fund III Associates (the Joint Venture) as of December 31, 2006, and the related statements of operations, partners capital, and cash flows for the year ended
December 31, 2006. Our audit also included the financial statement schedule listed in the index at Item 15(a). These financial statements and schedule are the responsibility of the Joint Ventures management. Our responsibility is to
express an opinion on these financial statements and schedule based on our audit.

We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an
audit of the Joint Ventures internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not
for the purpose of expressing an opinion on the effectiveness of the Joint Ventures internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides 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 Fund
II and Fund III Associates as of December 31, 2006, and the results of its operations and its cash flows for the year ended December 31, 2006, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/    FRAZIER & DEETER, LLC

Atlanta, Georgia

March 26, 2007



Page F-47



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##### Index to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The General Partners of

Fund II and Fund III Associates:

We
have audited the accompanying balance sheet of Fund II and Fund III Associates (the Joint Venture) as of December 31, 2005, and the related statements of operations, partners capital, and cash flows for each of the two years
in the period ended December 31, 2005. Our audits also included the financial statement schedule as of December 31, 2005 and for each of the two years in the period then ended listed in the index at Item 15(a). These financial
statements and schedule are the responsibility of the Joint Ventures management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Joint Ventures internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Joint
Ventures internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and 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 Fund II and Fund III Associates at
December 31, 2005, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

/s/    ERNST & YOUNG LLP

Atlanta, Georgia

March 9, 2007



Page F-48



---

##### Index to Financial Statements

FUND II AND FUND III ASSOCIATES

BALANCE SHEETS

DECEMBER 31, 2006 AND 2005

ASSETS



|                                                                                                                                   |  |      |           |      |   |          
|---------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | - | ---------
|                                                                                                                                   |  | 2006 |           | 2005
|                                                                                                                                   |  |      |           |      |   |          
|Real estate assets, at cost:                                                                                                       |  |      |           |      |   |          
|Land                                                                                                                               |  | $    | 1,504,743 |      | $ | 1,504,743
|Building and improvements, less accumulated depreciation of $7,237,578 and $10,212,761 at December 31, 2006 and 2005,
respectively |  |      | 4,480,963 |      |   | 4,985,575
|                                                                                                                                   |  |      |           |      |   |          
|Total real estate assets                                                                                                           |  |      | 5,985,706 |      |   | 6,490,318
|                                                                                                                                   |  |     
|Cash and cash equivalents                                                                                                          |  |      | 633,001   |      |   | 502,057  
|Tenant receivables, net                                                                                                            |  |      | 65,553    |      |   | 252,639  
|Deferred leasing costs, less accumulated amortization of $708,606 and $820,455 at December 31, 2006 and 2005,
respectively         |  |      | 151,875   |      |   | 230,744  
|Other assets, net                                                                                                                  |  |      | 10,396    |      |   | 10,522   
|                                                                                                                                   |  |      |           |      |   |          
|Total assets                                                                                                                       |  | $    | 6,846,531 |      | $ | 7,486,280
|                                                                                                                                   |  |      |           |      |   |          

LIABILITIES AND PARTNERS CAPITAL



|                                                                     |  |   |           |  |   |          
|-------------------------------------------------------------------- |  | - | --------- |  | - | ---------
|Liabilities:                                                         |  |   |           |  |   |          
|Accounts payable, accrued expenses, and refundable security deposits |  | $ | 135,547   |  | $ | 212,804  
|Due to affiliates                                                    |  |   | 13,493    |  |   | 11,199   
|Deferred income                                                      |  |   | 159,764   |  |   | 164,697  
|Partnership distributions payable                                    |  |   | 254,940   |  |   | 98,618   
|                                                                     |  |   |           |  |   |          
|Total liabilities                                                    |  |   | 563,744   |  |   | 487,318  
|                                                                     |  |  
|Partners capital:                                                   |  |   |           |  |   |          
|Fund II and Fund II-OW                                               |  |   | 4,005,310 |  |   | 4,462,408
|Wells Real Estate Fund III, L.P.                                     |  |   | 2,277,477 |  |   | 2,536,554
|                                                                     |  |   |           |  |   |          
|Total partners capital                                              |  |   | 6,282,787 |  |   | 6,998,962
|                                                                     |  |   |           |  |   |          
|Total liabilities and partners capital                              |  | $ | 6,846,531 |  | $ | 7,486,280
|                                                                     |  |   |           |  |   |          

See accompanying notes.



Page F-49



---

##### Index to Financial Statements

FUND II AND FUND III ASSOCIATES

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED

DECEMBER 31,
2006, 2005, AND 2004



|                                                         |  |      |           |      |   |           |      |  |   |          
|-------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- | ---- |  | - | ---------
|                                                         |  | 2006 |           | 2005 |   |           | 2004
|REVENUES:                                                |  |      |           |      |   |           |      |  |   |          
|Rental income                                            |  | $    | 1,739,437 |      | $ | 1,737,858 |      |  | $ | 1,736,835
|Reimbursement income                                     |  |      | 84,862    |      |   | 99,200    |      |  |   | 42,315   
|Interest and other income                                |  |      | 25,842    |      |   | 2,146     |      |  |   | 0        
|                                                         |  |      |           |      |   |           |      |  |   |          
|Total revenues                                           |  |      | 1,850,141 |      |   | 1,839,204 |      |  |   | 1,779,150
|                                                         |  |      |          
|EXPENSES:                                                |  |      |           |      |   |           |      |  |   |          
|Property operating costs                                 |  |      | 814,375   |      |   | 748,704   |      |  |   | 745,817  
|Management and leasing fees                              |  |      | 133,385   |      |   | 133,168   |      |  |   | 122,605  
|Depreciation                                             |  |      | 450,317   |      |   | 423,007   |      |  |   | 556,345  
|Amortization                                             |  |      | 102,553   |      |   | 102,554   |      |  |   | 102,553  
|Lease termination expense                                |  |      | 94,104    |      |   | 0         |      |  |   | 0        
|General and administrative                               |  |      | 53,486    |      |   | 61,772    |      |  |   | 68,150   
|                                                         |  |      |           |      |   |           |      |  |   |          
|Total expenses                                           |  |      | 1,648,220 |      |   | 1,469,205 |      |  |   | 1,595,470
|                                                         |  |      |          
|EQUITY IN INCOME OF FUND II, III, VI, AND VII ASSOCIATES |  |      | 0         |      |   | 20,934    |      |  |   | 484,250  
|                                                         |  |      |           |      |   |           |      |  |   |          
|NET INCOME FROM CONTINUING OPERATIONS                    |  |      | 201,921   |      |   | 390,933   |      |  |   | 667,930  
|                                                         |  |      |          
|DISCONTINUED OPERATIONS:                                 |  |      |           |      |   |           |      |  |   |          
|Operating income (loss)                                  |  |      | 4,349     |      |   | (6,388    | )    |  |   | 92,841   
|Gain on disposition                                      |  |      | 0         |      |   | 0         |      |  |   | 771,145  
|                                                         |  |      |           |      |   |           |      |  |   |          
|Income (loss) from discontinued operations               |  |      | 4,349     |      |   | (6,388    | )    |  |   | 863,986  
|                                                         |  |      |           |      |   |           |      |  |   |          
|NET INCOME                                               |  | $    | 206,270   |      | $ | 384,545   |      |  | $ | 1,531,916
|                                                         |  |      |           |      |   |           |      |  |   |          

See accompanying notes.



Page F-50



---

##### Index to Financial Statements

FUND II AND FUND III ASSOCIATES

STATEMENTS OF PARTNERS CAPITAL

FOR THE YEARS ENDED

DECEMBER 31,
2006, 2005, AND 2004



|                           |  |                        |            |   |                                |   |            |                         |  |   |            |  
|-------------------------- |  | ---------------------- | ---------- | - | ------------------------------ | - | ---------- | ----------------------- |  | - | ---------- | -
|                           |  | Fund II and Fund II-OW |            |   | Wells RealEstateFund III, L.P. |   |            | Total Partners Capital | 
|BALANCE, DECEMBER 31, 2003 |  | $                      | 6,776,735  |   |                                | $ | 3,908,802  |                         |  | $ | 10,685,537 |  
|                           |  |                        |           
|Net income                 |  |                        | 957,690    |   |                                |   | 574,226    |                         |  |   | 1,531,916  |  
|Partnership contributions  |  |                        | 81,055     |   |                                |   | 48,945     |                         |  |   | 130,000    |  
|Partnership distributions  |  |                        | (3,096,210 | ) |                                |   | (1,850,609 | )                       |  |   | (4,946,819 | )
|                           |  |                        |            |   |                                |   |            |                         |  |   |            |  
|BALANCE, DECEMBER 31, 2004 |  |                        | 4,719,270  |   |                                |   | 2,681,364  |                         |  |   | 7,400,634  |  
|                           |  |                        |           
|Net income                 |  |                        | 245,214    |   |                                |   | 139,331    |                         |  |   | 384,545    |  
|Partnership distributions  |  |                        | (502,076   | ) |                                |   | (284,141   | )                       |  |   | (786,217   | )
|                           |  |                        |            |   |                                |   |            |                         |  |   |            |  
|BALANCE, DECEMBER 31, 2005 |  |                        | 4,462,408  |   |                                |   | 2,536,554  |                         |  |   | 6,998,962  |  
|                           |  |                        |           
|Net income                 |  |                        | 131,457    |   |                                |   | 74,813     |                         |  |   | 206,270    |  
|Partnership contributions  |  |                        | 17,818     |   |                                |   | 10,760     |                         |  |   | 28,578     |  
|Partnership distributions  |  |                        | (606,373   | ) |                                |   | (344,650   | )                       |  |   | (951,023   | )
|                           |  |                        |            |   |                                |   |            |                         |  |   |            |  
|BALANCE, DECEMBER 31, 2006 |  | $                      | 4,005,310  |   |                                | $ | 2,277,477  |                         |  | $ | 6,282,787  |  
|                           |  |                        |            |   |                                |   |            |                         |  |   |            |  

See accompanying notes.



Page F-51



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##### Index to Financial Statements

FUND II AND FUND III ASSOCIATES

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED

DECEMBER 31,
2006, 2005, AND 2004



|                                                                                    |  |      |           |   |      |   |          |      |  |   |            |  
|----------------------------------------------------------------------------------- |  | ---- | --------- | - | ---- | - | -------- | ---- |  | - | ---------- | -
|                                                                                    |  | 2006 |           |   | 2005 |   |          | 2004 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                               |  |      |           |   |      |   |          |      |  |   |            |  
|Net income                                                                          |  | $    | 206,270   |   |      | $ | 384,545  |      |  | $ | 1,531,916  |  
|Adjustments to reconcile net income to net cash provided by operating activities:   |  |      |           |   |      |   |          |      |  |   |            |  
|Gain on disposition                                                                 |  |      | 0         |   |      |   | 0        |      |  |   | (771,145   | )
|Equity in income of Fund II, III, VI, and VII Associates                            |  |      | 0         |   |      |   | (20,934  | )    |  |   | (484,250   | )
|Operating distributions received from Fund II, III, VI, and VII Associates          |  |      | 0         |   |      |   | 0        |      |  |   | 66,070     |  
|Depreciation                                                                        |  |      | 450,317   |   |      |   | 423,007  |      |  |   | 570,925    |  
|Amortization                                                                        |  |      | 102,553   |   |      |   | 102,554  |      |  |   | 102,553    |  
|Lease termination expense                                                           |  |      | 94,104    |   |      |   | 0        |      |  |   | 0          |  
|Changes in assets and liabilities:                                                  |  |      |           |   |      |   |          |      |  |   |            |  
|Decrease in tenant receivables, net                                                 |  |      | 123,593   |   |      |   | 89,047   |      |  |   | 79,493     |  
|Decrease (increase) in other assets, net                                            |  |      | 126       |   |      |   | (1,483   | )    |  |   | (104,027   | )
|Decrease in accounts payable and accrued expenses                                   |  |      | (77,257   | ) |      |   | (17,521  | )    |  |   | (44,018    | )
|(Decrease) increase in deferred income                                              |  |      | (4,933    | ) |      |   | 3,895    |      |  |   | 158,995    |  
|Increase (decrease) in due to affiliate                                             |  |      | 2,294     |   |      |   | (412     | )    |  |   | 7,082      |  
|                                                                                    |  |      |           |   |      |   |          |      |  |   |            |  
|Net cash provided by operating activities                                           |  |      | 897,067   |   |      |   | 962,698  |      |  |   | 1,113,594  |  
|                                                                                    |  |      |          
|CASH FLOWS FROM INVESTING ACTIVITIES:                                               |  |      |           |   |      |   |          |      |  |   |            |  
|Net proceeds received from the sale of real estate                                  |  |      | 0         |   |      |   | 0        |      |  |   | 2,346,693  |  
|Net proceeds received from Fund II, III, VI, & VII Associates                       |  |      | 0         |   |      |   | 0        |      |  |   | 1,614,182  |  
|Investment in Fund II, III, VI, and VII Associates                                  |  |      | 0         |   |      |   | (2,780   | )    |  |   | 0          |  
|Investment in real estate assets                                                    |  |      | 0         |   |      |   | (213,560 | )    |  |   | (100,799   | )
|                                                                                    |  |      |           |   |      |   |          |      |  |   |            |  
|Net cash (used in) provided by investing activities                                 |  |      | 0         |   |      |   | (216,340 | )    |  |   | 3,860,076  |  
|                                                                                    |  |      |          
|CASH FLOWS FROM FINANCING ACTIVITIES:                                               |  |      |           |   |      |   |          |      |  |   |            |  
|Operating distributions to joint venture partners in excess of accumulated earnings |  |      | (794,701  | ) |      |   | (798,387 | )    |  |   | (1,060,897 | )
|Net sale proceeds distributions to joint venture partners                           |  |      | 0         |   |      |   | 0        |      |  |   | (3,960,875 | )
|Contributions from joint venture partners                                           |  |      | 28,578    |   |      |   | 0        |      |  |   | 130,000    |  
|                                                                                    |  |      |           |   |      |   |          |      |  |   |            |  
|Net cash used in financing activities                                               |  |      | (766,123  | ) |      |   | (798,387 | )    |  |   | (4,891,772 | )
|                                                                                    |  |      |          
|NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                |  |      | 130,944   |   |      |   | (52,029  | )    |  |   | 81,898     |  
|                                                                                    |  |      |          
|CASH AND CASH EQUIVALENTS, beginning of year                                        |  |      | 502,057   |   |      |   | 554,086  |      |  |   | 472,188    |  
|                                                                                    |  |      |           |   |      |   |          |      |  |   |            |  
|CASH AND CASH EQUIVALENTS, end of year                                              |  | $    | 633,001   |   |      | $ | 502,057  |      |  | $ | 554,086    |  
|                                                                                    |  |      |           |   |      |   |          |      |  |   |            |  
|                                                                                    |  |      |          
|SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:              |  |      |           |   |      |   |          |      |  |   |            |  
|Due from Fund II, III, VI, and VII Associates                                       |  | $    | 0         |   |      | $ | 0        |      |  | $ | 1,182      |  
|                                                                                    |  |      |           |   |      |   |          |      |  |   |            |  
|Partnership distributions payable                                                   |  | $    | 254,940   |   |      | $ | 98,618   |      |  | $ | 110,788    |  
|                                                                                    |  |      |           |   |      |   |          |      |  |   |            |  
|Write-off of fully depreciated real estate costs                                    |  | $    | 3,479,795 |   |      | $ | 0        |      |  | $ | 0          |  
|                                                                                    |  |      |           |   |      |   |          |      |  |   |            |  
|Write-off of fully amortized deferred leasing costs                                 |  | $    | 448,723   |   |      | $ | 0        |      |  | $ | 96,088     |  
|                                                                                    |  |      |           |   |      |   |          |      |  |   |            |  

See accompanying notes.



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##### Index to Financial Statements

FUND II AND FUND III ASSOCIATES

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2006, 2005, AND 2004



|1. | ORGANIZATION AND BUSINESS
|-- | -------------------------

In April 1989, Fund II and
Fund II-OW entered into a Georgia general partnership with Wells Real Estate Fund III, L.P. (Wells Fund III), known as Fund II and Fund III Associates (the Joint Venture) for the purposes of developing, constructing,
operating, and selling commercial and industrial real properties. Fund II and Fund II-OW is a joint venture between Wells Real Estate Fund II (Wells Fund II) and Wells Real Estate Fund II-OW (Wells Fund II-OW).

In April 1989, the Joint Venture acquired an approximate 118,000 square foot, four-story office building, Boeing at the Atrium, in Houston, Texas. In 1991, Fund II
and Fund II-OW contributed its interest in a 5.8-acre of land, known as the Brookwood Property, in Roswell, Georgia, to the Joint Venture. An approximate 7,000 square foot restaurant, Brookwood Grill, was developed on 1.5 acres of
the Brookwood Property. During 1995, the remaining 4.3 acres of the Brookwood Property were transferred at cost to the Fund II, III, VI and VII Associates, a joint venture partnership between the Joint Venture, Wells Real Estate Fund VI,
L.P. (Wells Fund VI), and Wells Real Estate Fund VII, L.P. (Wells Fund VII). Development on this property of two buildings containing a total of approximately 49,500 square feet was substantially complete in 1996. Once
constructed, this property became known as the Holcomb Bridge Property. The general partners of Wells Fund II, Wells Fund II-OW, and Wells Fund III are Leo F. Wells, III and Wells Capital, Inc. The general partners of Wells Fund VI and Wells Fund
VII are Leo F. Wells, III and Wells Partners, L.P., a private Georgia limited partnership. Ownership interests were recomputed based on relative cumulative capital contributions from the joint venture partners.

On July 1, 2004, the Joint Venture and Fund II, III, VI, and VII Associates sold Brookwood Grill and the Holcomb Bridge Property, respectively, to an unrelated
third party for an aggregate gross sales price of $9,500,000. As a result of the Brookwood Grill sale, the Joint Venture has been allocated net sale proceeds of approximately $2,318,000 and recognized a gain of approximately $771,000. As a result of
the sale of the Holcomb Bridge Property, the Joint Venture received net sale proceeds of approximately $1,614,000 and was allocated a gain of approximately $462,000. Fund II, III, VI, and VII Associates wound up its affairs in 2005 by, among other
things, collecting the outstanding receivables, satisfying outstanding payables, and distributing any residual cash balances to the joint venture partners. We terminated Fund II, III, VI, and VII Associates during 2006 in accordance with the
relevant dissolution and termination provisions of the Georgia Uniform Partnership Act.



|2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|-- | ------------------------------------------

Basis of
Presentation

The Joint Ventures financial statements are prepared in accordance with U.S. generally accepted accounting principles
(GAAP).

Use of Estimates

The preparation
of the Joint Ventures financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosures of contingent
assets and liabilities in the financial statements and accompanying notes. Actual results could differ from those estimates.



Page F-53



---

##### Index to Financial Statements

Revenue Recognition

The Joint Ventures leases typically include renewal options, escalation provisions and provisions requiring tenants to reimburse the Joint Venture for a pro-rata share of operating costs incurred. All of the Joint Ventures
leases are classified as operating leases, and the related rental income, including scheduled rental rate increases (other than scheduled increases based on the Consumer Price Index) is recognized on a straight-line basis over the terms of the
respective leases. Rents and tenant reimbursements collected in advance are recorded as deferred income in the accompanying balance sheets.

Lease
termination income is recognized when the tenant loses the right to lease the space and the Joint Venture has satisfied all obligations under the related lease or lease termination agreement.

The Joint Venture records the sale of real estate assets pursuant to the provisions of Statement of Financial Accounting Standard (SFAS) No. 66,
Accounting for Sales of Real Estate. Accordingly, gains are recognized upon completing the sale and, among other things, determining the sale price and transferring all of the risks and rewards of ownership without significant continuing
involvement with the seller. Recognition of all or a portion of the gain would be deferred until both of these conditions are met. Losses are recognized in full as of the sale date.

Real Estate Assets

Real estate assets are stated at cost, less accumulated depreciation. Amounts capitalized to real
estate assets consist of the cost of acquisition or construction, and any tenant improvements or major improvements and betterments which extend the useful life of the related asset. We consider the period of future benefit of the asset to determine
the appropriate useful lives. These assessments have a direct impact on net income. Upon receiving notification of a tenants intention to terminate a lease, undepreciated tenant improvements are written off to lease termination expense. All
repairs and maintenance are expensed as incurred.

The estimated useful lives of the Joint Ventures real estate
assets by class are provided below:



|                      |  |                                       
|--------------------- |  | --------------------------------------
|Buildings             |  | 40 years                              
|Building improvements |  | 5-25 years                            
|Land improvements     |  | 20 years                              
|Tenant Improvements   |  | Shorter of lease term or economic life

Management continually monitors events and changes in circumstances that could indicate that the carrying amounts
of the real estate assets owned by the Joint Venture may not be recoverable. When indicators of potential impairment are present, management assesses whether the respective carrying values will be recovered with the undiscounted future operating
cash flows expected from the use of the asset and its eventual disposition for assets held for use, or with the estimated fair values, less costs to sell, for assets held for sale. In the event that the expected undiscounted future cash flows for
assets held for use or the estimated fair value, less costs to sell, for assets held for sale do not exceed the respective asset carrying value, management adjusts such assets to the respective estimated fair values, as defined by SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets, and recognizes an impairment loss. Estimated fair values are calculated based on the following information, dependent upon availability, in order of preference: (i) recently
quoted market prices, (ii) market prices for comparable properties, or (iii) the present value of undiscounted cash flows, including estimated salvage value. The Joint Venture has determined that there has been no impairment in the
carrying value of any of the real estate assets held as of December 31, 2006.

In the third quarter of 2004, the Joint Venture completed a review of
its real estate depreciation by performing an analysis of the components of each property type in an effort to determine weighted-average composite useful lives of its real estate assets. As a result of this review, the Joint Venture changed its
estimate of the weighted-average composite useful lives for all building assets. Effective July 1, 2004, for all building assets, the Joint Venture extended the weighted-average composite useful life from 25 years to 40 years. The change
resulted in



Page F-54



---

##### Index to Financial Statements

an increase to net income of approximately $144,000 for the year ended December 31, 2004. We believe the change more appropriately reflects the
estimated useful lives of the building assets and is consistent with prevailing industry practice.

Investment in Fund II, III, VI, and VII Associates

The Joint Venture has evaluated Fund II, III, VI, and VII Associates and concluded that it is not a variable interest entity under the provisions of
Financial Accounting Standards Board Interpretation (FIN) No. 46(R), Consolidation of Variable Interest Entities, which supersedes FIN No. 46 and is an interpretation of Accounting Research Bulletin (ARB)
No. 51, Consolidated Financial Statements. The Joint Venture does not have control over the operations of Fund II, III, VI, and VII Associates; however, it does exercise significant influence. Approval by the Joint Venture as well as the other
joint venture partners is required for any major decision or any action that would materially affect Fund II, III, VI, and VII Associates, or their real property investments. Accordingly, upon applying the provisions of Statement of Financial
Accounting Standard (SFAS) No. 94, Consolidation of All Majority-Owned Subsidiaries, ARB No. 51, and Statement of Position No. 78-9, Accounting for Investments In Real Estate Ventures, the Joint Venture
accounted for its investment in Fund II, III, VI, and VII Associates 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 Joint Venture. Pursuant to the terms of the joint venture agreements, all income (loss) and distributions are allocated to joint venture partners in accordance with their respective ownership interests. Distributions of net cash
from operations, if available, are generally distributed to the joint venture partners on a quarterly basis.

Cash and Cash Equivalents

The Joint Venture considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents include
cash and short-term investments. Short-term investments are stated at cost, which approximates fair value, and consist of investments in money market accounts.

Tenant Receivables, net

Tenant receivables are comprised of tenant receivables and straight-line rent receivables. Management assesses the
collectibility of tenant receivables on an ongoing basis and provides for allowances as such balances, or portions thereof, become uncollectible. Upon receiving notification of a tenants intention to terminate a lease, unamortized
straight-line rent receivables are written off to lease termination expense. Allowances of $1,694 and $2,315 are included in tenant receivables as of December 31, 2006 and 2005, respectively.

Deferred Leasing Costs, net

Deferred leasing costs reflect costs
incurred to procure operating leases, which are capitalized and amortized on a straight-line basis over the terms of the related leases. The remaining unamortized balance of deferred leasing costs will be amortized over a weighted-average period of
approximately one year. Upon receiving notification of a tenants intention to terminate a lease, unamortized deferred leasing costs are written-off to lease termination expense.

Other Assets, net

Other assets as of December 31, 2006 and 2005 is comprised
of the following balances:



|                             |  |      |        |      |   |       
|---------------------------- |  | ---- | ------ | ---- | - | ------
|                             |  | 2006 |        | 2005
|Prepaid property insurance   |  | $    | 6,302  |      | $ | 6,010 
|Interest receivable          |  |      | 2,608  |      |   | 0     
|Refundable security deposits |  |      | 1,000  |      |   | 1,000 
|Other                        |  |      | 486    |      |   | 3,512 
|                             |  |      |        |      |   |       
|Total                        |  | $    | 10,396 |      | $ | 10,522
|                             |  |      |        |      |   |       



Page F-55



---

##### Index to Financial Statements

Management assesses the collectibility of other assets on an ongoing basis and provides for allowances as such balances,
or portions thereof, become uncollectible. An allowance of $8,530 is included in other assets as of December 31, 2006 and 2005. Prepaid property insurance is recognized in the period in which the coverage is provided. Refundable security
deposits represent cash deposits received from tenants. Pursuant to the respective leases, the Joint Venture may apply such balances towards unpaid receivable balances or property damages, where applicable, or is obligated to refund remaining
balances to the tenants upon the expiration of their related lease term. Balances without a future economic benefit are written off as they are identified.

Allocation of Income and Distributions

Pursuant to the terms of the joint venture agreement, income and distributions are allocated to the
joint venture partners based upon their respective ownership interests as determined by relative cumulative capital contributions, as defined. For the periods presented, Fund II and Fund II-OW and Wells Fund III held ownership interests in the Joint
Venture of approximately 63% and 37%, respectively. Net cash from operations is generally distributed to the joint venture partners on a quarterly basis.

Income Taxes

The Joint Venture is not subject to federal or state income taxes; therefore, none have been provided for in the accompanying
financial statements. The partners of Wells Fund II, Wells Fund II-OW, and Wells Fund III are required to include their respective share of profits and losses from the Joint Venture in their individual income tax returns.

Reclassifications

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

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value Measurements, which defines fair value,
establishes a framework for measuring fair value, and expands disclosures required for fair value measurements under GAAP, including amending SFAS No. 144. SFAS No. 157 emphasizes that fair value is a market-based measurement, as opposed to an
entity-specific measurement. SFAS No. 157 will be effective for the Joint Venture beginning January 1, 2008. The Joint Venture is currently assessing provisions and evaluating the financial impact of SFAS No. 157 on its financial
statements, however, does not believe the adoption of this pronouncement will have a material impact on its financial statements.

In September 2006, the
Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, which provides
interpretive guidance on the consideration of the effects of prior year misstatements in quantifying current year misstatements for the purpose of a materiality assessment. SAB No. 108 is effective for fiscal years ending after
November 15, 2006, and is effective for the Joint Venture for the year ended December 31, 2006. The adoption of this pronouncement has not had a material impact on the Joint Ventures financial statements.

In July 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109, which clarifies the
relevant criteria and approach for the recognition, derecognition, and measurement of uncertain tax positions. FIN No. 48 will be effective for the Joint Venture beginning January 1, 2007. The Joint Venture is currently assessing
provisions and evaluating the financial impact of FIN No. 48 on its financial statements, however, does not believe the adoption of this pronouncement will have a material impact on its financial statements.



Page F-56



---

##### Index to Financial Statements

In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, which replaces
Accounting Principles Board Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 changes the method to account for and report changes in
accounting principles and corrections of errors. Previously, most voluntary changes in accounting principles required recognition as a cumulative effect adjustment to net income during the period in which the change was adopted. Conversely, in
circumstances where applicable accounting guidance does not include specific transition provisions, SFAS No. 154 requires retrospective application to prior periods financial statements unless it is impractical to determine either the
period-specific effects or the cumulative effect of the change. SFAS No. 154 is effective for fiscal years beginning after December 15, 2005; however, it does not change the transition provisions of any of the existing accounting
pronouncements. The adoption of this pronouncement has not had a material impact on the Joint Ventures financial statements.



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

Management and Leasing Fees

Wells Fund II, Wells Fund II-OW, and Wells Fund III entered into a property management and leasing agreement with Wells Management Company, Inc.
(Wells Management), an affiliate of their general partners. In accordance with the property management and leasing agreement, Wells Management receives compensation for the management and leasing of the Joint Ventures properties,
the Joint Venture will generally pay Wells Management fees equal to (a) of the gross revenues collected monthly, 3% for management services and 3% for leasing services, plus a separate fee for the one-time 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, which is assessed periodically based on market studies, or
(b) in the case of commercial properties which are leased on a long-term net basis (ten or more years), 1% of the gross revenues, except for initial leasing fees equal to 3% of the gross revenues over the first five years of the lease term.
During the years ended December 31, 2006, 2005, and 2004, the Joint Venture incurred management and leasing fees that are payable to Wells Management and its affiliates of $116,585, $116,480, and $132,342, respectively, portions of which are
included in income (loss) from discontinued operations in the accompanying statements of operations.

Administrative Reimbursements

Wells Management and its affiliates perform certain administrative services for the Joint Venture, relating to accounting, property management, and other joint venture
administration, and incur the related expenses. Such expenses are allocated among these entities based on time spent on each entity by individual personnel. In the opinion of management, this is a reasonable estimation of such expenses. During 2006,
2005, and 2004, the Joint Venture reimbursed $27,221, $35,209, and $39,164, respectively, to Wells Management and its affiliates for these services, portions of which are included in income (loss) from discontinued operations in the accompanying
statements of operations.

Due to Affiliate

As of
December 31, 2006 and December 31, 2005, due to affiliate balances reflect the following items due to Wells Management:



|                              |  |      |        |      |   |       
|----------------------------- |  | ---- | ------ | ---- | - | ------
|                              |  | 2006 |        | 2005
|Property management fees      |  | $    | 9,616  |      | $ | 9,555 
|Administrative reimbursements |  |      | 3,877  |      |   | 1,644 
|                              |  |      |        |      |   |       
|                              |  | $    | 13,493 |      | $ | 11,199
|                              |  |      |        |      |   |       



Page F-57



---

##### Index to Financial Statements

|4. | INVESTMENT IN FUND II, III, VI AND VII ASSOCIATES
|-- | -------------------------------------------------

As of
December 31, 2005, the Joint Venture owned an interest of approximately 23% in Fund II, III, VI, and VII Associates. Fund II, III, VI, and VII Associates wound up its affairs by, among other things, collecting the outstanding receivables,
satisfying outstanding payables, and distributing all residual cash balances to the joint venture partners. We terminated the Joint Venture in 2006 in accordance with the relevant dissolution and termination provisions of the Georgia Uniform
Partnership Act.

Roll-forwards of the Joint Ventures investment (deficit) in Fund II, III, VI, and VII Associates for the year ended
December 31, 2006 and 2005 are presented below:



|                                                                  |  |      |   |      |   |         |  
|----------------------------------------------------------------- |  | ---- | - | ---- | - | ------- | -
|                                                                  |  | 2006 |   | 2005 |  
|Deficit in Fund II, III, VI and VII Associates, beginning of year |  | $    | 0 |      | $ | (24,896 | )
|Equity in income of Fund II, III, VI and VII Associates           |  |      | 0 |      |   | 20,934  |  
|Contributions to Fund II, III, VI and VII Associates              |  |      | 0 |      |   | 3,962   |  
|                                                                  |  |      |   |      |   |         |  
|Investment in Fund II, III, VI and VII Associates, end of year    |  | $    | 0 |      | $ | 0       |  
|                                                                  |  |      |   |      |   |         |  

Condensed financial information for Fund II, III, VI, and VII Associates as of December 31, 2006 and 2005,
and for the years ended December 31, 2006, 2005, and 2004 is presented below:



|                                |  |                                 |  |                                     |  |                                 |  |          |  |           |  |        |  |         |  |            |  |        |  |         |  |           
|------------------------------- |  | ------------------------------- |  | ----------------------------------- |  | ------------------------------- |  | -------- |  | --------- |  | ------ |  | ------- |  | ---------- |  | ------ |  | ------- |  | ----------
|Total Revenues                  |  | Loss From Continuing Operations |  | Income From Discontinued Operations |  | Net Income                     
|For The Years EndedDecember 31, |  | For The Years EndedDecember 31, |  | For The Years EndedDecember 31,     |  | For The Years
EndedDecember 31,
|2006                            |  | 2005                            |  | 2004                                |  | 2006                            |  | 2005     |  | 2004      |  | 2006   |  | 2005    |  | 2004       |  | 2006   |  | 2005    |  | 2004      
|$    0                          |  | $    0                          |  | $    0                              |  | $    0                          |  | $(4,799) |  | $(23,811) |  | $    0 |  | $94,148 |  | $2,090,607 |  | $    0 |  | $89,349 |  | $2,066,796
|                                |  |                                 |  |                                     |  |                                 |  |          |  |           |  |        |  |         |  |            |  |        |  |         |  |           

The Joint Venture allocates its share of earnings generated by the property owned by Fund II, III, VI, and VII
Associates to its joint venture partners pursuant to the joint venture agreement provisions outlined in Note 2 for allocation of income and distributions. The components of income from discontinued operations recognized by Fund II, III, VI, and VII
Associates are provided below:



|                                     |  |                                      |  |                                      |  |               |  |              |  |         |  |                 |  |              |  |           
|------------------------------------ |  | ------------------------------------ |  | ------------------------------------ |  | ------------- |  | ------------ |  | ------- |  | --------------- |  | ------------ |  | ----------
|For The Year Ended December 31, 2006 |  | For The Year Ended December 31, 2005 |  | For The Year Ended December 31, 2004
|OperatingIncome                      |  | Gain on Sale                         |  | Total                                |  | OperatingLoss |  | Gain on Sale |  | Total   |  | OperatingIncome |  | Gain on Sale |  | Total     
|$    0                               |  | $    0                               |  | $    0                               |  | $(6,038)      |  | $100,186(1)  |  | $94,148 |  | $217,207        |  | $1,873,400   |  | $2,090,607
|                                     |  |                                      |  |                                      |  |               |  |              |  |         |  |                 |  |              |  |           



| | (1) | Represents additional gain recognized on the sale of the Holcomb Bridge Property, which was deferred
at closing related to a rental guarantee for certain space at the Holcomb Bridge Property.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Page F-58



---

##### Index to Financial Statements

|5. | DISCONTINUED OPERATIONS
|-- | -----------------------

In accordance with SFAS No. 144, the
Joint Venture has classified the results of operations related to the office component of Brookwood Grill, which was sold on July 1, 2004, as discontinued operations in the accompanying statements of operations. The details comprising income
(loss) from discontinued operations are presented below:



|                                           |  |      |       |      |   |        |      |  |   |        
|------------------------------------------ |  | ---- | ----- | ---- | - | ------ | ---- |  | - | -------
|                                           |  | 2006 |       | 2005 |   |        | 2004
|Rental income                              |  | $    | 3,728 |      | $ | 3,728  |      |  | $ | 124,958
|Reimbursement income                       |  |      | 0     |      |   | 0      |      |  |   | 17,566 
|Interest and other income                  |  |      | 621   |      |   | 0      |      |  |   | 0      
|                                           |  |      |       |      |   |        |      |  |   |        
|Total revenues                             |  |      | 4,349 |      |   | 3,728  |      |  |   | 142,524
|                                           |  |      |      
|Property operating costs                   |  |      | 0     |      |   | 852    |      |  |   | 16,470 
|Management and leasing fees                |  |      | 0     |      |   | 112    |      |  |   | 9,737  
|Depreciation                               |  |      | 0     |      |   | 0      |      |  |   | 14,580 
|Bad debt expense                           |  |      | 0     |      |   | 9,152  |      |  |   | 1,693  
|General and administrative                 |  |      | 0     |      |   | 0      |      |  |   | 7,203  
|                                           |  |      |       |      |   |        |      |  |   |        
|Total expenses                             |  |      | 0     |      |   | 10,116 |      |  |   | 49,683 
|                                           |  |      |       |      |   |        |      |  |   |        
|                                           |  |      |      
|Operating income (loss)                    |  |      | 4,349 |      |   | (6,388 | )    |  |   | 92,841 
|Gain on disposition                        |  |      | 0     |      |   | 0      |      |  |   | 771,145
|                                           |  |      |       |      |   |        |      |  |   |        
|Income (loss) from discontinued operations |  | $    | 4,349 |      | $ | (6,388 | )    |  | $ | 863,986
|                                           |  |      |       |      |   |        |      |  |   |        



|6. | RENTAL INCOME
|-- | -------------

The future minimum rental income due to the Joint
Venture under noncancelable operating leases as of December 31, 2006 follows:



|                         |  |   |          
|------------------------ |  | - | ---------
|Year ending December 31: |  |   |          
|2007                     |  | $ | 1,603,106
|2008                     |  |   | 250,791  
|                         |  |   |          
|                         |  | $ | 1,853,897
|                         |  |   |          

One tenant generated approximately 100% of rental income for the year ended December 31, 2006, and will
generate approximately 100% of future minimum rental income.



Page F-59



---

##### Index to Financial Statements

SCHEDULE III  REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2006



|                        |  |              |  |              |  |                                              |  |                                               |      |            |                            |             |                         |    |       |             |                             |            |                      |      |               |        
|----------------------- |  | ------------ |  | ------------ |  | -------------------------------------------- |  | --------------------------------------------- | ---- | ---------- | -------------------------- | ----------- | ----------------------- | -- | ----- | ----------- | --------------------------- | ---------- | -------------------- | ---- | ------------- | -------
|                        |  |              |  | Initial Cost |  | CostsCapitalized Subsequent ToAcquisition(c) |  | Gross Carrying Amount as of December 31, 2006 |      |            |                            |             |                         |   
|Description             |  | Encumbrances |  | Land         |  | Buildings and Improvements                   |  |                                               | Land |            | Buildings and Improvements |             | Constructionin Progress |    | Total |             | Accumulated Depreciation(b) |            | Date of Construction |      | Date Acquired
|BOEING AT THE ATRIUM(a) |  | None         |  | $1,367,000   |  | $11,409,245                                  |  | $447,039                                      |      | $1,504,743 |                            | $11,718,541 |                         | $0 |       | $13,223,284 |                             | $7,237,578 |                      | 1988 |               | 4/03/89



| | (a) | Boeing at the Atrium is a
four-story office building located in Houston, Texas.
| | --- | -------------------------------------------------------------------------------



| | (b) | Buildings, land improvements,
building improvements, and tenant improvements are depreciated using the straight-line method over 40 years, 20 years, 5 to 25 years, and the shorter of the economic life or corresponding lease terms, respectively.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | Includes acquisition and advisory fees and acquisition expense reimbursements applied at
acquisition.
| | --- | -----------------------------------------------------------------------------------------------------



Page F-60



---

##### Index to Financial Statements

SCHEDULE III  REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2006



|                             |  |      |            |   |                          |   |            |    
|---------------------------- |  | ---- | ---------- | - | ------------------------ | - | ---------- | ---
|                             |  | Cost |            |   | Accumulated Depreciation |  
|BALANCE AT DECEMBER 31, 2003 |  | $    | 18,403,966 |   |                          | $ | 9,834,673  |    
|                             |  |     
|Additions                    |  |      | 100,799    |   |                          |   | 570,925    |    
|Dispositions                 |  |      | (2,015,246 | ) |                          |   | (615,844   | )  
|                             |  |      |            |   |                          |   |            |    
|BALANCE AT DECEMBER 31, 2004 |  |      | 16,489,519 |   |                          |   | 9,789,754  |    
|                             |  |     
|Additions                    |  |      | 213,560    |   |                          |   | 423,007    |    
|                             |  |      |            |   |                          |   |            |    
|BALANCE AT DECEMBER 31, 2005 |  |      | 16,703,079 |   |                          |   | 10,212,761 |    
|                             |  |     
|Additions                    |  |      | 0          |   |                          |   | 504,612    | (1)
|Dispositions                 |  |      | (3,479,795 | ) |                          |   | (3,479,795 | )  
|                             |  |      |            |   |                          |   |            |    
|BALANCE AT DECEMBER 31, 2006 |  | $    | 13,223,284 |   |                          | $ | 7,237,578  |    
|                             |  |      |            |   |                          |   |            |    



| | (1) | Included in the number
presented is $54,295, which is included in lease termination expense in the accompanying statements of operations.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------



Page F-61



---

##### Index to Financial Statements

EXHIBIT INDEX

TO

2006 FORM 10-K

OF

WELLS REAL ESTATE FUND II-OW

The following documents are filed as exhibits to this report. Those exhibits previously filed and incorporated herein by reference are identified below by an asterisk. For each such asterisked exhibit, there is shown
below the description of the previous filing. Exhibits which are not required for this report are omitted.



|               |     |  |                                                                                                                                                                                                                                                  
|-------------- | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |     |  | Description of Document                                                                                                                                                                                                                          
|               |    
|*3             |     |  | Restated and Amended Certificate and Agreement of Limited Partnership of Wells Real Estate Fund II-OW (Registration Statement of Wells Real Estate Fund II-OW, Exhibit B to the Prospectus,
File No. 33-17977)                                   
|               |    
|*10            | (a) |  | Management Agreement between Registrant and Wells Management Company, Inc. (Exhibit to Form 10-K of Wells Real Estate Fund II-OW for the fiscal year ended December 31, 1990, File No.
0-17876)                                                  
|               |    
|*10            | (b) |  | Leasing and Tenant Coordination Agreement between Registrant and Wells Management Company, Inc. (Exhibit to Form 10-K of Wells Real Estate Fund II-OW for the fiscal year ended December 31,
1990, File No. 0-17876)                             
|               |    
|*10            | (c) |  | Purchase Agreement for the acquisition of Heritage Place at Tucker dated April 25, 1986 (Exhibit 10(f) to Form 10-K of Wells Real Estate Fund I for the fiscal year ended December 31, 1990,
File No. 0-14463)                                   
|               |    
|*10            | (d) |  | Joint Venture Agreement of Fund I and Fund II Tucker dated January 9, 1987 (Exhibit 10(g) to Form 10-K of Wells Real Estate Fund I for the fiscal year ended December 31, 1990, File No.
0-14463)                                                
|               |    
|*10            | (e) |  | Purchase Agreement for the acquisition of the Cherokee Commons Shopping Center dated December 31, 1986 (Exhibit 10(h) to Form 10-K of Wells Real Estate Fund I for the fiscal year ended
December 31, 1990, File No. 0-14463)                    
|               |    
|*10            | (f) |  | Joint Venture Agreement of Fund I and Fund II Cherokee dated June 27, 1987 (Exhibit 10(i) to Form 10-K of Wells Real Estate Fund I for the fiscal year ended December 31, 1990, File No.
0-14463)                                                
|               |    
|*10            | (g) |  | Fund II  Fund II-OW Joint Venture Agreement dated March 1, 1988 (Exhibit 10(g) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 1990, File No.
0-16518)                                                         
|               |    
|*10            | (h) |  | Lease with IBM dated March 17, 1987 (Exhibit 10(h) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 1990, File No. 0-16518)                                                                                      
|               |    
|*10            | (i) |  | Purchase Agreement for the Acquisition of the Atrium at Nassau Bay dated March 1, 1989 (Exhibit 10(i) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 1990,
File No. 0-16518)                                   
|               |    
|*10            | (j) |  | Joint Venture Agreement of Fund II and Fund III Associates dated March 1, 1989 (Exhibit to Post-Effective Amendment No. 2 to Registration Statement of Wells Real Estate Fund III, L.P., File
No. 33-24063)                                      
|               |    
|*10            | (k) |  | First Amendment to Joint Venture Agreement of Fund II and Fund III Associates dated April 1, 1989 (Exhibit 10(k) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December
31, 1990, File No. 0-16518)                        
|               |    
|*10            | (l) |  | Leases with Lockheed Engineering and Sciences Company, Inc. (Exhibit 10(l) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 1990, File No.
0-16518)                                                              
|               |    
|*10            | (m) |  | Cost Sharing Agreement between Registrant, Wells Fund II and the Fund II  Fund II-OW Joint Venture dated January 1, 1990 (Exhibit 10(m) to Form 10-K of Wells Real Estate Fund II for the
fiscal year ended December 31, 1990, File No. 0-16518)



---

##### Index to Financial Statements

|               |      |  |                                                                                                                                                                                                                                                                                       
|-------------- | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |      |  | Description of Document                                                                                                                                                                                                                                                               
|               |     
|*10            | (n)  |  | Amended and Restated Joint Venture Agreement of Fund I and Fund II Tucker-Cherokee dated January 1, 1991 (Exhibit 10(j) to Form 10-K of Wells Real Estate Fund I for the fiscal year ended
December 31, 1991, File No. 0-14463)                                                       
|               |     
|*10            | (o)  |  | Amended and Restated Joint Venture Agreement of Fund II and Fund III Associates (Exhibit 10(o) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 1991, File No.
0-16518)                                                                               
|               |     
|*10            | (p)  |  | Land and Building Lease Agreement between Fund II and Fund II-OW and Brookwood Grill of Roswell, Inc. (Exhibit 10(p) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended
December 31, 1991, File No. 0-16518)                                                         
|               |     
|*10            | (q)  |  | Assignment and Assumption of Lease dated September 20, 1991 between Fund II and Fund II-OW and Fund II and Fund III Associates (Exhibit 10(q) to Form 10-K of Wells Real Estate Fund II for the
fiscal year ended December 31, 1991, File No. 0-16518)                                
|               |     
|*10            | (r)  |  | Lease Modification Agreement No. 3 with The Kroger Co. dated December 21, 1993 (Exhibit 10(k) to Form 10-K of Wells Real Estate Fund I for the fiscal year ended December 31, 1993, File No.
0-14463)                                                                                 
|               |     
|*10            | (s)  |  | Lease Agreement with First Union National Bank of N.C. dated March 31, 1994, and First Amendment to Lease Agreement dated April 14, 1994 (Exhibit 10(s) to Form 10-K of Wells Real Estate Fund
II for the fiscal year ended December 31, 1994, File No. 0-16518)                      
|               |     
|*10            | (t)  |  | Joint Venture Agreement of Fund II, III, VI and VII Associates dated January 10, 1995 (Exhibit 10(w) to Form 10-K of Wells Real Estate Fund VI, L.P. for the fiscal year ended December 31,
1995, File No. 0-23656)                                                                   
|               |     
|*10            | (u)  |  | Joint Venture Agreement of Fund I, II, II-OW, VI and VII Associates dated August 1, 1995 (Exhibit 10(ii) to Form 10-K of Wells Real Estate Fund VI, L.P. for the fiscal year ended December 31,
1995, File No. 0-23656)                                                               
|               |     
|*10            | (v)  |  | First Amendment to Amended and Restated Joint Venture Agreement of Fund I and Fund II Tucker (formerly Fund I and Fund II Tucker-Cherokee) dated August 1, 1995 (Exhibit 10(m) to Form 10-K of
Wells Real Estate Fund I for the fiscal year ended December 31, 1995, File No. 0-14463)
|               |     
|*10            | (w)  |  | Custodial Agency Agreement between Wells Real Estate Fund II-OW and NationsBank of Georgia, N.A. dated January 10, 1995 (Exhibit to Form 10-K of Wells Real Estate Fund II-OW for the fiscal
year ended December 31, 1995, File No. 0-17876)                                          
|               |     
|*10            | (x)  |  | Amended and Restated Custodial Agency Agreement between Wells Real Estate Fund II-OW and NationsBank of Georgia, N.A. dated August 1, 1995 (Exhibit to Form 10-K of Wells Real Estate Fund
II-OW for the fiscal year ended December 31, 1995, File No. 0-17876)                       
|               |     
|*10            | (y)  |  | Amendment to Amended and Restated Certificate and Agreement of Limited Partnership of Wells Real Estate Fund II-OW dated January 1, 2000 (Exhibit to Form 10-K of Wells Real Estate Fund II-OW
for the fiscal year ended December 31, 2000, File No. 0-17876)                         
|               |     
|*10            | (z)  |  | Purchase and Sale Agreement for the sale of Cherokee Commons Shopping Center dated August 6, 2001 (Exhibit 10(p) to Form 10-K of Wells Real Estate Fund I for the fiscal year ended December
31, 2001, File No. 0-14463)                                                              
|               |     
|*10            | (aa) |  | Amendments to the Brookwood Grill Lease (Exhibit 10(aa) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 2001, File No. 0-16518)                                                                                                                      
|               |     
|*10            | (bb) |  | Lease Agreement with The Boeing Company (Exhibit 10(bb) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 2002, File No. 0-16518)                                                                                                                      
|               |     
|*10            | (cc) |  | First Amendment to Lease Agreement with The Boeing Company (Exhibit 10(cc) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 2002, File No.
0-16518)                                                                                                   



---

##### Index to Financial Statements

|               |  |                                                                                                                                                                                                                                 
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description of Document                                                                                                                                                                                                         
|               | 
|*10(dd)        |  | Second Amendment to Lease Agreement with The Boeing Company (Exhibit 10(dd) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 2002, File No.
0-16518)                                            
|               | 
|*10(ee)        |  | Third Amendment to Lease Agreement with The Boeing Company (Exhibit 10(ee) to Form 10-K of Wells Real Estate Fund II for the fiscal year ended December 31, 2002, File No.
0-16518)                                             
|               | 
|*10(ff)        |  | Purchase and Sale Agreement relating to the Heritage Place Shopping Center (Exhibit 10.1 to the Form 10-Q of Wells Real Estate Fund I for the quarter ended June 30, 2003, Commission File
No. 0-14463)                         
|               | 
|*10(gg)        |  | Purchase and Sale Agreement for 880 Holcomb Bridge Road and Brookwood Grill (Exhibit 10.1 to the Form 10-Q of Wells Real Estate Fund II for the period ending September 30, 2004, Commission
File No. 0-16518)                  
|               | 
|*10(hh)        |  | Purchase and Sale Agreement for office portion of Heritage Place (Exhibit 10.3 to the Form 10-Q of Wells Real Estate Fund I for the quarter ended March 31, 2006, Commission File No.
0-14463)                                  
|               | 
|*10(ii)        |  | First Amendment to Purchase and Sale Agreement for office portion of Heritage Place (Exhibit 10.4 to the Form 10-Q of Wells Real Estate Fund I for the quarter ended March 31, 2006, Commission
File No. 0-14463)               
|               | 
|*16            |  | Letter from Ernst & Young LLP dated September 27, 2006 regarding change in accountants (Exhibit 16.1 to the Current Report on Form 8-K of Wells Real Estate Fund II-OW filed on September
27, 2006, Commission File No. 0-17876)
|               | 
|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